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Shareholder activism has really arrived in India. This can be proven by the fact that there have been many
instances in the current proxy season where shareholders have stood up to the management rather than
be mere spectators of mismanagement in listed companies. Another positive takeaway has been that many
of these not only involved individual cases of a retail shareholder but also larger funds and institutional
investors voicing concerns against the boards and management and taking active steps to address them.
As the month of September went by, we witnessed two cases of shareholder activism here in India. It
involved three investors and two listed companies. While one of them is a foreign fund, the other two are
India based investors. The cases are: IDBI Trusteeship Services and India Horizon Fund vs Religare &
Florintree Advisors vs PTC India. We discuss both the cases in brief.
Religare Enterprises Limited is facing two lawsuits filed by two investors in September. While one of
these suits is filed by IDBI Trusteeship Services Limited in the Bombay High Court, the other is by its
shareholder India Horizon Fund Limited in the New Delhi bench of NCLT.
As per the suit filed in Bombay High Court, IDBI Trusteeship, on May 21, 2014, had subscribed to deben-
tures of SGGD Projects Development Pvt. Ltd. worth Rs. 335 Crore. SGGD Projects is a public share-
holder of Religare holding 75,01,005 equity shares constituting 4.20% of its equity share capital. These
debentures were secured by four entities, three of which are public shareholders and one is a promoter of
Religare, pledging 3,18,51,891 equity shares of Religare. The share pledge agreement, which involved
2,75,68,309 equity shares constituting 15.45% of the equity share capital of Religare restricted the pledgers
from exercising their voting rights in respect of the pledged shares for proposals that may have adverse
effect on the shares pledged with IDBI Trusteeship. The agreement further stated that if the security be-
comes enforceable and voting notice is issued, IDBI Trusteeship can vote on such proposals. Subsequently,
SGGD Projects and the other pledgers defaulted in making the payments.
On August 8, 2017 Religare notified the stock exchanges of a postal ballot meeting seeking approval for
investment of Rs. 500 Crore in Religare Capital Markets Limited (RCML), a 100% subsidiary. The explana-
tory note stated that RCML is a loss-making entity and the entire investment of Rs. 500 Crore will be
written off in the accounts of Religare. Fearing that this investment would result in diminution in the value
of shares of Religare pledged in favour of it, IDBI Trusteeship issued notice to exercise its voting rights as
provided under the share pledge agreement.
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Shareholder Activism in September
INGOVERN RESEARCH SERVICES
Governance Watch OCTOBER 2017
Volume - 2017:10
Inside this issue:
Shareholder Activism
Revision in Secretarial
Standards
Proxy Season 2017 so
far ...
We are in News
IDBI Trusteeship had filed the lawsuit to restrict the pledgers in exercising their voting rights on the pro-
posal. The High Court, in its judgment dated September 13, 2017 allowed IDBI’s plea and directed
Religare to discard any votes cast by the pledgers on the resolution and it also set a further date for con-
tinuation of the case.
Religare issued its voting results of the postal ballot on September 11, 2017 stating that the proposal has
been approved with requisite majority after ignoring the votes cast by the pledged shares with IDBI Trus-
teeship. As per the voting result, the proposal garnered 55.63% approval of voting public shareholders in-
spite of 99.95% institutional shareholders voting against it. Promoters were not allowed to vote since it
was a related party transaction.
What is not clear is whether IDBI Trusteeship did actually exercise its voting rights on the resolution and
if so, whether its votes were taken into consideration after ignoring the votes of the pledgers. There has
been no further stock-exchange notification by Religare in this regard.
The second petition against Religare is by India Horizon Fund in the New Delhi Bench of NCLT. The suit
was filed under sections 241, 242 and 244 of the Companies Act, 2013. These Sections empowers share-
holders to approach NCLT against oppression and mismanagement in their companies. India Horizon
Fund owns 6.15% of the equity share capital of Religare.
Through its petition, India Horizon Fund sought
stay on postal ballot resolution for investment of Rs. 500 Crore in RCML,
cancellation of an AGM resolution to raise up to Rs. 500 Crore through issue of NCDs, and
Removal of existing board and appointment of administrator to oversee affairs of the company
A petition under these sections require shareholders to own at least 10% of equity shares of the compa-
ny. India Horizon Fund submitted a consent letter by IDBI Trusteeship stating that voting rights owned by
both would be higher than the 10% requirement limit. However, the bench rejected the consent of IDBI
Trusteeship because of its involvement in the suit in the Bombay High Court which is subjudice. Further,
the bench has agreed for a later date to decide on the case and India Horizon Fund’s pleas.
While the above instance was the unusual route of shareholder activism through the legal channel, the
next case is of that through a shareholder proposal.
PTC India Limited, through a stock exchange notification dated September 15, 2017 notified an adden-
dum to its AGM on September 25, 2017 in form of a shareholder proposal by Florintree Advisors Private
Limited which is seeking appointment of Mr. Mathew Cyriac as a Director. There are no further details
provided by the Company. This proposal is similar to the one proposed by another investor two months
ago, i.e. Unifi Capital in case of Alembic Ltd.
Page 2
Shareholder Activism in September… (contd)
However, the main difference is that while Unifi Capital had sought appointment of a small shareholder
under Section 151 of the Companies Act, 2013 by rallying support of around thousand small shareholders,
Florintree Advisors is proposing appointment through Section 160 which is the usual route for appoint-
ment of a director to the board. This would require a simple majority of votes to be in favour for its ap-
proval. Both the proposals by Unifi Capital as well as Florintree Advisors are as a result to the board and
management’s inaction to address the undervaluation of equity shares of the company for a long period of
time. A point to note is that while Alembic’s board refused to even table Unifi Capital and thousand small
shareholders’ proposal in front of shareholders, the board of PTC India has added and tabled Florintree
Advisors’ proposal to its AGM agenda.
As per the voting results of the AGM notified by PTC India on September 26, 2017, the shareholder pro-
posal was defeated as it received 29.29% votes in its favour.
Shareholder Activism in September… (contd)
Page 3
The Institute of Company Secretaries of India (“ICSI”) which mandates various secretarial standards to be
followed by Company Secretaries of public companies in India, has recently revised its Secretarial Stand-
ard-1 (“SS-1”) and Secretarial Standard-2 (“SS-2”). While SS-1 relates to conduct of Board Meetings, SS-2
is mandated for conduct of Shareholder Meetings. These revisions will be effective from the first date of
this month, i.e., October 1, 2017. We discuss the key changes made in these secretarial standards.
Secretarial Standard-1 (Board Meetings)
Definition of Board Committees
• Existing: A committee meant any committee of Directors constituted by the Board
• Revised: A committee now means a Committee of Directors mandatorily required to be consti-
tuted by the Board under the Act
• Takeaway: Now, secretarial standards will be applicable only on board committees that are man-
datorily constituted under the Companies Act, 2013. These are: Audit Committee, Nomination &
Remuneration Committee, Stakeholder Relationship Committee and CSR Committee
Definition of Secretarial Auditor
• Existing: Secretarial Auditor meant a Company Secretary in Practice appointed in pursuance of
the Act to conduct the secretarial audit of the company
• Revised: “Secretarial Auditor” now means a Company Secretary in Practice or a firm of Compa-
ny Secretary(ies) in Practice appointed in pursuance of the Act to conduct the secretarial audit of
the company
• Takeaway: Secretarial firms have also been included to act as Secretarial Auditors of companies
Day of holding Board Meeting
• Existing: A Board meeting (new and adjourned) couldn’t be held on a national holiday
• Revised: A Board meeting (new and adjourned) can now be held on any day
• Takeaway: It is now possible to hold board meetings on national holidays
Notice of the Meeting
• Existing: Notice of the Meeting was required to mention the venue if done through Electronic
mode
• Revised: Notice of the Meeting should clearly mention the venue
• Takeaway: The standards now mandate mentioning the venue of board meetings irrespective of
whether electronic mode for participation is provided or not
Revision to Secretarial Standards 1&2
Page 4
Directors Participation through Electronic Mode
• Existing: Directors could participate through electronic mode in Board and Audit Committee
meetings, for discussion on certain restricted items, only if permitted by the chairman of the
board. Some of these restricted items included approval of the annual financial statement, Board’s
report, prospectus and matters relating to amalgamation, merger, demerger, acquisition and take-
over, etc
• Revised: Now, directors cannot participate through electronic mode in Board and Audit Com-
mittee meetings, for discussion on these restricted items
• Takeaway: The revision explicitly restricts directors participation through electronic mode in
discussion of these important agendas such as approval of financials, prospectus, mergers and ac-
quisitions, etc. This is in-line with requirements of Companies Act
Mode of sending Meeting Notice
• Existing: Meeting notice could be sent to directors either by hand or by post, courier, facsimile,
email or any other electronic means
• Revised: Meeting notice can be sent to directors either by hand or by post, facsimile, email or any
other electronic means. However, in case of shorter notice, the company may choose an expedi-
ent mode of sending Notice.
• Takeaway: The revision excludes courier facility for sending meeting notice to directors unless in
case of meetings conducted in shorter notice
Maintenance of Proof of sending of Notice
• Existing: Proof of sending Notice and its delivery was to be maintained by the company
• Revised: Proof of sending Notice and its delivery shall be maintained by the company for such
period as decided by the Board, which shall not be less than 3 years from the date of the Meeting
• Takeaway: It is now mandatory for all companies to maintain copy of proof of sending of notice
at least for 3 years from the date of meeting
Extra Items that are not included in Agenda
• Existing: Any item not included in the Agenda was to be taken up for consideration with the
permission of the Chairman and with the consent of a majority of the Directors present in the
Meeting, which would include at least one Independent Director, if any
• Revised: Any item not included in the Agenda may be taken up for consideration with the per-
mission of the Chairman and with the consent of a majority of the Directors present in the Meet-
ing. The decision taken in respect of any other item shall be final only on its ratification by a ma-
jority of the Directors of the Company, unless such item was approved at the Meeting itself by a
majority of Directors of the Company
• Takeaway: The approval of an independent director for such extra items is not required any-
more. However, it has to be ratified by majority of directors of the company
Revision to Secretarial Standards 1&2… (contd)
Page 5
Frequency of Board Meetings
• Existing: The Board had to meet at-least once in every quarter, with a maximum interval of 120
days between any two consecutive Meetings, such that at least 4 meeting were held in each calen-
dar year.
• Revised: The Company shall hold at least four Meetings of its Board in each Calendar Year with a
maximum interval of one hundred and twenty days between any two consecutive Meetings
• Takeaway: There is no need to hold Board Meeting in each Calendar Quarter
Interested Director for the purpose of Quorum
• Existing: A Director was treated as interested in a contract or arrangement entered into or
proposed to be entered into by the company with the Director himself or his relative
• Revised: (New Insertion) If the item of business is related party transaction, then he shall not be
present at the Meeting, whether physically or through Electronic Mode, during discussions and
voting of such item
• Takeaway: Now, interested directors will not be able participate in discussion of businesses
where they are interested
Attendance Register
• Existing: The attendance register was deemed to have been signed by the Directors participating
through Electronic Mode, if their attendance was recorded by the Chairman or the Company
Secretary in the Attendance Register and the Minutes of the Meeting
• Revised: The attendance register shall be deemed to have been signed by the Directors partici-
pating through Electronic Mode, if their attendance is recorded in attendance register and authen-
ticated by the Company Secretary or where there is no Company Secretary, by the Chairman or
by any other Director present at the Meeting, if so authorized by Chairman and the fact of such
participation is also recorded in the Minutes
• Takeaway: Authentication or recording of attendance can be now done by any Director present
at the Meeting, if so authorized by Chairman
Custody of Register
• Existing: Where there was no Company Secretary, the attendance register could be kept in the
custody of any director authorized by the Board of this purpose
• Revised: Where there is no Company Secretary, the attendance register shall be in the custody
of any other person authenticated by the Board of this purpose
• Takeaway: Now, any directors authenticated by the Board can be in charge of custody of the
attendance register
Page 6
Revision to Secretarial Standards 1&2… (contd)
Inspection of Attendance Register
• Existing: The attendance register was open for inspection by the Directors
• Revised: The attendance register is open for inspection by the Directors. Even after a person
cease to be a Director, he shall be entitled to inspect the attendance register of the Meeting held
during the period of his Directorship
• Takeaway: Now, a Director after retirement can inspect the Attendance Register for the period
of his Directorship
Leave of Absence
• Existing: Leave of absence was to be granted to a Director only when a request for such leave
has been received by the Company Secretary or by the Chairman
• Revised: Leave of absence shall be granted to a Director only when a request for such leave has
been received by the Company Secretary or by the Chairman or to any other person authorized
by the Board to issue Notice of the Meeting
• Takeaway: Now, leave of absence can be granted by any person authorised by the Board
Passing of Resolution by Circulation
• Existing: Proof of sending and delivery of the draft of the Resolution and the necessary papers
was to be maintained by the company
• Revised: Proof of sending and delivery of the draft of the Resolution and the necessary papers
shall be maintained by the company for such period as decided by the Board, which shall not be
less than three years from the date of the Meeting. An additional two days shall be added for the
service of the draft Resolution, in case the same has been sent by the Company by speed post or
by registered post or by courier
• Takeaway: Now, proof of sending of Notice has to be maintained by the Company for at least 3
years. Also, 2 additional days shall be added for the services of the draft resolution, in case the
same has been sent by the Company by speed post or by register post or by courier
Recording of appointments made at the Meeting
• Existing: All appointments made one level below Key Managerial Personnel were to be noted by
the Board
• Revised: This has been removed
• Takeaway: Now, appointment made one level below KMP is no longer required to be noted by
the Board
Revision to Secretarial Standards 1&2… (contd)
Page 7
Recording of Minutes
• Existing: Any unsigned document, including report or notes placed before the Board and re-
ferred to in the Minutes were to be identified by initialing of such document, report or notes by
the Company Secretary or the Chairman. Wherever any approval of the Board was to be taken
on the basis of certain papers laid before the Board, proper identification was to be made by ini-
tialing of such papers by the Company Secretary or the Chairman and a reference thereto shall be
made in the Minutes
• Revised: Wherever the decision of the Board is based on any unsigned documents including re-
ports or notes or presentations tabled or presented at the Meeting, which were not part of the
Notes on Agenda and are referred to in the Minutes, shall be identified by initialing of such docu-
ments by the Company Secretary or the Chairman
• Takeaway: Only unsigned documents placed before the Board, in respect of items requiring
decision of the Board, need to be so initialed. Thus, certain papers placed for noting and/or papers
which have been already signed by the Chairman, Director or any other official of the company
need not be initialed again
Maintenance of proof of sending draft Minutes
• Existing: Proof of sending draft Minutes and its delivery was to be maintained by the company
• Revised: Proof of sending draft Minutes and its delivery shall be maintained by the company for
such period as decided by the Board, which shall not be less than three years from the date of the
Meeting
• Takeaway: It is now mandatory for companies to maintain proof of sending of draft minutes at
least for 3 years from the date of meeting
Disclosures
• Existing: The Annual Report and Annual Return of a company had to disclose the number and
dates of Meetings of the Board and Committees held during the financial year indicating the num-
ber of Meetings attended by each Director
• Revised: The Report of the Board of Directors shall include a statement on compliances of appli-
cable Secretarial Standards
• Takeaway: This is major change. Board of Directors now has to mention a statement in its Di-
rectors’ Report that “Company is in compliances with applicable Secretarial Standards”
Applicability
• Existing: The standard was applicable on the Section 8 Companies
• Revised: The standard shall not be applicable on One-Person companies and Section 8 companies
• Takeaway: The revision exempts applicability of the standards on One-Person companies and
Section 8 companies
Page 8
Revision to Secretarial Standards 1&2… (contd)
Secretarial Standard-2 (Shareholder Meetings)
Notice on the Website
• Existing: In case of companies having a website, the Notice was required to be hosted on the
website
• Revised: In case of companies having a website, the Notice shall simultaneously be hosted on the
website till the conclusion of the meeting
• Takeaway: Now companies have to publish the notice of General Meeting till the conclusion of
meeting. This means, it is not mandatory to keep notice on website after the conclusion of the
meeting
Notice on stating of Resolutions
• Existing: In respect of items of Ordinary Business, Resolutions were not required to be stated in
the Notice except where the Auditors or Directors to be appointed are other than the retiring
Auditors or Directors
• Revised: In respect of items of Ordinary Business, Resolutions are not required to be stated in
the Notice
• Takeaway: Now there is no need to give the resolution in Notice in case of ordinary businesses
Form of Proxy
• Existing: An instrument appointing a Proxy was to be either in the Form specified in the Articles
or in the Form set out in the Companies Act
• Revised: An instrument appointing a Proxy shall be in the Form prescribed under the Act
• Takeaway: Now, companies cannot on their own discretion design the proxy form through their
Articles
Proxies and Authorizations
• Existing: No such clause
• Revised: In case of remote e-voting: (i) The letter of appointment of representative(s) of the
President of India or the Governor of a State; or (ii) The authorization in respect of representa-
tive(s) of the Corporations; shall be received by the scrutinizer/ company on or before close of e-
voting
• Takeaway: A new clause has been introduced for President/ Governor for appointment of a
representative and for Corporations to authorize their representative, so they can participate in a
meeting till on or before close of e-voting
Revision to Secretarial Standards 1&2… (contd)
Page 9
Voting on Resolutions
• Existing: Every Resolution was to be proposed by a member and seconded by another member
• Revised: Every Resolution, except a resolution which has been put to vote through remote e-
voting or on which a poll has been demanded, shall be proposed by a Member and seconded by
another member
• Takeaway: This revision accommodates e-voting practice used in general meetings
Voting on Related Party Transactions
• Existing: A Member who is a related party is not entitled to vote on a Resolution relating to
approval of any contract or arrangement in which such Member is a related party
• Revised: A member who is a related party is entitled to vote on a Resolution pertaining to ap-
proval of any contract or arrangement to be entered into by: a) A Government company with any
other Government company; or (b) An unlisted Government company with the prior approval of
competent authority, other than those contract or arrangements referred in clause (a)
• Takeaway: Government companies are allowed to vote on related party transactions
Declaration of Results in case of e-voting
• Existing: Based on the scrutiniser’s report received on Remote e-voting and voting at the Meet-
ing, the Chairman or any other Director was authorized to countersign the scrutiniser’s report
and declare the result of the voting forthwith with details of the number of votes cast for and
against the Resolution, invalid votes and whether the Resolution has been carried or not
• Revised: The scrutiniser(s) shall submit his report within three days from the date of the Meeting
(seven days in case of postal ballot) to the Chairman or a person authorized by him, who shall
countersign the same and declare the result of the voting forthwith with details of the number of
votes cast for and against the Resolution, invalid votes and whether the Resolution has been car-
ried or not
• Takeaway: Now, scrutinisers have to submit their report within three days
Adjournment of meetings
• Existing: If a Meeting, other than a requisitioned Meeting, stood adjourned for want of Quorum,
the adjourned Meeting was to be held on the same day, in the next week at the same time and
place or on such other day, not being a National Holiday, or at such other time and place as de-
termined by the Board
• Revised: If a Meeting, other than an Annual General Meeting and a requisitioned Meeting, stands
adjourned for want of Quorum, the adjourned Meeting shall be held on the same day, in the next
week at the same time and place or on such other day or at such other time and place as may be
determined by the Board
• Takeaway: Now, adjourned meetings can be held at National holidays
Page 10
Revision to Secretarial Standards 1&2… (contd)
Maintenance of Minutes
• Existing: Minutes may be maintained in electronic form in such manner as prescribed under the
Act and as may be decided by the Board. Minutes in electronic form was to be maintained with
Timestamp. Minutes Books was to be kept at the Registered Office of the company or at such
other place, as may be approved by the Board
• Revised: A company may maintain its Minutes in physical or in electronic form. Minutes Books
shall be kept at the Registered Office of the company
• Takeaway: Two changes. No need of time Stamp on Electronic Minutes. Minutes book can be
kept only at the registered office of the Company
Content of Minutes
• Existing: Minutes were to state the name of the company, day, date, venue and time of com-
mencement and conclusion of the Meeting
• Revised: Minutes shall state, at the beginning the Meeting, name of the company, day, date, venue
and time of commencement of the Meeting
• Takeaway: No need to mention the time of conclusion of General Meeting
Revision to Secretarial Standards 1&2… (contd)
Page 11
Times of India: Minority investors rush to be part of cos’ mgmt. (Click here)
“Now, minority/institutional shareholders can utilise various regulations like the Bankruptcy Code or provisions
in the Companies Act to drive better financial returns or voice concerns of financial wrongdoings. But for
the move to be impactful, involvement and support of other institutional investors like mutual funds (who
are at times passive) will be crucial to achieve their objective”
Economic Times: PwC arm moves SEBI to settle Satyam fraud case (Click here)
“Since this could be a precedent-setting move, one hopes that Sebi's decision will carry enough heft to act as
a deterrent in the future”
Business Today: A Board Seat (at Alembic) (Click here)
“Though there were many incidents of shareholders demanding change of directors or initiating action against
board or management decisions, small shareholder activism is not familiar to India as it requires a motivated in-
vestor and some effort and time to bring together 1,000 such shareholders to a consensus”
Business Standard: Proxy advisory movement likely to emerge stronger from ITC case (Click here)
“This only shows the increasing influence of proxy advisory firms that companies of the size of ITC are reacting in
this manner. Proxy advisory firms are registered and regulated by SEBI and the main function is to put out voting
recommendations and that is what IIAS has done. SEBI and institutional investors should come in support and
should not allow ITC to muzzle proxy advisory firms in this manner. The court should summarily dismiss the
case.”
Times of India: Tata Sons looks to shed its ‘public ltd’ tag for ‘pvt ltd’ (Click here)
“The move means less accountability, less transparency and less disclosures”
We are in the News!
The Proxy Season 2017 so far ...
AGMs
Apollo Hospital
Bosch
BPCL
Coal India
GAIL India
HCL Tech
Hindalco
Indiabulls Housing
Maruti
NTPC
ONGC
Powergrid
Others
Reliance Inds
Asian Paints
Yes Bank
Bharti Airtel
Ambuja Cem
Lupin
Bharat Forge
VIP Inds
Religare Ent.
There were 925 shareholder
meetings scheduled in September
whose meeting details were col-
lected by InGovern.
These included 855 AGMs, 8
EGMs, 54 Postal Ballots and 8
CCMs.
Some of the large companies that
held meetings during September
are:
Page 12
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