Bharti Telecom Wins NCLAT Backing for Capital Reduction
The National Company Law Appellate Tribunal (NCLAT) cleared Bharti Telecom's 2018 capital reduction plan, rejecting the plea of minority shareholders that the plan was not fair and did not follow the law. Bharti Telecom is the holding company of Bharti Airtel.
Capital reduction enables a company to repurchase its shares from the shareholders, reducing its share capital.
The lawyer for Bharti Telecom claimed that the capital reduction scheme met all the relevant rules and regulations and the shares worth offered to the minority shareholders as part of the scheme were computed by employing a standard approach.
The minority shareholder's lawyer claimed that Bharti Telecom arrived at the calculation of shares worth 25% discount, which was unjust and contrary to the law.
Defending the argument, Bharti Telecom's lawyer replied, "It's a prevalent practice for ascertaining value of shares of unlisted companies and also under the Indian Accounting Standards".
Discount of 25% was utilized to determine value of shares in order to take into account non-marketable-ness of shares. Moreover, as the shares belonged to an unlisted company, it was not reasonable to take market price as a base.
Bharti Telecom's lawyer also stated "99.90% of total shareholders had approved the capital reduction scheme", which maintains the corporate democracy principles.
Minority shareholders account for 1.09% of Bharti Telecom's share capital.
