NEW DELHI, Dec 7: Having run into troubles with institutional investors over its Gujarat plant transfer to parent Suzuki, car maker Maruti now wants to seek approval of minority shareholders after a proposed relaxation comes into effect in the Companies Act.
Maruti Suzuki India had earlier planned to seek shareholders’ approval for the transaction in November.
The Cabinet, meanwhile, has cleared a slew of amendments this month to various aspects of the new Companies Act.
“Now another new factor which is the proposed amendment to the Companies (Amendment) Bill has come up. So it would not make sense to go for the vote till we know what that bill is and what the future is,” MSI Chairman RC Bhargava told PTI.
Once the changes come into effect, after Parliament’s nod, it would become easier for companies to get shareholder approvals for related party transactions. Maruti’s proposed plant transfer to Suzuki falls under this category of transactions.
Under pressure from institutional investors, Maruti had decided earlier this year to seek minority shareholders’ approval after tweaking some of the earlier proposals with regard to transfer of the Gujarat plant to Suzuki.
When asked if the company would wait for the bill to be passed in the Parliament, to take up the matter with the minority shareholders, Bhargava said: “I think so. It won’t make sense to go for a vote on a law which is going to change, so it is going to be delayed.”
Bhargava, however, said the delay in taking the approval would not impact the construction work at the Gujarat plant.
“…Work is carrying on (at the Gujarat plant) so it doesn’t matter,” Bhargava said.
As per the current regulatory framework under the Companies Act 2013, a proposal like Maruti’s would require approval from 75 per cent of the minority shareholders for a special resolution in this regard.
Following the latest changes approved by the Cabinet, such proposals can be approved through an ordinary resolution requiring a simple majority of over 50 per cent.
In January, Suzuki Motor Corporation (SMC) announced it would invest USD 488 million to build the Gujarat plant, which Maruti had earlier proposed to set up.
Opposing the move, Maruti’s institutional investors approached capital markets regulator Sebi, seeking its intervention to safeguard the interests of minority shareholders. Private sector mutual funds and insurance companies, which own almost 7 per cent of the company, led the opposition.
The plant, which would be SMC’s first fully owned factory in India, is being planned with an initial capacity of 1,00,000 units a year, all of which will be supplied to Maruti. (PTI)
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