The Company Law Board (CLB) today approved a proposal sell equity stake to a strategic investor in Satyam Computer Services and also to increase the share capital.
In its order, the CLB said the strategic investor should be selected through an open bidding process that will be overseen by a retired judge of the Supreme Court.
"In the interest of the company, its employees, shareholders, customers and in the larger public interest, further induction of long term funds through induction of a strategic investor is necessary," said S Balasubramanian, chairman of CLB.
Today’s order by CLB follows an application from the IT outsourcing company to bring investment into Satyam through issue of equity shares on preferential basis.
Further, CLB also directed Satyam to seek the market regulator, Securities Exchange Board of India's (Sebi) permission in terms of takeover code. Recently, Sebi said it was willing to waive open offer conditions in terms of pricing on case-to-case basis.
This would enable Satyam to issue shares on preferential route at a price which reflects the current quoted price in the stock exchange. The stock price fell sharply after Satyam founder B Ramalinga Raju admitted to manipulating the accounts of the company last month.
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CLB also permitted Satyam to increase its authorized share capital from Rs 160 crore consisting of 800 million share of Rs 2 each to Rs 280 crore comprising of 1.4 billion shares of Rs 2 each. The fresh shares to be issued can be allotted at par or at premium.
The order was passed under Section 17 of the Companies Act, which deals with “Special resolution and confirmation by Centre required for alteration of memorandum”. This section allows changes in Memorandum of Association for reasons ranging from carrying the business more efficiently to sell a part of the undertaking.
CLB has allowed the government-appointed board to pass a resolution authorizing itself to make a preferential allotment of equity shares. This order was based under Section 81 A of the Companies Act that deals with “Further issue of capital”.