India: Vijay Mallya persuaded to step down from United Breweries board - sources

Vijay Mallya has been persuaded to step down from the United Breweries Ltd (UBL) board and he will propose a successor following a Securities and Exchange Board of India (Sebi) order that’s made him ineligible to be director of any listed company, several people close to the development said. The move has also been prompted by the dwindling possibility of his voluntary return to India. He hasn’t revealed the identity of his nominee, said the persons cited above, The Economic Times reports.

The regulator’s decision came after lenders declared him a “wilful defaulter.” The Articles of Association between Heineken and Mallya, joint venture partners in United Breweries, entitles him to be UBL’s chairman for life and remain a non-retiring director, unless he nominates someone to replace him or voluntarily steps down.

Mallya did not respond to an email seeking comment. Heineken declined to comment.

UBL has nominated CY Pal, one of the directors, as acting chairman. The board has been pushing for appointment of a chairman, citing corporate governance norms. “The board is functioning smoothly and operations are in good shape. But it is not the best corporate governance move to have an acting chairman, especially when the current chairman is no longer serving as a director on the board and is facing regulatory issues,” a board member said.

It could be a challenge for Mallya to pick a successor, even though he has a number of executives loyal to him, since the person could come under the scrutiny of the regulatory authorities.

The successor is expected to be announced before the year-end, said the people cited above. “Since he ceases to be a director on the board as per the regulatory requirement, he has to choose a nominee. He may even be forced to consider a Heineken nominee if things get difficult,” an executive said.

Mallya left India for the UK in 2016, pursued by banks seeking an estimated Rs 9,000 crore in repayments and investigative agencies wanting to question him about alleged money laundering. India has been seeking to extradite him from the UK and he was recently briefly detained by British police before being released on bail. Mallya has consistently denied any wrongdoing and said he’s worried he may not get a fair hearing in India.

There is speculation that Heineken may be wary of compensating Mallya for stepping down as chairman and risking regulatory scrutiny as Diageo did for a similar move at United Spirits Ltd (USL), said an executive.

“We will go by the law and we have asked Mallya to nominate a chairman,” a board member said. “It will be decided by the shareholders and Heineken has to tackle it.”

Mallya had earlier rejected a request from UBL to quit the board following the Sebi directive barring him from the securities market and holding any directorships or other key managerial positions.

He last chaired a UBL board meeting in November 2016 by video-conferencing from London. UBL has stopped sharing confidential information with Mallya and has said that he is no longer privy to any strategic developments.

23 October, 2017