The Securities and Exchange Board of India (SEBI), in its latest order, has restrained Essel Group Chairman, Subhash Chandra, and Zee Entertainment head, Punit Goenka from holding any key managerial position until further notice. In the interim order, Sebi has said that investigation revealed that Chandra and Punit Goenka abused their position as directors of Zee Entertainment in 2019 by siphoning off funds for their own benefit.

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Here is all you need to know about the impact of the order:

What is the immediate impact on Chandra and Goenka?

According to lawyers CNBC-TV18 spoke to, the Sebi’s interim order automatically suspends both Puneet Goenka and Subhash Chandra from their managerial positions. Both Goenka and Chandra are immediately debarred from acting as a director in any listed company or its subsidiary which includes ZEE.

“I am of the opinion that, while the investigation is still underway, their continuation as a director/Key Managerial Personnel in any listed company or its subsidiaries are likely to be prejudicial to the interest of those companies, particularly its investors,” Ashwani Bhatia, whole time member, SEBI had said in his interim order.

Will moving to SAT change stay the above order?

Well not exactly. According to experts, moving the Securities Appellate Tribunal has no bearing on the implications of the order immediately. Filing an appeal doesn’t automatically gives you a stay. The legal team, representing Goenka has approached SAT following the order and the matter is now listed on 15th June. No relief has been granted yet, so until SAT hears the matter and orders a stay, the interim order holds.

Will Zee need to appoint new directors immediately?

The answer is NO. As per the regulations, a Board should have appropriate number of directors and six is the minimum. requirement. ZEEL as of now has required number of directors. However, Puneet Goenka was the only Executive Director, so now the board doesn’t have any executive directors at the moment. If SAT doesn’t stay the order on June 15, the company will have to appoint a new executive director within three months from the date of vacancy.

What does this order mean for the Zee-SONY merger?

As of now, Puneet Goenka is slated to be the MD and CEO of the Zee-Sony merged company. However, with SEBI's order, this becomes tough. Experts foresee roadblocks for the merger as well. “The legal issues will weave a web of uncertainty to the Zee Sony merger. A forensic auditor will be appointed to go into the allegations and to determine the authenticity of the financial statements before the merger process is allowed to be initiated by Sebi and the stock exchanges,” says HP Ranina, Senior Advocate, Supreme Court.

What happens to the shareholding of Puneet Goenka and Subhash Chandra?

The promoters own 3.99 percent shareholding in ZEEL. Advocates CNBC-TV18 spoke to said that the SEBI order does not have any implication on their shareholding and promoter status. The current SEBI order is an interim one, but the final order could give further directions related to the findings on siphoning of funds.

First Published:Jun 13, 2023 1:24 PM IST