Minority shareholders of Max Financial Services Ltd. approved the payment of Rs 850 crore as non-compete fees to Analjit Singh and his promoter group as part of HDFC Life - Max Life merger.
64.67 percent of the minority shareholders were in favour of the payment of the non-compete fees over a four-year period, while 35.32 percent voted against the resolution, Max Financial said in a notification to the National Stock Exchange.
75.36 percent of minority shareholders, who between them hold 13.99 crore shares, participated either via postal ballot or e-voting. Of this, nearly 80.6 percent voted via e-voting, the company added.
The Non-Compete Issue
According to the terms of the merger announced in August, HDFC Life had to pay a non-compete fee of Rs 850 crore to Max Financial Services' promoter group, including an upfront payment of Rs 501 crore, while the remaining Rs 349 crore would be paid in three equal installments.
A non-compete is usually paid to compensate a person for exiting a business and for promising not to re-enter it for a period – four years in this case.
The agreement also said that these payments are subject to the receipt of upfront majority approval from minority shareholders of Max Financial Services. Analjit Singh and promoter entities were classified as minority shareholders in the merged HDFC Life, according to the merger scheme.
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