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Legal experts expect the merger of Sony Group Corporation‘s India media division, Culver Max Entertainment, also known as Sony Pictures Networks India, and Punit Goenka-led Zee Entertainment Enterprises (ZEEL) to proceed despite disagreements over the position of CEO of the merged entity as the contractual drop off date of December 20 nears.
Abhijit Joshi, managing partner at Veritas Legal said a scheme, once approved by all the authorities, should typically proceed subject to the conditionalities as per the scheme. “Typically, there is a lag between the approval from the court or tribunal and the effectiveness of the scheme. The scope of withdrawal will be limited and will depend on conditionalities to its effectiveness under the provisions of the scheme,” he said.
As reported by ET, Sony has requested that Goenka let go of the position of MD and CEO of the merged entity till he gets cleared by Sebi, which is probing him for alleged misappropriation of company funds. While Sony is also looking to appoint its own executive, SPNI CEO NP Singh to the merged entity, Goenka believes that the Securities Appellate Tribunal’s (SAT) verdict setting aside the Sebi order banning him from holding the top position has cleared the way for him to head the Sony-Zee combined entity.
Three Likely Outcomes
While setting aside the Sebi order, the SAT allowed the market watchdog to complete its probe against Goenka and his father Subhash Chandra in eight months and take relevant action as per the legal process.
Though he stated that Sony and Zee had gone too far with the merger to turn back now, lawyer Abhishek Malhotra listed three potential outcomes as the two parties work to complete the merger.
He said the first scenario is that both parties decide that as the cut-off date to complete the merger is approaching, it’s important to go ahead with the merger with a CEO from Sony until Goenka gets cleared of charges by Sebi. “While the Sebi probe is on, someone from Sony might become the CEO of the merged entity, and the CFO might be from Zee. They can take this arrangement forward and change it back to the original understanding as soon as Punit gets the clean chit,” Malhotra said.
According to Malhotra, the second scenario could be that Goenka will nominate someone else from Zee as the CEO.
“In the third scenario, Punit might say that there is no impediment to him being the MD & CEO since there is a stay currently on the Sebi order. He might argue that the Sebi probe could last longer than eight months, so let him be the MD & CEO, and the probe can continue,” he stated.
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