The board of IPO-bound Paytm has got sweeping powers as part of a shareholders' agreement between investors and company founder Vijay Shekhar Sharma to decide on all critical decisions relating to the company and its dozens of subsidiaries.
The board has analyzed the definition of the term promoter under the Companies Act and is of the opinion that the founder does not have control over the affairs of the company directly or indirectly, whether as a shareholder or director, a resolution by the company's board said.
The board of One97 Communications Ltd, the holding company of Paytm, will have the power to take important decisions, including raising debt, creation and operation of subsidiaries, approval of business plan, inter-company financial transactions above a certain monetary threshold, and appointment and removal of the key management team.
The 43-year-old Sharma, who currently holds 14.67 per cent stake, will be involved in the management and affairs of the company, but his role will be limited to his professional capacity as MD and CEO.
Sharma does not own the minimum 20 per cent stake as required under the guidelines of the Securities and Exchange Board of India (SEBI) for being considered a promoter.
The fintech company, which is building a financial services business model on top of the payments business, is already classified as a foreign-owned and controlled company.
China's Alibaba Group, Japan's SoftBank, Hong kong-based Elevation Capital, T Rowe Price and Discovery Capital and Berkshire Hathaway are among the biggest shareholders of the company. These shareholders will have the maximum say in the management of company's affairs.
"In the future, the board of the company is not accustomed to act in accordance with the founder's advice, directions, or instructions," the resolution stated.
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