Institutional EYE

Commentary on Corporate Governance Issues

ZEE Learn fails its tests

ZEE Learn is unable to answer its investors’ questions. Its board and management have not provided the requisite leadership resulting in poor capital allocation decisions, including a botched-up acquisition. Plagued with high debt and weakening cash flows, the problems are exacerbated by pledged promoter equity. The board needs to find a solution for the entire business and the company itself. For this, investors may need to wrestle the company out of the promoters’ control and influence. Zee Learn Ltd. (ZEE Learn) provides education from preschool upto class 12 across India through its brands like Kidzee and Mount Litera. In February 2018, the board of ZEE Learn acquired a 44.53% stake in M

MCA allows holding of EGMs through video conferencing and pauses

This article has been updated. After the publication of this article, MCA has issued a clarification dated 13 April 2020. This version incorporates the clarifications. Having given relaxations on EGMs, MCA has taken a pause: it has not been extended to AGMs. MCA may be waiting to obtain feedback after a round of EGMs. Or it could be expecting that when the AGM season1 - June to September, commences, the pandemic will be behind us. Irrespective of its the assessment, MCA needs to go the full distance. There are companies with a December year-end, and for them this is the time to hold their AGM. The Companies Act, 2013, requires physical quorum to constitute a valid meeting. However, in lig

COVID – 19 | The Virtual Reality of Shareholder Meetings

With social distancing and lockdowns becoming the norm, shareholder meetings will have to take on a virtual form. Although companies, investors, and regulators may not all be prepared, this will be the new normal. While the system of having shareholder meetings finds this new equilibrium, AGMs will be delayed as will the expectation of a dividend payout. The outbreak of COVID-19, which was declared a pandemic on March 11 by the World Health Organization (WHO), has sent shock waves across global markets and has forced unprecedented measures on the movement of people within and across the country. The Government of India’s directives of a 21-day lockdown and social distancing to avoid large pu

Slash dividends, cease buybacks: prioritize shoring up balance sheet

Given that many companies are going to scramble to find money just to survive, dividends and buy-backs should be the last thing on a board’s agenda. Only after business has stabilized and there is visibility ahead, should companies look at paying their shareholders. The Finance Minister while presenting FY20-21 Union Budget proposed to remove dividend distribution tax on companies: henceforth the tax is to be collected from recipients, at the applicable rate, which could be as high as 43%. Since then companies have scrambled to declare an interim dividend to make it more tax-efficient for the (controlling) shareholders. Market data shows that 424 companies have announced interim dividends be

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