Metals and oil conglomerate Vedanta Ltd’s proposal to restructure capital and retain Rs 12,587 crore from normal reserves has been supported by US-based proxy advisory firm Glass Lewis.
Vedanta has called a meeting of shareholders of the company on October 11 to approve a plan of arrangement.
In a notice to shareholders, Vedanta argued that the firm had “built up significant reserves through transfer of profits” over the years.
“The Company is of the view that the funds represented by common reserves exceed the Company’s anticipated operational and business needs in the future, thus, these additional funds may be used to create further shareholder value,” it said. .
It said the transfer was in the “interest of all stakeholders of the company”.
The move essentially frees up cash reserves and allows companies to reward shareholders.
In its recommendation on the issue, Glass Lewis said, it believes that decisions involving managing and operating the business are best for management and the board, but not for any serious or illegal conduct that could jeopardize shareholder value. Is.
“We believe that board members can be held accountable on these issues when they face re-election,” it said.
It was stated that the proposal would not have any pecuniary impact on the shareholders of the company. “Therefore, we believe that shareholders should support the proposed transaction.” This is not the first time such a transfer is taking place. HUL did the same in 2018, when it shifted the balance in its general reserves to its profit and loss (P&L) account on April 1, 2015 (approximately Rs 2,187 crore).
The changes introduced by the Companies Act, 2013 made it possible to transfer balances from the general reserves to the P&L account. Earlier, companies had to transfer a certain percentage of profits to their common reserves before the declaration of dividend.
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