Invesco’s requisition for EGM is invalid & illegal, says ZEE; refuses to hold meeting

The ZEE Board has turned down the requisition for Extraordinary General Meeting (EGM) made by Invesco Developing Market Funds and OFI Global China Fund, LLC, calling it “invalid and illegal”. Zee Entertainment Enterprises Ltd (ZEEL) informed the bourses about this via its letter dated October 1, 2021.

The ZEE Board held a meeting on October 1, 2021 and arrived at a conclusion that the “requisition is invalid and illegal” and has accordingly conveyed its inability to convene the EGM to two of its largest stakeholders.

In its letter to the bourses, ZEE stated that, “The Board, comprising of experienced professionals deliberated and discussed various legal and statutory implications of the requisition notice. The Board sought the opinions of independent counsel, legal experts, including senior retired Supreme Court judges and evaluated the matter in a fair and transparent manner.”

The ZEE Board further stated that it had also referred to various non-compliances under multiple laws, including the Securities and Exchange Board of India guidelines, Ministry of Information and Broadcasting guidelines and key clauses under the Companies Act & Competition Act, and had arrived at this decision after taking into account the interests of all the stakeholders and stakeholders of the company.

As reported earlier, Invesco Developing Market Funds and OFI Global China Fund, LLC, who together hold 17.88% of the paid-up share capital of ZEEL, are seeking the ouster of ZEE CEO and MD Punit Goenka as Director, as well as two other Directors of the company – Manish Chokhani and Ashok Kurien. Chokhani and Kurien resigned as Non-Executive Non-Independent Directors of the company on September 13, 2021, a day ahead of ZEE’s AGM. Invesco and OFI have also proposed the appointment of six new independent directors. The charges levelled by the investors include inability to handle governance issues, unfair high compensation for MD and CEO Punit Goenka, non-accountability for losses, misgovernance, etc. The ZEE Board, on the other hand, have decried the charges levelled by some proxy advisory companies against Manish Chokhani and Ashok Kurien, both former non-executive directors.

Meanwhile, on September 22, 2021, Sony Pictures Networks India (SPNI) and ZEEL announced that they have entered into an exclusive, non-binding Term Sheet to combine both companies’ linear networks, digital assets, production operations and program libraries. The non-binding Term Sheet provides an exclusive negotiation period of 90 days, during which ZEEL and SPNI will conduct mutual diligence and negotiate definitive, binding agreements. It has been proposed that Punit Goenka, current Managing Director & CEO of ZEEL, will lead the combined company, while NP Singh, MD and CEO, Sony Pictures Networks India, will hold a leadership role on the Board of directors of the combined entity.

Amid the ZEE-Sony merger buzz, Invesco and OFI reiterated their demand for an extraordinary general meeting (EGM) and wrote a second letter to the ZEE Board on September 23, 2021. Following this, on September 29, 2021, Invesco and OFI approached the National Company Law Tribunal (NCLT) and sought its intervention in directing ZEE to hold the EGM. The case No. CP - 322/2021 was registered that day.

With ZEE digging its heels and Invesco and OFI being relentless in holding the EGM to seek Punit Goenka’s ouster and the appointment of the six new independent directors proposed by the two investors, the saga is expected to get murkier in the coming days.

How far the largest investors in ZEE will be able to impact the ZEE-Sony merger deal remains to be seen.