Tata Sons, the holding company of the Tata Group, is facing a significant corporate hurdle as it prepares to convene its Annual General Meeting (AGM). The company is reportedly considering approaching the National Company Law Tribunal (NCLT) if it remains unable to meet the required quorum for the meeting.

The issue has emerged because of restrictions involving the Sir Ratan Tata Trust (SRTT). Several important corporate matters are awaiting consideration at the AGM, including the reappointment of N. Chandrasekaran as a director.

Why has the Tata Sons AGM been delayed?

Tata Sons was originally scheduled to hold its AGM on August 18, but the meeting could not proceed because the required quorum was not present.

The company has subsequently received a three-month extension from the Registrar of Companies (RoC) to hold the AGM.

The problem is linked to an order by the Maharashtra Charity Commissioner that has prevented the Sir Ratan Tata Trust from holding meetings or taking decisions.

Under Article 86 of Tata Sons' Articles of Association, a general meeting requires at least five members to be physically present to constitute a quorum. The provision also requires the presence of at least one representative jointly nominated by the Sir Dorabji Tata Trust (SDTT) and SRTT, as long as both trusts together meet the specified shareholding threshold.

With SRTT currently unable to take decisions, the process of jointly nominating a representative has been disrupted.

Tata Trusts hold a majority stake in Tata Sons

The shareholding of the two key trusts makes the issue particularly important.

According to the information provided, SDTT holds approximately 27.98% of Tata Sons, while SRTT holds around 23.56%. Together, the two trusts hold about 51.54% of the company.

When other charitable Tata trusts are included, the combined trust holding is approximately 66%.

The restrictions on SRTT therefore have consequences beyond the trust itself, because the inability to nominate a representative can affect Tata Sons' ability to satisfy the quorum requirements for its general meeting.

N. Chandrasekaran's position is also at stake

The delayed AGM has implications for the company's board.

One of the important matters expected to come before the meeting is the reappointment of N. Chandrasekaran as a director.

The Tata Sons board meeting held recently reportedly witnessed differences over two major issues: Chandrasekaran's continuation as chairman and the company's potential listing.

According to the information provided, Tata Trusts Chairman Noel Tata opposed both proposals, while the other directors supported them.

Until a valid AGM is held and the necessary corporate resolutions are passed, Chandrasekaran is expected to continue as a director in accordance with the existing arrangements.

Why is Tata Sons considering the NCLT?

If the quorum problem cannot be resolved, Tata Sons could seek legal intervention from the NCLT.

Section 97(1) of the Companies Act, 2013 provides the tribunal with powers relating to the convening of an AGM when a company is unable to hold it in accordance with the law.

Legal experts cited in the report say the NCLT has broad powers in such circumstances and could potentially issue directions regarding the conduct of the meeting, including determining an appropriate quorum arrangement.

One possibility discussed by legal experts is that the tribunal could direct that even a single member present at the meeting be treated as sufficient quorum under the circumstances.

Such an order could potentially allow Tata Sons to proceed with its AGM despite the absence of a jointly nominated SRTT-SDTT representative.

But NCLT intervention may not end the dispute

Approaching the NCLT does not necessarily mean the underlying dispute will disappear.

Legal experts point out that the tribunal's powers under the Companies Act would relate to the conduct and convening of the AGM. They would not necessarily override the separate order issued by the Charity Commissioner concerning SRTT.

This creates another layer of legal uncertainty.

Even if the NCLT permits Tata Sons to conduct the AGM, shareholders could potentially challenge the validity of the meeting or resolutions passed at it, depending on the circumstances.

What happens to the SRTT representative?

The Charity Commissioner's order has reportedly prevented SRTT from holding its own meeting until an investigation report becomes available.

As a result, the trust may not currently be in a position to nominate its representative for the Tata Sons general meeting.

Legal experts quoted in the report believe the NCLT has substantial powers to facilitate the holding of a meeting, but there could still be questions about shareholder rights and the requirements contained in Tata Sons' Articles of Association.

Tata Sons faces a complicated legal and corporate situation

The situation has therefore created a difficult combination of corporate governance and legal issues.

Tata Sons needs to hold its AGM to address important matters, but the quorum requirement is proving difficult to satisf