The Telegraph
Since 1st March, 1999
Email This Page
Sandvik equity rejig falters

Mumbai, Oct. 21: A recent Bombay High Court verdict has dismissed a Sandvik Asia petition on an equity restructuring programme that envisaged buying out the stake of small shareholders without their consent.

Sandvik Asia, a leading blue chip multinational company, had proposed a compulsory exit for its minority shareholders by using Section 100 of the Companies Act.

Eleven shareholders, led by Janak Mathuradas and Aspi Bhesania, raised objections in the court to the resolution, which is fast becoming a norm as more and more companies are lining up to ease out small investors from their rosters.

Section 100 allows companies to reduce share capital by paying off any paid-up share capital which is in excess of the company’s requirements.

The Bombay High Court, however, dismissed the petition in favour of small shareholders. It will now act as precedent and stop other companies from following this route, Mathuradas said.

Mathuradas, holding 304 Sandvik shares, declined the company's offer to buy out his stake at Rs 850 per share. Minority shareholders still hold 4.46 per cent stake in Sandvik totalling 61,000 shares.

“We have become shareholders of the company through an initial public offer,” Mathuradas said.

“They (Sandvik) came out with several open offers to buy our shares and even went without dividend for a year. We understood their predicament. When they delisted the shares from the stock exchanges, we never protested,” he added.

“We have grown together and want to continue to have a stake in the company which has a monopoly in the domestic carbide tool industry,” he said.

If the scheme was ratified by the high court, many other companies would have used it to ease out small shareholders, Bhesania said.

John Fowler, Madura Coats and Skol Breweries have also lined up to get similar proposals ratified by the court. Sandvik Asia had called an extraordinary general meeting of the shareholders to reduce its share capital.

By virtue of a majority of over 95.56 per cent, the resolution was passed. However, the reduction in capital had to be confirmed by the Bombay High Court or the National Company Law Tribunal.

Email This Page