Anotice in August from Hindustan Unilever Limited (HUL), calling shareholders to participate in the electronic voting to approve the appointment and remuneration of Priya Nair was a simple formality to legally endorse a decision that was celebrated by the corporate world and widely covered by the media. In July, HUL had announced Ms Nair, a Lever lifer, as its new CEO. A member of the Unilever Leadership Executive, Ms Nair is the first woman CEO and managing director of HUL.
The customary notice, following the regular templates that legal departments of corporates stick to, would have been lost like many others. But it did not. A few, seasoned shareholders who bothered to read through the 11 pages — either out of academic reason, or vicarious pleasure or plain curiosity — stumbled upon a line that stood out: the FMCG giant, with revenues of a little less than $7 billion, was willing to share with shareholders a copy of its agreement with the new CEO.
No law requires a listed company to do this. Indeed, no company does it. However, shareholders who insist on examining the document are allowed to visit the corporate office at a prescribed time to go through it. The HUL notice goes beyond that.
It says: “Electronic copy of the draft agreement between the Company and Ms. Priya Nair setting out the terms and conditions and other documents relating to this item of business shall be available for inspection. The Members may obtain a copy of the same by writing to the Company at levercare.shareholder@unilever.com mentioning their name, Folio no. / Client ID and DP ID, with a self-attested copy of their PAN card attached to the email.”
The regulations to share documents differ across jurisdictions. For instance, US-listed companies share most material documents, sometimes redacting sensitive portions. Some Indian companies share important documents with board members who can view them on i-pads without having the option of downloading them or taking a printout. Emailing a copy or allowing a printout runs the risk of a document, meant to remain within a closed-loop system, of getting leaked out or widely circulated on Whatsapp.Legal views on the subject vary. According to Jayesh H, co-founder of the law firm JurisCorp, “Holding out that shareholders can obtain a copy of such a document by email is unusual to say the least. As it is most companies even dissuade shareholders wanting to physically inspect sensitive documents. Unless the company is sharing a copy, it should issue a clarification. All of this does beg another and bigger question. In an era of hyper competitiveness, should shareholders even be offered inspection of such documents? Time to do away with this as part of Ease of Doing Business?” However, Puneet Shah, partner of RegFin Legal, another law firm said: “Under Section 190 of the Companies Act, 2013, every public company is required to keep at its registered office a copy of the contract of service entered into with its managing director or whole-time director.
This contract must be open for inspection by any shareholder without charge. It is further obligated to furnish a copy of the contract to any member who requests it, upon payment of prescribed fees. If the contract or the memorandum of the terms of appointment is referred to in the explanatory statement accompanying a notice of general meeting or postal ballot, the company is duty bound to make it available to the shareholders who request for it reinforcing the principles of transparency and accountability in executive appointments.”
When asked whether any shareholder has asked for the agreement copy and if the company has shared with any member, a HUL spokesperson said: “The company continues to make the relevant documents available for inspection to shareholders in accordance with the procedure outlined in the Companies Act, 2013, and rules issued thereunder. We continue to provide services and respond to shareholder requests directly and/ or through RTA (Registrar and Transfer Agent), from time to time.”
