IndiGo co-founder Rakesh Gangwal Friday said that he has taken the decision to support a resolution to amend the airline's Articles of Association at the company's Annual General Meeting (AGM) to be held on August 27.
The board of directors of InterGlobe Aviation Ltd which runs IndiGo has given its approval to a new policy on related-party transaction (RPT) to increase the board size from 6 to 10 members.
"The Board also has now approved a new related party transaction policy and to close an open issue if the Articles of Association (AoA) are amended at the upcoming August 27 AGM to increase the Board size to 10 directors," Gangwal said in a statement.
The company's board at present comprises 6 members with two independent directors. The special resolution to amend the AoA will not be achieved without Gangwal's (who owns 37% in IndiGo) support. This is because it requires the consent of 75% of the shareholders.
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"In light of this positive and important development, I will be supporting the proposed changes to the Articles. While much work lies ahead, including mending some fences and the regulators completing their investigation on the governance issues raised with them, it is gratifying to see progress towards better governance," he added.
This endorsement from Gangwal comes following the company board's concurrence to not allow any policy decisions unless the board has full strength.
Gangwal had in the past challenged board chairman M.Damodaran for not adopting the agreed RPT policy and said that he will object to the special resolution at the AGM unless another resolution is approved by the board to impede the IGE group from getting more power and until the company adopts a new policy on RPT.
In a letter to IndiGo's Board of Directors dated August 5, Gangwal said that due to "serious unresolved issues" he won't vote affirmatively on the special resolution for "Alteration in Articles of Association" unless there is a change in the status quo.
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"The AGM notice along with unnamed sources having planted press reports that the chairman has brokered peace and matters have been resolved leaves a misleading and false impression that issues on RPTs and changes to the Articles have the support of both promoter groups," read the letter. He added that this is in "stark contrast" to a flurry of emails exchanged since July 20 where he has made his stand clear.
Gangwal had clarified that his vote would depend on the passing of a complementary board resolution to prevent Bhatia's InterGlobe Enterprises (IGE) Group "from getting even more rights and abilities than they have today" and putting the new Related Party Transaction policy in place. He added that while both parties have agreed on the language of the new policy, it is yet to be sent out for board adoption. Moreover, "changes to the articles are still an open issue".
According to him, IndiGo Chairman M. Damodaran, who was credited with brokering an agreement between the feuding promoters in late July should have directed the company to "flag this material fact in the AGM notice in the interest of transparency and for the benefit of the minority shareholders".
During the two-day meeting over July 19 and 20 - to consider the unaudited financial results for the June quarter as well as to discuss governance issues, which was the bone of contention between the promoters - IndiGo's board Directors agreed to amend the Articles of Association of the Company for expanding its size from six members currently up to a maximum of 10.