Rakesh Gangwal to back changes in IndiGo's AoA after concerns addressed
India’s biggest airline by market share currently has a board comprising 6 members. The proposal is to increase it to 10.
The board has also approved a new policy for related-party transactions, he added.
The change in board structure will be done via an amendment in the company’s articles of association that will be taken up at its upcoming annual shareholders’ meet on August 27.
Articles of association form a company’s constitution that defines responsibilities of the board directors, nature of its business and the means by which the shareholders exert control over the company’s board.
InterGlobe Aviation, which operates IndiGo, India’s biggest airline by market share, currently has a board comprising six members. The proposal is to increase it to 10.
Gangwal had on August 6 said he would not be supporting the resolution as a loophole in the new structure would end up giving co-founder Rahul Bhatia more rights than he already had. The lion’s share of decision making – on the appointment of the company’s chairman, most directors and key management personnel — already rests with Bhatia.
The amendment needs a special resolution which requires 75% of shareholders’ approval.
Gangwal, his family, and his family trust together own about 37% of the shares in the airline.
Without Gangwal’s assent, such a resolution will fail.
Bhatia’s IGE Group has two nominees on the board. There are two independent directors and Gangwal, apart from the chairman. A proposal on July 20 sought to increase the size to 10.
Gangwal’s contention was that in the event of resignation of an independent director, Bhatia’s IGE Group with five nominees would have enough strength to pass any resolution.
The loophole, a person said, has been closed with a clause that all board decisions —barring specific urgent ones such as to adhere to a new government rule — can be passed only when there is full board strength.
A new policy for related-party transactions was one of Gangwal’s main demands. He flagged irregularities in transactions in the past in detailed letters to Sebi and government bodies, including the offices of the prime minister and finance minister. That and other issues flagged by Gangwal led to a public, bitter feud between the two partners who built an airline that controls half of India’s domestic air passenger market.
Sebi is still perusing through documents it has sought from IndiGo in this matter.
“While much work lies ahead, including mending some fences and the regulators completing their investigations on the governance issues raised with them, it is gratifying to see progress towards better governance,” Gangwal said in his statement which he uploaded Friday night on his newly-formed website .