McDonald's licence renewal stuck over signature

43 stores in Delhi shut on June 29 because their licences were not renewed even after the deadline

In a new twist to an ongoing battle between the partners, a move by McDonald’s to appoint one of the executives in the joint venture company as an authorised signatory for renewal of licences has hit a roadblock with an employee refusing the offer. 

As many as 43 McDonald’s stores in Delhi and adjoining regions had to shut shop on June 29 because their health and eating licences were not renewed even after the deadline expired. 

The move to find a non-board member was pushed through in a board meeting at Connaught Place and Restuarants Ltd (CPRL), after Indian joint venture partner Vikram Bakshi, who holds 50 per cent stake, communicated to McDonald’s early in March — and also in the meeting — that he would not append his signatures on licensing documents due to the declining quality standards and potential fear of prosecution. He requested that the foreign directors, solely or together, take up this power (McDonald’s has two directors in the board).  

However, Aysel Melbye, one of the McDonald’s nominees on the board, contended that under the agreement in December 2013, Bakshi and she were jointly authorised to sign on such applications and he was now going back on the agreement. 

Aysel, in a communication, asked the company secretary to prepare a resolution authorising the head of the licensing department or the head of operation department to be the licence signatory so that the stores could be reopened. However, one of the identified signatories, Harish Sharma, the licensing head in CRPL, has rejected the offer saying that since the directors in the board have refused to sign on the said application, he will follow suit. 

When contacted, Bakshi said: “Yes, it is correct that foreign nominee directors do not want to take the onus of signing the renewal of licences by themselves even though the Indian directors have agreed to authorise them. I have been the sole signatory to the licences till 2013. The foreign nominee directors want the responsibility to be thrust on an employee of CPRL.” 

Bakshi also said that the employees identified by foreign directors have been unwilling to become authorised signatories. 

“The current situation is the result of our former JV partner's refusal to co-sign the licence renewal applications with an MIPL (McDonald's India Pvt Ltd)-nominated director, which were the protocols previously approved by the CPRL board. The resolution to the situation will require the appointment of someone from CPRL other than the directors. We hope to resolve the issues as soon as possible,” said Barry Sum, director of corporate relations, Asia Foundational Markets, McDonald’s. Sum, however, did not provide information on when the company was likely to identify a person who will be an authorised signatory. 

Sources say if the issue is not resolved, the closure of the operations could cost the company as much as Rs 60 crore for the next three months. 

Bakshi and his wife Madhurima, who is also a director, have questioned the foreign directors on many counts: Their unwillingness to sign on the licences, independent of Indian directors, and the fact that the licences have lapsed and no attempt has been made to resolve the signatory issue. 

The two have also raised the issue of whether under the law it is mandatory for the directors to be the authorised signatory for taking licences. McDonald’s argued that based on legal opinion there is no such mandatory requirement.