A day after Ashneer Grover, the embattled co-founder of BharatPe sought removal of CEO Suhail Sameer from the Board, the fintech startup’s other founder Shashvat Nakrani has thrown his weight behind the chief executive, saying the official continues to enjoy his confidence.
In a move that is expected to complicate Mr Grover’s pursuit to oust Sameer as both the founders need to consent jointly to remove the CEO, Mr Nakrani asserted that he himself has not given any consent or demand for such removal and that the CEO continues to enjoy his support.
Legal experts contend that the CEO cannot be removed from the board on the sole demand of Ashneer Grover and any such removal can only be done jointly by both the co-founders. Lawyers also confirmed that if the CEO is a nominee of both founders, then one founder’s unilateral withdrawal is not valid under the law.
When contacted, Mr Nakrani confirmed that he has not given any consent or demand for removal of Suhail Sameer from the Board.
“I have neither given my consent, nor sought the removal of Suhail Sameer from the Board of BharatPe. News reports suggesting this are incorrect”, Mr Nakrani said.
He added: “I can confirm that I was one of the two joint nominees in the appointment resolution of Suhail Sameer as the CEO and Board member of BharatPe, and he continues to enjoy my support.” According to the company’s Articles of Association (clauses 91.3 and 91.7), Suhail Sameer, the CEO, was jointly nominated by two founders — Ashneer Grover and Shashvat Nakrani, as the founders’ nominee on the board.
Experts believe that neither Ashneer Grover nor Shashvat Nakrani have an individual right to withdraw the nomination of the CEO from the board, and any removal from the board can only be done jointly by them.
The board of BharatPe currently comprises nine members — the two founders, one joint founder nominee (CEO), four investor nominees, and two professional independent directors (Rajnish Kumar and Kewal Handa).
The current term for the CEO is for five years and upon completion can be re-confirmed.
According to Mathew Chacko, Founding Partner of Spice Route Legal, the standard venture capital documentation would provide a power to an appointing group to remove a director so appointed.
“Common misconceptions abound that these are personal powers bestowed upon the person who most often exercise these powers – in reality these are frequently joint powers, to be exercised after consultation with the group,” Mr Chacko said.
He further pointed out: “The requirement that a group act jointly acts as a powerful check on individual tendencies to assume a god complex. Yes – they need to act jointly to remove a director”.
Citing the Articles of Association document, Rishi Anand, Partner at DSK Legal said Article 91.7 provides that a board member can be removed only by written consent of the shareholder who has nominated such a director.
“So, a person appointed jointly may only be removed with joint consent,” Anand said.
With Mr Grover recently launching an offensive against the BharatPe investors after facing a probe over alleged fraud, abrasive behaviour and corporate governance issues, the company on Friday had said questioning the integrity of board members and misrepresentation of facts was painful.
“The (company) board in all its actions has followed due process in the best interest of the company. We would urge that the confidentiality and integrity of the governance review and board meetings is maintained by all,” BharatPe had said in a statement.
Grover was sent on a three-month leave following allegations of using abusive language against Kotak Mahindra Bank staff and for fraudulent practices. He reportedly claimed that he was “arm-twisted” by the company’s investors into going on leave and that he had lost confidence in CEO Sameer Suhail.
While BharatPe has engaged Alvarez and Marsal and PwC to run a fine-tooth comb through its governance practices, Mr Grover has denied all allegations.