Jet Airways, Etihad amend shareholder agreement

The agreement has been amended to address Sebi's concerns about substantial management rights to Etihad

Jet Airways (India) Ltd and Etihad Airways have amended their shareholder agreement to address the Securities and Exchange Board of India (Sebi)'s concerns about substantial management rights to the latter.

The document, part of Etihad's deal with Jet to pick a 24 per cent stake in the Indian carrier, will be signed in a day or two, a person aware of the development said, requesting anonymity.

One of the key changes ensures that Etihad will not have the unilateral right to terminate the commercial cooperation agreement and this right will now be held by both sides.

Also, the agreement has been re-worked to ensure there is no ambiguity with respect to special rights and veto powers. A source said neither sides could now exercise veto power or casting vote in board matters or resolutions. "The changes were carried out to show that the control is not passed on to Etihad following the investment," he added. The other changes pertain to powers of board members.

Sebi wanted Jet to convince it that the agreement did not amount to joint control alongside promoter Naresh Goyal. The shareholder agreement treats Etihad as a "public shareholder", thereby exempting it from making an open offer.

Last Friday, Jet did not put up the proposal to amend the company's articles of association at its extraordinary general meeting here, where the sale of equity stake to Etihad was approved.

Articles of association is a document which defines the responsibilities of a company's directors, the business to be undertaken, and the means by which the shareholders exert control over the board.

Etihad is investing Rs 2,060 crore in the airline and according to the original agreement, would get three seats on the board. Jet's shareholders, however, objected to certain clauses which gave Etihad a say in important matters such as appointments of vice-chairman and auditors. Another objection was to a particular clause that stated the quorum of meetings would not be complete unless there was a member each from Jet and Etihad. Some shareholders said the articles of association were discriminatory to ordinary shareholders and inserted at Etihad's behest.