Diageo bars United Breweries from appointing independent director at United Spirits

MUMBAI (Reuters) - Britain's Diageo PLC said India's United Breweries Holdings Ltd can no longer appoint an independent director to the board of United Spirits Ltd (USL) after reducing its ownership of the South Asian distillery.

Diageo nearly doubled its stake in USL following a $1.9 billion bid earlier this year, giving it the right to appoint the majority of directors to USL's board.

The London-listed beverage maker in a statement on Wednesday said Vijay Mallya, who controls United Breweries, will continue to serve as non-executive director and chairman of USL for as long as United Breweries owns at least 1.3 million USL shares.

A spokesperson for United Breweries declined to comment.

Mallya previously controlled USL through United Breweries, but he had to lower his stake because of heavy debt brought about by the collapse of his Kingfisher Airlines Ltd.

Diageo also said Mallya's position on USL's board will be contingent upon the "absence of certain defaults" by either Mallya or United Breweries. Diageo did not specify how it classified defaults.

Mallya was declared a "wilful defaulter" last month by state-run lender United Bank of India. In India, that means he could be forced to stand down from any corporate posts and may limit the fundraising prospects of his businesses.

(Reporting by Himank Sharma; Editing by Christopher Cushing)