Zee Refuses to Call for EGM at the Request of Invesco Fund

On 01st October, the NCLT passed an order urging Zee Entertainment to call an extraordinary general meeting (EGM) of shareholders as demanded by Invesco Fund and OFI Global China. These 2 funds hold 17.88% stake in Zee Entertainment and are the single largest holder in Zee. The Subhash Chandra family holds just 3.44% in Zee Entertainment.

Invesco and OFI Global China had called for the EGM with a 2 point agenda. They wanted a vote on the removal of Punit Goenka from the post of MD and CEO as well as appointing 6 of their nominees to the board of Zee Entertainment to reflect their holdings in Zee. Invesco wants even the merger with Sony Pictures to be debated afresh by the new Board.

Check - What does the Zee merger with Sony mean?

Over the weekend, Zee Entertainment has expressed its inability to call for an EGM and has termed the demand by Invesco as being illegitimate. Zee has also filed a petition with the court to strike down the NCLT order urging Zee to call the EGM on the demand of Invesco. Under Section 100 of the Companies Act 2013, an EGM has to be called if shareholders with more than 10% paid up capital demand for an EGM.

Zee’s argument is that any management changes need the prior approval of the Ministry of Information & Broadcasting (MIB). Hence, convening the EGM at the behest of Invesco will amount to breach of the MIB Uplinking Policy Guidelines. The one option in front of Invesco now is to request NCLT to call for EGM under Section 98 of the Companies Act. However, that could imply overruling the I&B Ministry.

The other option in front of Invesco is to itself call for EGM under Section 100 of the Companies Act on the grounds that the current board was oppressive to the interests of shareholders. However, that may be practically more complicated. For now, it is turning out to be a battle of wits between Zee management and Invesco Fund. It could end up being a case of “Who Blinks First”.

Also Read :- Invesco Approaches NCLT to Call EGM for Change of Zee Board