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IndiGo gets approval for new policy on related party transactions, board expansion: Report

As per the new policy, the airline would seek external advice for related party transactions worth over Rs 2 crore and the bidding process would be mandatory for any such contracts

twitter-logo BusinessToday.In   New Delhi     Last Updated: July 24, 2019  | 20:28 IST
IndiGo gets approval for new policy on related party transactions, board expansion: Report
IndiGo has decided to expand the strength of the board to up to ten members, including four independent directors instead of the current two

The board of InterGlobe Aviation has reportedly approved a new policy on related party transactions amid the ongoing tussle between the company's co-promoters over governance issues.

The development came in wake of recent spats between the two founders of InterGlobe Aviation - Rakesh Gangwal and Rahul Bhatia - which has brought the airline under the scanner of the Ministry of Corporate Affairs as well as markets regulator Securities and Exchange Board of India (SEBI). In a letter to SEBI, Gangwal had accused Bhatia of corporate governance violations and sought the regulator's intervention in the matter.

The IndiGo's board, which comprises of six members, including Gangwal and Bhatia, has unanimously approved the policy on related party transactions (RPTs), news agency PTI quoted sources as saying.

As per the new policy, the company would seek external advice for RPTs worth over Rs 2 crore and the bidding process would be mandatory for any such contracts, the sources told the news agency. Any changes in RPTs would have to be unanimously approved by the company's independent directors, the sources added.

The board of InterGlobe Aviation had met for two days on July 19 and 20 to consider and approve the unaudited financial results for the June quarter as well as to discuss governance issues.

Also Read: IndiGo promoters criticised for poor board meeting attendance

According to the report, the airline also took a decision to expand the strength of the board to up to ten members, including four independent directors instead of the current two. Sources said that Gangwal will have just one nominee on the board, while Bhatia will be able to nominate five board members, including the Chief Executive Officer.

The Institutional Investor Advisory Firm (IiAS) in a recent report raised concerns over IndiGo's board composition. The advisory firm had called for expansion of the board to provide the necessary checks and balances to the control rights that the promoters have embedded within the company's Articles of Association.

Also Read: IndiGo row: SEBI, MCA put regulatory pressure on airline; ask for crucial documents

These changes have been reportedly approved by both the parties. Gangwal, along with his affiliates (RG Group), owns nearly 37 per cent stake in InterGlobe Aviation, whereas Rahul Bhatia and his affiliates (IGE Group) hold around 38 per cent stake.

"The board of directors has decided to amend the Articles of Association (AoA) for expanding the board by up to a maximum of 10 members, including four independent directors," IndiGo had said in a regulatory filing on Sunday.

"The said amendment of the articles will be subject to the approval of the shareholders at the forthcoming annual general meeting of the company," it had said.

Edited by Chitranjan Kumar with PTI inputs

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