Tata Power Ltd. has issued an explanatory statement ahead of the company's extraordinary general meeting convened on December 26 to consider a resolution to remove former Tata Sons chairman, Cyrus Mistry, from his position as chairman and director.
Mistry did not abide by the governance guidelines which he had played an active role in formulating, that required him to resign from the board of Tata Power after his ouster, the company said in a stock exchange filing.
In his capacity as executive chairman of Tata Sons, Mistry was an employee of Tata Sons, and after being replaced in that role on October 24, 2016, he was required to resign from the board of Tata Power.
The company cited various provisions in its own Articles of Association and Tata group guidelines, to make a case for Mistry's removal from the board.
Employees of a Tata company should, post employment, immediately resign from the boards of all Tata companies where they are functioning as non-executive directorsClause 2.9, Governance Guidelines of Tata Group
So long as the word ‘TATA' is associated with the name of the Company, Tata Sons Limited will have the right to nominate the Chairman of the Board of Directors.Article 164(b), Articles of Association, Tata Power
In addition, Mistry has hurt the company and its shareholders by making unsubstantiated allegations since his removal as chairman of Tata Sons, the statement said.
Mr. Mistry's conduct has caused enormous harm to the Tata group, TPCL and its stakeholders, including employees and shareholders. Consequently, it is felt that it would not be appropriate for Mr. Mistry to continue as the Chairman and as a Director of TPCL.Tata Power EGM Notice
Tata Power enjoys the rights to use the 'Tata' brand name by virtue of a Tata Brand Equity and Promotion Agreement which they entered into with Tata Sons, the statement added.
However, Tata Sons may terminate the 1998 agreement for use of the Tata brand name in case of any breach of terms or due to any other specific reason set out in the pact, Tata Power said citing the offer letter issued during its 2014 rights issue. In case of a termination, Tata Power may have to change the name of the company.
Loss of this brand value could cause diversion of management time into rebuilding and restoring its reputation which could have a material adverse effect on Tata Power's business, financial condition, results of operations and prospects.Tata Power Letter of Offer dated March 19, 2014
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