In a notice to its shareholders ahead of the annual general meeting (AGM) scheduled for September 21, Tata Sons
has sought approval to amend its memorandum of association and articles of association to convert itself from a public limited company to a private limited one.
It has also sought to change the name of the company from Tata Sons
Limited to Tata Sons
The change in Tata Sons’ corporate structure will require to be cleared by a special resolution, needing at least 75 per cent votes.
Asked why Tata Sons
was being converted into a private limited company, a spokesperson said, “The reinstatement of Tata Sons
as a private company was considered by the board to be in its best interest.”
While two investment firms of the Shapoorji Pallonji
family — Cyrus Investments and Sterling Investment — own 18.4 per cent in the company. Tata Trusts own 66 per cent of the share capital of the company, while the remaining shares are held mostly by the Tata family, some group companies
and a few individuals.
The Mistry family has objected to Tata Sons’ attempt to convert it into a private limited company. A letter from Cyrus Investments to the Tata Sons
board said, “The proposal to convert Tata Sons
from a public company to a private company constitutes yet another act of oppression of the minority shareholders of Tata Sons
at the hands of the majority shareholders.”
Lawyers say that transfer of shares in a company can be restricted by way of adding necessary covenants in the Articles of the company which are in essence the company’s charter documents. “In the ordinary course, this restriction is exercised by the board to ensure the best interest of the company. In the case of public companies, however, this is a tenuous issue and several noted judgments have opined that any restriction on the free transferability of shares in a public company is not maintainable,” said Pallav Pradyumn Narang, partner, Arkay& Arkay.
Agreements between individual shareholders imposing restrictions are, however, kosher as the public company itself is not a party, he added.