Tata Sons, the promoter of major operating companies of the Tata Group, is looking to explore ways to change its status from a public limited company to a private limited one. The group has sought approval from its shareholders to amend its memorandum of association and articles of association to move ahead on the proposal.
The development comes a week ahead of the annual general meeting (AGM) of the group scheduled for September 21st.
Aa Tata Sons spokesperson said that the reinstatement of Tata Sons as a private company was considered by the board to be in the best interest of the company. The proposed switch, according to Tata Sons, is chiefly because its status of 'deemed public company' is not statutorily recognised under the Companies Act, 2013.
Meanwhile, the family of ousted chairman Cyrus Mistry, which holds 18.4 per cent stake in Tata Sons, has opposed the move. Tata Trusts holds 66 per cent stake in the salt to software conglomerate.
In a letter to the board of directors of Tata Sons, Cyrus Investments Pvt Ltd described the step as another act of oppression of the minority shareholders of Tata Sons at the hands of majority shareholders.
"The real motive behind convening the proposed AGM is malafide and for ulterior purposes and the proposed resolutions are not in the interest of Tata Sons as a whole or at all," the letter alleged.
Cyrus Investments Pvt Ltd and Sterling Investments Corporation of the Mistry family are fighting a legal battle against Tata Sons at the National Company Law Tribunal (NCLT) following the dismissal of Mistry as chairman last year. "Given the nature of grievances already raised and relief sought in the NCLT petition, the timing and issuance of the AGM is a subversion of the judicial process," it said.
The move to convert Tata Sons into a private limited company would put restrictions on "free transferability" of shares of the company and is "yet another attempt by the majority shareholders to oppress minorityshareholders", it added.
The letter to the Tata Sons board further alleged that the proposal is a device to "subvert the highest standards of good corporate governance, which is expected to be maintained in a company of the stature and repute as Tata Sons". Tata Sons spokesperson did not comment on the allegations raised by the Mistry side.