Shareholders making their voices heard, two AGMs show
Shareholders last week voted down two resolutions, both of which were related-party transactions. One of those was proposed by American multinational company 3M India, and the other by defence supplier Astra Microwave Products.
3M India proposed a resolution to approve material related-party transactions up to ₹1,153 crore from the 2023 AGM until the 2024 AGM with its parent 3M Company, US, which holds 75% equity in the Indian subsidiary.
About 51.59% voted against the resolution, while 48.41% voted in favour.
The proposed nature of transactions includes royalty, purchase of materials, providing contract research services, sale of goods and recharge of expenses. 3M India pays a royalty to 3M Company at the rate of 1.5% of its turnover.
Besides, 3M India also pays corporate management fees to fellow subsidiaries, taking the total payments to over 4% of turnover.
While recommending voting against the resolutions, corporate advisory firm Institutional Investor Advisory Services India (IiAS) said that the company must provide the basis for determining the increased rate of royalty payments.
«Payment of royalty and corporate management fee ranged between 4% and 6.3% of turnover in the last 10 years, which is high,» said IiAS. «Basis a revised intellectual property agreement effective April 1, 2023, the royalty payments to 3M Company will increase to about 2.4% of turnover, which will result in aggregate payment (royalty and corporate management fee) to the promoter group above 5-6% of turnover.»
In another instance, a resolution by Astra Microwave Products to approve loans, investments, guarantees or security to an entity that is an associate or joint venture up to ₹80 crore under Section 185 of the Companies Act, 2013, was
