Aditya Kalra, Abhirup Roy

NEW DELHI (Reuters] – Zee Entertainment, India’s top TV network is engaged in a legal fight with Invesco. Invesco, citing corporate governance issues, asked for Zee Entertainment’s CEO to be fired and the company’s board to be reformed.

Zee claimed it had tightened its governance. However, the dispute is not over as India’s top news and entertainment channels plans to merge with Japan’s local unit. Sony Group Corp.

Let’s see what this dispute really is about.

WHAT DO INVESCO DESIRE?

Reuters reviewed Invesco’s legal documents, which aren’t public. They show that it is seeking changes at Zee to address financial and corporate governance issues that have plagued the business. These irregularities have been flagged even by India’s regulator.

Invesco’s Developing Markets Fund LLC, and OFI Global China Fund LLC collectively own a close 18% stake in Zee. Six new board members have been proposed by Invesco, with Punit Goenka being removed as CEO of Zee.

Invesco demanded that Zee call an extraordinary general meeting of shareholders, Sept. 11, to discuss its demands.

HOW ZEE VIEWS INVESCO’S MANDATES

Zee rejected Invesco’s October 1 request for a revamp of the board. Invesco took the fight to India’s Companies Tribunal, and is now trying to get Zee to call it, claiming that Zee’s behavior is “oppressive”. Zee has been ordered by a tribunal to reply before 22 October.

Indian television giant, Indian Television Corporation (ITV), claims that corrective measures have been taken to address the concerns of the regulator. It also says it adheres to the highest standards for governance.

While it’s not known how shareholders will vote in the event of a meeting being called, Subhash Chandra (father of CEO Goenka) has accused Invesco, Zee founder, of trying to suppress shareholder votes.

Chandra said that they want to take control of the company in violation of Indian laws. Invesco stated that Zee can be improved by good governance.

Is THE ZEE-SONY DEAL AT RISK

Invesco wanted a shareholder meeting. Zee, however, announced that it was in negotiations with Sony. These terms stipulate that Goenka would be the CEO of the newly merged entity. Sony will hold a majority share.

Invesco in Indian tribunal hearings stated that it was not against Zee-Sony’s plan. However, its filing criticizes the way the two parties entered into negotiations.

Invesco stated that Chandra’s relatives could increase their shareholding to as high as 20% from the current 4%, and it was simply an attempt to “distract the general public” to stall a shareholder meeting.

BOLLYWOOD SUPPORT

Chandra, who was tearful as she spoke on Zee’s Hindi news channel, made a special TV appearance to highlight Zee’s Indian journey.

He said, “I ask Invesco not to act like an owner but like a shareholder.”

Zee is an Indian household name that has offered entertainment channels in multiple languages and programs in India for many years. Bollywood now supports Zee.

American and Chinese investors have been pursuing Zee as a channel to promote India’s first nationalist channel. Pray Zee Entertainment will remain in Indian entrepreneurs’ passionate hands,” Boney Kapoor (NYSE:) stated on Twitter.

BEFORE SONY – RELIANCE TALKS

Zee claims that Invesco attempted to reach a deal to buy out parts of an Indian company in February. It would have enabled Goenka, his family, to take a stake in the new business and allow him to become the head. Zee didn’t name the organization.

The deal was canceled by Zee, who did not consider it in the shareholders’ best interests.

Invesco acknowledged that it helped to facilitate the talks between Zee (Reliance) and naming Mukesh Ambani’s conglomerate for the first-time.

Invesco said it wouldn’t seek to reduce its long-term shareholders interest in a deal.

Reliance has not responded to my request for comment about any Zee talks.