Bombay High Court Proposal
Update: The Bombay High Court has granted time till June 2 to Yes Bank CEO Rana Kapoor and sister-in-law Madhu Kapur to settle the legal dispute amicably.
The High Court had earlier, without passing judgment, said that both the shareholders should reduce their stake to below 10%. If this happens, conflict of nomination of IP (Indian Partners) Representative Director gets resolved as they both will lose their rights to nominate Directors, as reported in the Hindu.
Read below to update yourself on what the Yes Bank family feud is all about.
Yes Bank Case: The Big Question
Can the ‘Professional Rights’ of a Promoter of a specialised company, such as a bank, pass to his immediate relatives after his death? Even if they may not be professionally qualified to run such a firm? Or does just the share of ownership pass to his immediate family?
What is the Dispute?
For nearly two years Yes Bank’s two largest individual shareholders, Rana Kapoor and Madhu Kapur have been in a legal tussle.
Madhu Kapur is the widow of Yes Bank co-promoter Ashok Kapur. Rana Kapoor is Yes Bank’s MD & CEO. Since her husband’s demise, Madhu Kapur and her daughter Shagun Gogia, have claimed that as legal heirs of the private bank’s promoter, they should have a say in the appointment of Directors to the Bank’s Board.
Madhu Kapur claims she was not consulted regarding appointments to Yes Bank’s Board of Directors. Ms. Kapur is keen to nominate her daughter Shagun as a Director.
Family Ties & Stakes
1. Rana Kapoor and Ashok Kapur jointly founded Yes Bank in 2004.
2. Ashok Kapur was tragically killed in the Mumbai terror attack of 26/11, 2008.
3. Rana Kapoor’s wife and Madhu Kapur are sisters.
4. Madhu Kapur & her family own a 10.29% stake in Yes Bank. Rana Kapoor, MD & CEO, owns an 11.77 % stake.
See the chart below for shareholding pattern as of 31st March, 2015
Yes Bank Response to Madhu Kapur
Yes Bank’s Board had rejected Shagun Gogia’s appointment as Director, saying she does not meet RBI criterion, which state - ‘it is a matter of good practice not to have more than one family member on the board of a bank’, as reported in Telegraph India.
Yes Bank has so far also maintained that banking is not a family business and that ‘family successors’ do not automatically become part of the Promoter Group of a firm, again citing regulatory criteria -
Madhu Kapur being successor of Late Ashok Kapur cannot be considered as Indian partner or India promoter and accordingly, cannot inherit the rights under Articles of Association or the status of Promoter of Yes Bank
– Yes Bank Statement
It further added,
A bank is a public institution. Banking is not a family business and Rana Kapoor cannot take a decision on this matter on his own as he is obliged to work in fullest consultation with the Board of Directors whose decisions and consultations are in accordance and fullest conformity with the Banking Regulation Act.
– Yes Bank Statement
An Expert View
The dispute is admittedly, a complex riddle. Here is an expert’s opinion -
Bank boardrooms must be professionally run. Promoters are required to bring down their shareholding over time, as the RBI prefers banks NOT to be dominated by promoters but managed by professionals. But if promoters happen to be professional bankers with a strong track record, that would justify their Board position beyond just equity stake.
– Vaibhav Agrawal - VP Research, Angel Broking
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