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Reliance Energy notice to bourses to empower RIL
BS Corporate Bureau in Mumbai | December 22, 2004 09:08 IST
Reliance Energy Ltd on Tuesday sent a notice to the stock exchanges, saying it was seeking shareholder approval to empower its principal shareholder, Reliance Industries, to appoint the company's chairman, vice-chairman and other directors and to set their tenure.
Shareholders will vote on a special resolution to this effect that is being sent to them for approval. A scrutiniser, Bhupendra Bangari, a chartered accountant, will submit a report on the resolution, which is being sent through postal ballot, by January 18, 2005.
The notice to the stock exchanges said: "Reliance Industries shall designate one of the directors to be the chairman of the board, and may also designate one of the directors to be the vice-chairman and shall determine the period for which each of them is to hold such office. The chairman and vice-chairman so designated shall not be liable to retire by rotation."
The notice seeks to delete articles 131(a)(i), 131(a)(ii) and 131(aa) of REL's articles of association and replace it with a new article 131(a), which says: "So long as the Reliance group and its subsidiaries or associate companies hold 26 per cent or more of the paid-up voting equity share capital of the company and are the single largest shareholding group in the company, they shall have the right to appoint a majority of the directors on the board of directors of the company and shall be deemed to be the promoter of the company."
Conflicting explanations for the notice were proffered by aides to the Ambani brothers. The Mukesh Ambani side immediately suspected it was a ploy by the rival Anil Ambani camp to ensure that REL chairman and managing director Anil Ambani would continue to have the right to appoint directors to the REL board.
A senior Reliance group executive said the proposal was being sent to shareholders with the expectation that it would be defeated.
"After BSES was taken over, Reliance Industries changed the articles of association of the company in February 2003 to reserve the power of appointment of directors with it. Subsequently, Reliance Energy passed a resolution at an extraordinary general meeting in March this year to empower Anil Ambani to appoint directors. Apparently, the move is meant to restore the pre-March status. But if the special resolution is defeated, Anil Ambani will continue to have the right to appoint directors," he said.
A special resolution requires the support of more than 75 per cent of the shareholders who participate in the voting to be carried.The executive said Anil Ambani expected some shareholders, particularly banks and financial institutions, to stay away from the postal ballot.