The draft shareholders agreement for Videsh Sanchar Nigam Ltd (VSNL) has proposed a five-year lock-in period for the strategic partner, during which the latter cannot sell its 25 per cent stake in the company.
With its 25 per cent shareholding, the strategic partner will have an equal representation in the board as that of the government, which will have 26 per cent stake in the company. The board will have 12 members, of which four each will be appointed by the government and the strategic partner.
There will be four independent directors who will be nominated by both the government and the startegic partner. The managing director will be a nominee of the strategic partner, as long as it has the 25 per cent stake in the company. Besides, the board will have at least 10 Indian nationals.
The agreement also states that after the expiry of the five-year lock-in period, the government can sell all or a part of its stake to the strategic partner at the higher of the fair value or original purchase price. In case, any equityholder wants to offload his share, the existing shareholders will have the first right of refusal.
In case of default, the government reserves the right to buy back shares at 50 per cent of the sale price or at a price specified by law. Under certain specific conditions, the board or the government reserves the right to issue additional shares by preferential allotment, remove any director or executive officer, go in for compulsory disposal of equity shares or restrict their transferability.
The agreement also states that the corporate name, logo and trademark of the company can be changed with the consent of the shareholders. The registered office of the company will continue to remain within the country.
The terms of the draft agreement specify that the government cannot be held liable for failure to put in money by way of subscription to equity capital and also that in case the company borrows money from any bank or financial institution (FI), the government will not be obliged to provide any guarantee for the amount.
No board meeting can take place without at least one director nominated by the government being present.
Approval of the government nominee would be required in case of 21 specific issues, including any change in the capital structure of the company, sale, lease/transfer or disposal of any asset, making loans in excess of Rs 10 crore to any person other than in the ordinary course of the business of the company.
