IIHL cannot annul Esops of Reliance General: Law firm

livemint.com:

Insurance Co., as part of its resolution plan for the parent firm, Reliance Capital, according to law firm Khaitan & Co. A copy of the letter, which is in response to a query by the insurer, was reviewed by Mint.

Reliance General, a subsidiary of the insolvent Reliance Capital, asked if the resolution applicant, IIHL, has authority to modify the rights of employees of Reliance Capital’s subsidiaries and associates. The requirement for a legal opinion arose when IIHL, in its resolution plan for Reliance Capital, sought to terminate all Esops, phantom stocks, and other incentive programmes of Reliance Capital and its subsidiaries, including the insurer.

The move sought to prevent RCAP and IIHL from incurring additional expenses after the acquisition. Khaitan, however, clarified that following the implementation of the resolution plan of the Hindujas, it will practically have control over assets and liabilities of Reliance General.

“Consequent to the implementation plan, IIHL will have indirect control over the board and shareholding of Reliance General and, thereby, practically control the assets and liabilities of the insurance company with the ability to alter assets and liabilities of Reliance General," Khaitan said in a seven-page note. Any such alteration “would be required to be done in accordance with terms of the contract and cannot simply be done by IIHL or Reliance Capital unilaterally", the firm said.