“Another distinct disadvantage of converting Tata Sons into a private company from the standpoint of a minority shareholder is that various governance standards would potentially get diluted in relation to private companies,” the letter said.
The five listed Tata group companies own an 11.41 per cent stake in Tata Sons (see chart), while the Mistry family owns 18.4 per cent stake in the holding company. The Tata Trusts own a 66 per cent stake in the company.
“As directors of a public limited company holding shares in Tata Sons, it is incumbent on you to apply your mind to these important issues and discharge your duties in law, also being mindful of the fact that the investments involved are material in nature and size. I trust you will discharge your duties responsibly,” the letter said.
“Further in your case, the company is a listed company and as directors you have additional responsibilities owed to public shareholders and investors in the company’s own securities,” it added.
A Tata Sons spokesperson declined to comment on the letter.
Ahead of the AGM on September 21, Tata Sons has sought shareholders’ approval to amend its memorandum of association and articles of association for the purpose of converting itself from a public limited company to a private limited one.
The change in the Tata Sons’ corporate structure will need to be cleared by a special resolution, needing at least 75 per cent votes. Besides the shareholders’ approval, the change in its status will also need an approval from the National Company Law Tribunal (NCLT).
Asked why Tata Sons was being converted into a private limited company, a spokesperson had said: “The reinstatement of Tata Sons as a private company was considered by the board to be in its best interest.”
The Mistry family plans to move the NCLT against the Tata Sons’ move.