The National Company Law Appellate Tribunal (NCLAT) has approved Bharti Telecom’s 2018 capital reduction scheme, dismissing objections raised by minority shareholders who claimed the scheme was unfair and non-compliant with legal provisions. Bharti Telecom is the parent entity of Bharti Airtel.
Capital reduction enables a company to repurchase its shares from shareholders, thereby reducing its share capital. Bharti Telecom argued that the scheme adhered to all relevant laws and regulations, and the share valuation offered to minority shareholders was conducted using a standard methodology.
However, minority shareholders contended that the valuation was done at a 25 per cent discount, which they deemed unjust and unlawful.
In response, Bharti Telecom maintained that applying a discount is a standard practice in valuing shares of unlisted companies and is in line with Indian Accounting Standards. The discount accounted for the lack of marketability of the shares, and since the company was unlisted, using a market price benchmark was not appropriate.
Further, Bharti Telecom noted that 99.90 per cent of the total shareholders had approved the capital reduction scheme, reinforcing the principle of corporate democracy.
