Jet-Etihad agreement may be revised again

The Jet Airways-Etihad share holder agreement is likely to be revised again following Securities and Exchange Board of India and Foreign Investment Promotion Board's concerns over substantial control to the Abu Dhabi airline under the deal.

Under the current agreement board resolutions require consent of 3/4th of members. According to sources it might amend a clause saying that simple majority will be required to pass resolutions in the board.

As per the agreement Etihad would get three board positions while Jet Airways would have four members. There will be seven independents on the board. In simple terms the proposed amendment means that vote of eight board members will be sufficient to pass a resolution.

A Jet Airways spokesperson said, "As the Jet Airways and Etihad Airways alliance is being examined by the concerned regulatory authorities and their consequent approvals are awaited, it would be inappropriate for Jet Airways (India) Ltd to respond at this stage."

Etihad has agreed to pick up 24 percent in Jet Airways for about Rs 2,060 crore. If indeed the amendment goes through this will be the second revision of the share holder agreement. It was signed by the two airlines in April and was modified in May after Sebi raised objections regarding the structure of the deal.

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

The other change pertained to constitution of  the nomination committee of the board which will make key board and management appointments. The nomination committee will include one person nominated each by Jet Airways and Etihad and three other board members will be chosen through consensus.

In the earlier agreement Etihad had the right to nominate the three independent members on the committee.

Etihad is being regarded as an ordinary public shareholder under the agreement it signed with Jet Airways and such a classification does not require it to make an open offer.

However the deal is facing hurdles with share holders and even Securities and Exchange Board of India (Sebi) and Foreign Investment Promotion Board (FIPB) of India raising concerns over "substantial rights'' being accorded to Etihad Airways. The FIPB has deferred granting sanction to the proposal until the issues

regarding control are adddressed.

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.