A board position requires one to hold at least 3 per cent of the outstanding shares. Binny holds around 5 per cent stake in Flipkart
Though Binny Bansal has stepped down from the post of group chief executive officer and chairman of Flipkart over allegations of ‘serious personal misconduct’, US retail giant Walmart will not be able to remove him as a director from the board.
According to the new articles of association approved by the company on September 25, Binny would continue to remain as a founder-director of the Indian e-commerce major as long as he holds at least 3.53 million shares in the company.
For all other minority shareholders, a board position will require them to hold at least 3 per cent of the outstanding shares.
Binny holds around 5 per cent stake in Flipkart, the company he co-founded along with Sachin Bansal in 2007. Walmart owns a 77 per cent stake in the Indian e-tailer.
Though Business Standard couldn't ascertain the exact number of shares Binny holds as of now, sources said his current holding is far higher than the stipulated minimum amount for him to retain the board seat.
Business Standard had on Tuesday reported that Binny retained his board position due to a possible investor agreement.
According to documents sourced from data intelligence platform Paper VC, the articles of association of Flipkart also specifies that the board can have a maximum of nine members, including one founder director.
Currently, Flipkart's board comprises seven members that include Binny Bansal as the founder director.
“The founder shall be entitled to be a director for so long as the founder satisfies the minimum ownership threshold," the document said.
It also said that in the case of founder director losing his right to continue on the board, Walmart will have the right to appoint an additional director.
“If the founder loses his right to be a director, then the number of directors that Walmart has the right to appoint shall increase by one,” it added.
However, the new director would be an independent one unless Walmart holds an 85 per cent stake in Flipkart, which is not the case now.
The investor agreement also specifies that any alteration in the voting structure of Flipkart can be brought in by Walmart only after it owns an 85 per cent stake in the company.
On Tuesday, Walmart in a statement to the US SEC said Binny had tendered his resignations after an investigation into allegations of "serious personal misconduct" which were levelled against him.
While the investigation found no merit in the complainant's allegations, it did find instances of lapse in Bansal's judgement and lack of transparency on his part.
With the exit of Binny Bansal from the day-to-day running of Flipkart, India's e-commerce sector is clearly dominated by two US giants.
Amazon has pumped in close to $5 billion into India since it launched its service here in 2013, while Walmart invested $16 billion to acquire a majority ownership of Flipkart in May this year.
Photograph: Abhishek N Chinnappa/Reuters