Directs company to seek Sebi permission to waive takeover code.
The Company Law Board (CLB) today approved a proposal by the government-appointed board of Satyam Computer Services to sell equity to a strategic investor 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 or a former chief justice of India.
"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," CLB Chairman S Balasubramanian said.
| OPEN SESAME (What the Company Law Board said) |
| * CLB okays Satyam stake sale plan |
| * To include Rs 2,000-4,000 crore class suits filed in the US |
| * To issue another Rs 60 crore shares at a face value of Rs 2 |
| * Satyam likely to sell 26% stake to strategic partner |
| * Around 12 companies understood to have evinced verbal interest |
| * CLB to appoint retired Supreme Court judge or a former chief justice to oversee the processes of partner induction and open bidding |
CLB also directed Satyam to seek permission from market regulator Securities Exchange Board of India (Sebi) to waive the takeover code. Sebi recently said it was willing to waive, on a case-to-case basis, open offer conditions that require shares to be priced at an average of the past six months’ price.
In Satyam's case, this becomes difficult since the stock has fallen from Rs 226.5 on December 16, when founder Ramalinga Raju proposed to invest in two family-owned concerns, to Rs 39.95 on January 7, when Raju confessed to overstating the company's profits. The average six-month price before January 7, 2009, would have been Rs 315.62 (from July 7, 2008 till January 6, 2009), significantly above the Rs 46 at which the stock closed today.
The Sebi waiver will enable Satyam to issue shares through a preferential issue at a price that reflects the current quoted price in the stock exchange.
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CLB also permitted Satyam to increase its authorised share capital from Rs 160 crore, consisting of 800 million shares of Rs 2 each, to Rs 280 crore comprising 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 Central Government required for alteration of memorandum”. This section allows changes in the Memorandum of Association for reasons ranging from carrying on the business more efficiently to selling a part of the undertaking.
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February 19: Satyam board for raising share capital