Proxy advisory firm Stakeholder Empowerment Services (SES) has pulled up aviation major Jet Airways saying that its proposal to make some amendments to Articles of Association (AoA) is not in compliance with good corporate governance practice.
Post its deal with Etihad Airways, Naresh Goyal promoted private airline Jet Airways has proposed some changes in the AoA, which according to SES, restricts the rights of the promoters to sell or transfer shares without the written consent from Etihad.
AoA is a statutory document providing internal rules and regulations of any company.
SES’s founder J.N. Gupta is of the view that if the proposed amendment gets a nod from the board of directors in its forthcoming extraordinary general meeting on May 24, then Etihad will end up getting special privilege rights which will impact the equitable rights of all the shareholders. He has thus suggested that the shareholders should vote against the move.
“The company has not identified the changes made in the articles. This makes the disclosure totally ineffective unless a shareholder compares previous set of articles and proposed articles line by line. Therefore, SES believes that the disclosures made by the company are not transparent,” Gupta said in its second report post the Jet-Etihad deal.
The company was unable to respond to an e-mail query.
In April, Jet approved a decision to allot 2.73 crore shares on a preferential basis to Etihad for around Rs 2,060 crore. After the allotment, Etihad will hold a 24 per cent stake in Jet while promoters will continue to hold 60.80 per cent stake. The deal values Jet at nearly Rs 8,500 crore.
The report’s another major area of concerns is the change in the shareholding pattern and the identity of proposed allottees.
About 2.73 crore equity shares (24 per cent of post-issue equity capital) which will be issued to Etihad Airways PSJC and that none of the promoters, directors or key managerial persons will participate in the preferential issue.
Also the company has declared that the preferential allotment will not result in a change in the control of the company and that Etihad has the right to appoint three directors on the board. SES is of the view that pursuant to the preferential issue, there will be a change in control from the ‘current promoters’ to the ‘current promoters and Etihad’. It also points out that the company has not complied with the listing agreement with stock exchanges.