YES BNAK CMP @ 228
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Yes Bank is now looking to appoint an independent search committee to prepare a list of CEO candidates before Kapoor’s term ends on 31 January, two people aware of the developments said.
“Even though RBI as the regulator has the power to approve or disapprove any bank CEO’s appointment, the bank’s board will seek satisfactory answers from RBI and reasons behind the regulator’s sudden change in stance,” added the second person.
What could come in the way is the face-off between the bank’s promoters Rana Kapoor and Madhu Kapur, and the AoA they signed and has been registered with the ministry of corporate affairs (MCA).
At the end of June 2018, Rana Kapoor holds a 4.34% stake and Madhu Kapur holds a 7.62% in Yes Bank. Other promoters include Yes Capital (India) Pvt. Ltd (3.28%), Morgan Credits Pvt. Ltd (3.05%) and Mags Finvest Pvt. Ltd. (1.7%).
The articles of association was agreed upon by the bank’s promoters in 2005 and amended in September 2017.
Section 127 (A) of Yes Bank’s articles of association says the managing director and CEO shall not be subject to “retirement by rotation” but be subject to the provisions of the contracts between them and the company. Retirement by rotation is a process whereby at each annual general meeting (AGM) one third of the directors must quit and seek re-election.
Kapoor is a director and this section of the articles of association protects him (or anyone who assumes the CEO’s position at Yes Bank) from automatic retirement.
Also, under Section 127A, to appoint any whole-time director, the board shall follow the recommendation made by the promoters.
It also says the board may appoint one of its members as whole-time director but even that would be subject to the AoA and RBI approval.
The conflict between Yes Bank’s promoters began in 2009, a year after co-founder Ashok Kapur was killed in the 2008 terrorist attack in Mumbai.
The board declined to appoint Shagun Gogia, daughter of Ashok Kapur, because it was felt she might not meet RBI’s fit-and-proper criteria. In 2013, Madhu Kapur (widow of Ashok Kapur) and her daughter Shagun Gogia approached the Bombay high court seeking greater say in appointing directors and wanted the court to uphold their right to jointly nominate directors.
In June 2015, a single bench of the Bombay high court ruled that both promoters must follow the articles of association . However, both Kapur and the bank have challenged the ruling before a division bench. Gogia told Mint over the phone on Thursday that the board can look for a successor and it does not require the approval of the promoters. However, if the board finds a successor to Rana Kapoor after appointing a search committee, it will nevertheless, have to seek approval of RBI before appointing the candidate.
She added that promoters can jointly suggest a successor but that too will need RBI approval. “In case Yes Bank wants to appoint a whole-time director, joint approval of the promoters will be required,” she said.
Post Updated 25 September, 2018 11:06AM
