Proxy advisory firm SES has said that it has found nothing wrong with the proposal to convert Tata Sons Ltd into a private limited company as it does not adversely impact any shareholders rights.
The move to change the legal status of the Tata Group holding company has drawn flak from the Mistry family as it would restrict its ability to sell stake to external investors.
"SES analysis does not find anything wrong with the proposal from governance point of view and the proposal cannot be said to be an oppression of minority.
"This does not in any manner adversely impact any shareholders of their rights and obligation. It aims to preserve character of the Company as private company, which it has for almost a century," SES said.
Shareholders of the closely held company, Tata Sons Ltd, will tomorrow vote on the change, which comes almost a year after Cyrus Mistry was ousted as Chairman of the USD 105 billion cars-to-software group, triggering a bitter boardroom battle.
Mistry family, which owns more than 18 per cent of the holding company, has called the move "oppression of the minority interests". The matter has gone to the NCLT.
In a report titled 'Tata Sons Ltd to Tata Sons Pvt Ltd Oppression of Minority??', SES said there will be a status quo for all shareholders.
"At best the change is on governance standards, which were applicable mandatorily by default, which are being adopted voluntarily," it said.
SES recommended however that the articles of association must provide to apply current standards of governance rather than what is built into AoA presently, as governance standards are subject to change.
Further, an interested board member must recuse himself from any of the matters brought to the Board, it said.
"Ideally Board members should never become an interested party."
Also, remuneration limit that is applicable to public companies must be built in the guidelines.
SES said Tata Sons can no longer do anything howsoever legitimate it may be, unless it goes through close scrutiny of interested party as well as neutral party like proxy advisors.
"Every move is watched closely or rather very closely. It seems that Right to Privacy judgement of Supreme Court is not applicable to Tata's," it said.
"Lastly it can be said that timing may not be best, as somehow or other the issue has got linked with ongoing battle Tata's are having with other shareholder Mistry family," it added.
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