Does NCLT hearing reignite hope for Zee-Sony merger? Or is its fate sealed?
NCLT has granted a hearing on March 12 to hear the plea of Mad Men Film, a Zee Entertainment Enterprises Limited shareholder seeking the execution of the terminated merger.
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After two long years of meeting and failing and extending deadlines, there is a new date on the table in the ongoing Zee-Sony merger saga – March 12, 2024. The National Company Law Tribunal (NCLT) has granted a hearing to the plea of Mad Men Film, a Zee Entertainment Enterprises Limited shareholder seeking the execution of the terminated merger. The body has also asked Sony to provide a response to the petition within three weeks.
The important question now is whether there is a possibility of the merger being reinstated, or is this simply another hearing in the long legal battle that unfolds as a consequence of the termination of the $10 billion Zee-Sony merger?
“The National Company Law Tribunal's (NCLT) recent move to entertain a hearing on the Zee shareholder's petition breathes life into the previously stalled merger discussions with Sony,” said Avi Kalra, founding partner at Clergy & Wisemen.
According to Kalra, this procedural development, especially in light of the NCLT's historical approval last August, hints at a legal pathway where the tribunal may mandate compliance with the merger agreement.
“The session's outcome, notably rebuffing Sony's argument of conditional approval, underscores the judicial process's capacity to clarify and possibly dictate the merger's progression, reflecting a nuanced understanding of corporate law dynamics,” he added.
The body had approved the merger on August 10, 2023.
“If the NCLT determines that the merger between Zee and Sony was not conditional or that any conditions were indeed met, this could lead to a series of outcomes,” he added.
These outcomes might include moving forward with the merger as originally planned, necessitating further actions like emergency arbitration in Singapore, ensuring compliance with NCLT's directives, engaging more actively with shareholders, and obtaining additional regulatory approvals.
Talking of emergency arbitration, there is one at the Singapore International Arbitration Center (SIAC) January 31, on the same matter,
Insiders in the know of the matter said that the expectations from the emergency arbitration proceedings at SIAC in the Zee Entertainment - Sony merger are multifaceted.
Firstly, both parties, Zee Entertainment and Sony, anticipate a swift resolution to the dispute regarding the termination of the merger agreement.
“Sony is likely to seek interim measures to protect its interests, including the enforcement of termination fees and potential damages claims. Zee Entertainment on the other hand may aim to challenge Sony's termination notice and explore avenues to salvage the merger agreement, possibly by demonstrating compliance with contractual obligations or disputing alleged breaches,” they said.
Additionally, stakeholders and industry observers keenly await insights into the procedural aspects of the arbitration, including the constitution of the arbitral tribunal and the timeline for subsequent hearings.
The outcome of the emergency arbitration will likely set the tone for further legal proceedings and negotiations between the parties, influencing market sentiment and shareholder confidence.
Overall, there is anticipation for clarity and direction from the SIAC hearing, as it represents a critical juncture in resolving the contentious issues surrounding the failed merger.
Can shareholder pleas actually breathe life into the terminated merger?
Pranav Vyas, Partner, DSK Legal who is also a white collar crime and international commercial arbitration expert said shareholders' role in a merger is usually limited to voting in support of/ against the merger at the shareholders' meeting which is convened as per NCLt's orders.
“A request by the shareholders does not necessarily mean that there is a renewed possibility of merger, especially given the impasse between Sony and Zee on the potential personnel leading the merged entity,” he said.
According to him, any amicable settlement at this stage seems unlikely between both parties since the merger was in works for almost two years before falling apart, and acrimony and de-valuation of target company resulting therefrom.
“There is likelihood of legal proceedings being pursued before multiple fora in coming months. This could include jurisdictional challenges to cross border disputes, emergency arbitrator proceedings under SIAC Rules, enforcement of and/ or challenge to the resultant ad-interim arrangements, if put in place by the emergency arbitrator,” he added.
