Lalit Modi quits as Godfrey director

Lalit Modi
People who helped him might be holding on to their chairs tightly, but businessman and former cricket administrator Lalit Modi had to let go one of the last offices he held in India.

London-based Modi stepped down as director of Godfrey Phillips India (GPIL), the flagship company of his father KK Modi’s empire, late last month. The loss of this position that earned him millions of rupees in remuneration annually could come as a blow at a time when he finds himself at the centre of a controversy that has rattled the political establishments across India and Britain.
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His continued stay outside the country, due to the ongoing investigations against him, meant he did not attend board meetings of the company. Provisions of the new Companies Act, which came into force last year, do not take such absence lightly.

 
In a filing to the BSE, Godfrey Phillips has said, “The board of directors of the company at its meeting held on May 30, 2015, took note of the fact that Lalit Kumar Modi has vacated his office as a director of the company with effect from May 28, 2015 by virtue of the provisions of section 167(1)(b) of the Companies Act, 2013, i.e. for non-attendance of the board meetings for a continuous period of 12 months.”

Modi was reappointed to the board of GPIL in September ignoring concerns raised by proxy advisory firms about his non-attendance. According to a Business Standard report in September, Modi had not attended a single board meeting in the financial year 2013-14, yet he took home Rs 1.7 crore in fees and other remuneration. In 2012-13, Modi had earned Rs 1.1 crore though he attended only one board meeting through tele conference.

Though proxy advisory firm Stakeholders’ Empowerment Service (SES) had advised shareholders to oppose the reappointment of Modi on the grounds of poor attendance and skewed remuneration policy, he managed to win the support of 99.8 per cent votes at the AGM and got reappointed.

However, the provisions of new companies Act that came into effect on April 1, 2014, claimed Modi’s lucrative chair nine months later.

According to these provisions, directors are disqualified if they remain absent for all board meetings in a period of 12 months, whether they seek a leave of absence or not. The earlier law allowed directors to continue without attending meetings for years, provided they obtained leave of absence from the board. “It is a good development. It is a sign of new provisions improving the corporate governance standards in the companies,” said J N Gupta, managing director SES.  

An email seeking comments sent to Godfrey Phillips spokesperson did not elicit any immediate response.

GPIL, which has interests in cigarettes, tea, retail and confectionaries, is owned by the K K Modi family through a clutch of corporate entities. While the promoter group controls 71.5 per cent, Lalit Modi and his father own only 2,000 shares each in their personal capacity.

With 15.2 million shares (29.23 per cent) K K Modi Investment & Financial Services is the largest shareholder, followed by Phillip Morris Global Brands, which owns 25.1 per cent. Corporate entities, trusts and other family members hold the rest.

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