Zee sets up an interim committee
Zee Entertainment Enterprises Ltd has established a temporary committee to supervise the day-to-day operations of the company. This decision was made after the former chairman Subhash Chandra and managing director and CEO Punit Goenka failed to overturn the ban imposed by the market regulator, preventing them from holding board positions.
According to a company spokesperson, the interim committee will be overseen by Zee's board.
In June, the Securities and Exchange Board of India accused Chandra and Goenka of diverting funds to other listed entities and firms associated with the founding shareholders. As a result, the regulator banned them from holding board positions in publicly listed companies for one year. The Security Appellate Tribunal recently upheld this decision and directed the regulator to issue a final order next month, giving Chandra and Goenka an opportunity to defend themselves.
This ruling comes at a crucial time as Zee and a subsidiary of Sony Group in India are nearing the completion of their merger, which was announced in 2021. The merger aims to create a $10-billion TV enterprise, with Goenka expected to become the managing director and CEO of the merged entity.
A Zee spokesperson stated that the board evaluated the situation and took necessary measures in response to the regulator's order and the subsequent judgment. As Goenka is restricted from holding director or key managerial positions in listed companies, the company's board appointed a temporary committee of senior executives to ensure smooth operations.
The spokesperson emphasized that the interim committee will work under the board's supervision and seek guidance on all company-related matters. The board expressed confidence in Goenka's leadership skills and will closely monitor the progress of the situation, aiming to deliver consistent growth and generate higher value for shareholders.
Following this announcement, Zee's shares saw a surge, closing with a gain of 6.27% at Rs 229.65 on the BSE.
Although concerns were raised about the potential delay of the merger with Sony due to the regulator's order, the formation of the interim committee may facilitate the continuation of the merger process.
Zee had previously announced its merger with Culver Max Entertainment (formerly known as Sony Pictures Networks India) in 2021. The merger has received approvals from stakeholders, creditors, and the Competition Commission of India. However, the final approval from the National Company Law Tribunal (NCLT) is still pending as the tribunal reserved its order last week.
According to sources, Punit Goenka, the debarred managing director of Zee, assured employees in a letter that the merger with Sony is in an advanced stage of completion and the issues with Sebi should not pose a problem for the company. Goenka highlighted that the merger has already obtained clearance from various regulatory authorities and shareholders.