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The shareholder agreement between Jet Airways (India) and Abu Dhabi-based Etihad Airways is likely to be revised again, following concerns raised by the Securities and Exchange Board of India and the Foreign Investment Promotion Board (FIPB) over the Gulf carrier gaining substantial control.
Under the current agreement, board resolutions require the consent of three-fourths of members. According to people aware of the development, the clause might be amended to say a simple majority will be required to pass resolutions in the board.
According to the agreement, Etihad will get three board positions, while Jet will have four members. There will be seven independent members on the board. In simple terms, the proposed amendment means that a vote of eight board members will be sufficient to pass a resolution.
A Jet spokesperson said in a response to a query: “As the Jet Airways and Etihad Airways alliance is being examined by the concerned regulatory authorities and their consequent approvals are awaited, it would be inappropriate for Jet Airways to respond at this stage.”
Etihad has agreed to pick up a 24 per cent stake in Jet for about Rs 2,060 crore. If indeed the amendment goes through, this will be the second revision of the shareholder agreement. It was signed by the two airlines in April and was modified in May after Sebi raised objections regarding the structure of the deal.
One of the key changes made in May ensured that Etihad will not have the unilateral right to terminate the commercial cooperation agreement and this right will now be held by both sides. The other change pertained to constitution of the nomination committee of the board, which will make key board and management appointments.
The nomination committee will include one person nominated each by Jet and Etihad and three other board members will be chosen through consensus.
In the earlier agreement, Etihad had the right to nominate the three independent members on the committee. Etihad is being regarded as an ordinary public shareholder under the agreement it signed with Jet and such a classification does not require it to make an open offer.
However the deal is facing hurdles with shareholders and even Sebi and FIPB raising concerns over "substantial rights'' being accorded to Etihad. FIPB has deferred granting sanction to the proposal until the issues regarding control are addressed.
Jet did not put up the proposal to amend the company's articles of association at its extraordinary general meeting, where the sale of equity stake to Etihad was approved. Articles of association is a document which defines the responsibilities of a company's directors, the business to be undertaken, and the means by which the shareholders exert control over the board.
Under the current agreement, board resolutions require the consent of three-fourths of members. According to people aware of the development, the clause might be amended to say a simple majority will be required to pass resolutions in the board.
According to the agreement, Etihad will get three board positions, while Jet will have four members. There will be seven independent members on the board. In simple terms, the proposed amendment means that a vote of eight board members will be sufficient to pass a resolution.
A Jet spokesperson said in a response to a query: “As the Jet Airways and Etihad Airways alliance is being examined by the concerned regulatory authorities and their consequent approvals are awaited, it would be inappropriate for Jet Airways to respond at this stage.”
Etihad has agreed to pick up a 24 per cent stake in Jet for about Rs 2,060 crore. If indeed the amendment goes through, this will be the second revision of the shareholder agreement. It was signed by the two airlines in April and was modified in May after Sebi raised objections regarding the structure of the deal.
One of the key changes made in May ensured that Etihad will not have the unilateral right to terminate the commercial cooperation agreement and this right will now be held by both sides. The other change pertained to constitution of the nomination committee of the board, which will make key board and management appointments.
The nomination committee will include one person nominated each by Jet and Etihad and three other board members will be chosen through consensus.
In the earlier agreement, Etihad had the right to nominate the three independent members on the committee. Etihad is being regarded as an ordinary public shareholder under the agreement it signed with Jet and such a classification does not require it to make an open offer.
However the deal is facing hurdles with shareholders and even Sebi and FIPB raising concerns over "substantial rights'' being accorded to Etihad. FIPB has deferred granting sanction to the proposal until the issues regarding control are addressed.
Jet did not put up the proposal to amend the company's articles of association at its extraordinary general meeting, where the sale of equity stake to Etihad was approved. Articles of association is a document which defines the responsibilities of a company's directors, the business to be undertaken, and the means by which the shareholders exert control over the board.
