InvestorQ : Why does Tata Sons have a problem with the Pallonji Mistry group pledging their holdings in Tata Sons? Is that not perfectly legitimate?
Mitali Bhutta made post

Why does Tata Sons have a problem with the Pallonji Mistry group pledging their holdings in Tata Sons? Is that not perfectly legitimate?

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Dawn Cherian answered.
1 year ago
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While that is perfectly legitimate, Tata Sons is worried about the impact on their ownership pattern if the pledgee invokes the shares. That is why Tata Sons plans to challenge the Pallonji Group’s plan to raise funds by pledging shares in Tata Sons. As per the Tata Sons, Articles of Association, Tata Sons has the first right to buy if any shareholder decides to sell shares. A majority of the shareholders of Tata Sons can even pass a special resolution to that effect. Clearly, Tata Sons wants to remain a closely held company. The fear is that if pledged shares are invoked and a bank takes ownership of those shares or sells to another third party, then ownership could get opened. SP group is of the view that the AOA only restricts transfer of shares and not pledging.

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