Mumbai :Tata Sons, the holding company of the Tata group, has received a clearance from the Registrar of Companies (RoC) to change its status from a deemed public limited company to a private limited one, according to the certificate of incorporation filed by the firm.
A Tata Sons spokesperson declined to comment.
The move is a big setback for the Shapoorji Pallonji Mistry family, which has been involved in a legal slugfest with Tata Sons since December 2016. Cyrus Mistry was removed as chairman of Tata Sons two months earlier. Most importantly, it will effectively restrict the Mistry family’s ability to sell its stake in the Tata group holding company to external entities.
The Mistry family firms — Cyrus Investments and Sterling Investment — jointly own 18.4 per cent in Tata Sons’ equity capital. Shareholders of the Tata Trusts-controlled Tata Sons had passed a resolution favouring the conversion of its status at its annual general meeting on September 21, 2017. Tata Sons had been a private limited company since 1917. It was deemed to be a public company in 1976 on the grounds of turnover according to Section 43(A) of the Companies Act, 1956.
Tata Sons got RoC’s nod on August 6, just a day before the National Company Law Appellate Tribunal (NCLAT) in Delhi started hearing the Mistry family’s appeal against the July 9 order of the National Company Law Tribunal (NCLT), Mumbai. On Wednesday, the appellate tribunal heard a petition filed by Cyrus Investments seeking a stay on the conversion while challenging the July order.
In response to the appeal, the NCLAT directed Tata Sons to file an affidavit and written responses by August 10 regarding its conversion into a private limited company from a deemed public company. The two-judge NCLAT bench, headed by Justice S J Mukhopadhyay, said it would hear arguments on August 14 after all documents related to the conversion are presented by Tata Sons in a proper manner and not as “loose documents”.
“Private limited companies are a lot less transparent. Therefore, it won’t be good for other shareholders if holding companies become private,” said Sandeep Parekh, managing partner at Finsec Law Advisors. While such a move would ease regulatory burden on the holding company, it would restrict share transfer rights of the minority shareholders, he added.
