Sweat claim turns up heat Sunanda not an employee: Consortium
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- Published 15.04.10
April 14: Shashi Tharoor and the Kochi IPL consortium have said Sunanda Pushkar has been given “sweat equity”, which rules say can be allotted to employees and directors of a company.
However, Satyajit Gaikwad, the spokesperson for the consortium, told The Telegraph tonight that she was not an employee but “a hired professional”.
Asked specifically if Sunanda is an employee of either the Kochi IPL team or Rendezvous Sports World, Satyajit said: “She is not an employee. She is a hired professional who will handle the branding, marketing and franchising services for the team. Her stake is a sweat security given to her against her professional tasks. She will be given shares at Re 1….”
Satyajit is the cousin of Shailendra Gaikwad, the chief executive of Rendezvous that won the Kochi IPL franchise as part of a consortium.
Sunanda had earlier in the day said in a statement to news agency IANS that she got the equity — described as “free” by IPL chief Lalit Modi in a tweet on Sunday — in lieu of salary for professional services. Sunanda said she owned some equity in the franchise but added that the “equity remains only on paper for the foreseeable future”.
Tharoor also told NDTV tonight “this is sweat equity”.
The term “sweat equity” raises the question whether procedural requirements have been met.
Satyajit said she was not an employee but did not clarify if she was a director — the other criterion to become eligible for sweat equity. He used the words “hired professional”, which could mean a consultant — a role Sunanda mentioned in her statement.
Sweat equity is a device that companies use to retain their best talent. Usually, it is given as part of a remuneration package at the end of the year. However, start-ups sometimes use sweat equity as a bait to court talent. IPL Kochi is an unlisted company, which means its shares are not traded on a stock exchange.
All companies can issue sweat equity to employees or their directors under Section 79A of the Companies Act but there are some restrictions that specifically apply to unlisted entities.
Unlisted companies like IPL Kochi cannot issue more than 15 per cent of the paid-up capital in a year or shares with a value of more than Rs 5 crore — whichever is higher — except with the prior approval of the central government.
Sunanda reportedly holds an 18 per cent stake — she has said it is much less — in Rendezvous, translating into an indirect stake of 4.5 per cent in the Kochi IPL. An estimate floating around is that the shares held by Sunanda are valued at Rs 70 crore — a point that Tharoor did not dispute in the television interview.
If the sweat equity is being issued for consideration other than cash (as in this case where Sunanda claims to be bringing her “professional expertise” to the table), an independent valuer has to carry out an assessment and submit a valuation report.
The company should also give “justification for the issue of sweat equity shares for consideration other than cash, which shall form part of the notice sent for the general meeting”, the rules state.
The board of directors’ decision to issue sweat equity has to be approved by passing a special resolution at a shareholders’ meeting later in the year. A special resolution must be passed by 75 per cent of the members attending and voting.
Sunanda has said she was invited to assist Rendezvous “particularly in the areas of fund-raising and networking”.
Fund-raising and networking are tasks where political connections or perception of proximity to those in power come in handy.
“In view of my extensive international experience as a business executive, marketing manager and entrepreneur, I was invited to assist Rendezvous particularly in the areas of fund-raising, networking, elsewhere; event management; and brand building,” she said.