Asset Reconstruction Company (India) Limited seeks nomination vote

Asset Reconstruction Company (India) Limited (ARCIL) has undertaken to seek shareholder approval after listing to give each sponsor one board nominee and any shareholder with at least 20% of post-offer equity two nominees. The commitment follows automatic termination of the existing special rights when trading begins, making a special resolution the mechanism for restoring nomination rights.

What board nomination rights will ARCIL seek after listing?

ARCIL will place a proposal before shareholders, by special resolution, for one nominee director for each sponsor and two nominee directors for any shareholder holding at least 20% of its post-offer equity share capital on a fully diluted basis. The July 1, 2025 undertaking was given to Avenue India Resurgence Pte. Ltd. and State Bank of India, which ARCIL identifies as its two sponsors.

The proposed rights would be considered as soon as practicable after ARCIL receives final listing and trading approval and trading begins on the stock exchanges. The undertaking requires ARCIL to take necessary steps under applicable law, including the Companies Act, 2013, to convene a general meeting. The rights therefore are not stated as automatically effective at listing: they depend on shareholder approval through the proposed special resolution.

The comparison shows that the proposed post-listing sponsor entitlement is one nominee for each sponsor, whereas Avenue India Resurgence Pte. Ltd. currently has a two-nominee right under Article 129(b). The undertaking separately sets a two-nominee entitlement for a shareholder meeting the 20% post-offer ownership threshold, but ARCIL does not state whether rights under the sponsor and 20% categories would be cumulative for a holder meeting both descriptions.

Why do ARCIL's current nomination rights end at listing?

ARCIL's current special shareholder rights end when trading of its equity shares begins because Part B of its articles of association automatically terminates at that point. Part B contains the special rights available to shareholders, including the current Article 129(b) nominations of two directors by Avenue India Resurgence Pte. Ltd. and one by State Bank of India.

The undertaking addresses this transition by requiring ARCIL to seek a fresh shareholder mandate after listing rather than preserving Part B directly. That distinction matters because the post-listing proposal has a different structure: it gives every sponsor one nomination right and extends a two-nominee right to any shareholder with at least 20% of post-offer equity capital. The document does not disclose the expected post-offer holdings of Avenue India Resurgence Pte. Ltd. or State Bank of India, so it does not establish which holders will satisfy the 20% threshold.

ARCIL's board had seven directors as of the red herring prospectus date: one executive director, two non-executive directors and four non-executive independent directors, including one woman independent director. The prospectus identifies the two non-executive directors, Sudarshan Sen and Ashish Shukla, as nominees of Avenue India Resurgence Pte. Ltd.; it does not identify a State Bank of India nominee in that board table. ARCIL's articles permit no more than 15 directors unless shareholders approve a higher number by special resolution.

How long could the proposed ARCIL nomination rights last?

ARCIL has committed to return the sponsor nomination rights to shareholders for approval at intervals after the first post-listing general meeting. Once the initial shareholder approval expires, ARCIL must take necessary steps under applicable law to place the nomination rights available to sponsors before shareholders again, by special resolution or another approval process required by law.

The prospectus does not specify the duration of the first shareholder approval or the precise renewal interval. It instead states that renewal will occur at intervals “as may be necessary,” which leaves the length and timing of subsequent mandates subject to the applicable legal requirements and shareholder process. The disclosed commitment is thus to pursue recurring approval for sponsor rights, not to provide an indefinite nomination right without further votes.

The 20% threshold is measured against ARCIL's post-offer equity share capital on a fully diluted basis, rather than against the pre-offer capital or the voting shares stated in the prospectus at an earlier date. That basis means eligibility will depend on the capital structure after the offer. ARCIL does not disclose in the undertaking any separate minimum holding period, lock-in condition or method for allocating seats if more than one shareholder qualifies for the 20% right.

What happens if ARCIL's offer does not complete?

ARCIL's undertaking will automatically terminate if the offer is not completed by the Long Stop Date, and the existing rights in Part B of its articles will then prevail without further corporate action. The Long Stop Date is the earlier of 12 months from final Securities and Exchange Board of India observations on the offer, any later date agreed in writing by ARCIL and the two sponsors, or withdrawal of the offer for any reason.

This outcome differs from a completed listing. If the offer fails or is withdrawn before the Long Stop Date, Avenue India Resurgence Pte. Ltd.'s existing right to appoint two nominee directors remains effective under Part B, and State Bank of India's existing right to appoint one remains effective. If trading commences, Part B terminates and ARCIL instead must seek the new shareholder-approved arrangement described in the undertaking.

A separate August 1, 2025 amendment illustrates another listing-related change in shareholder rights. An investor selling shareholder that acquired 32,164,818 equity shares under a 2008 share subscription agreement agreed to drop its board-nomination and information rights from the filing of the draft red herring prospectus; ARCIL states that investor has no nominee director on its board. The amendment can be rescinded if the investor ceases to hold shares or on its own drop-dead date, which includes listing, termination of offer agreements, a board decision not to proceed, or 12 months after final regulatory observations.

Conclusion

ARCIL's undertaking means listing would not necessarily end sponsor influence over board composition, but it changes the legal route and the stated allocation of rights. Existing rights under Part B end when trading begins; ARCIL then plans to ask shareholders to approve one nominee for each sponsor and two nominees for a shareholder holding at least 20% of post-offer equity on a fully diluted basis.

The next disclosed event to watch is the first general meeting after ARCIL receives final listing and trading approval and trading begins, because that meeting is to consider the special resolution. If the offer does not complete by the Long Stop Date, the undertaking ends and the pre-listing Article 129(b) rights, including two nominations for Avenue India Resurgence Pte. Ltd. and one for State Bank of India, continue instead.