Concerns have been raised about the proposed mega merger between Zee and Sony following the Securities and Exchange Board of India’s (SEBI) decision to prohibit Essel Group Chairman Subhash Chandra and Zed Entertainment Enterprises Chief Executive Officer Punit Goenka from holding any directorial or key managerial positions in listed companies or their subsidiaries.

A brief about potential effects of the SEBI interim suspension on Zee Entertainment promoters

The prohibition follows a SEBI probe that revealed Chandra and Goenka had misused their roles as directors and senior leadership figures to steal money for their own gain.

A possible area of worry is how the Zee-Sony merger, which aims to build a media powerhouse, would proceed. Ashish Kumar Singh, Managing Partner at Capstone Legal, says it’s crucial to know that despite owning just 4% of Zed Entertainment Enterprises (ZEEL), the promoters have the board’s trust and are actively involved in the management of the business. Additionally, the stockholders have placed their trust in the proposed merger with Sony.

Investment bankers advised BT that during the merger discussions, both sides would have laid forth a number of difficulties. “This too would have come up then,” said one who was monitoring the industry. 

As for the choices that are currently accessible, ZEEL’s promoters can immediately contest it by moving to the SAT or the high court. It’s also possible that Sebi would change the temporary order, says Singh. Regarding the Sony merger specifically, he claims that “from a legal standpoint, there is not much cause for concern, but from a practical point of view, it is a setback because the new merged entity cannot have Punit Goenka holding any key managerial position.”

While this is going on, Zed Chairman R. Gopalan stated, “The board is currently in the process of reviewing the detailed order and appropriate legal advice is being sought in order to take the next steps as required.”

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