Sucheta Dalal :Asahi Fibres: When corporate governance goes amiss
Sucheta Dalal

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Asahi Fibres: When corporate governance goes amiss   

November 26, 2009

 

Asahi Fibres Ltd, engaged in the manufacture of yarn and fabrics, got a fresh lease of life in 2008 when the Board for Industrial and Financial Reconstruction (BIFR) revoked its earlier recommendation, issued on 11 November 2002, to wind up the company.
 
BIFR held that Asahi’s current management had turned the company’s net worth positive as on 31 March 2007. Since then, the company’s management has flouted corporate governance rules. Asahi gave corporate guarantee in favour of two banks for loans taken by its associate company, Realtime Properties. It was approved by the Asahi Board in December 2008, without the approval from its shareholders.
 
What’s interesting is Asahi Fibres, with a net worth of Rs5.40 crore as on 31 March 2009, provided corporate guarantee of Rs190 crore, an amount almost 20 times higher than its net worth.
 
Realtime Properties is a unit of Jaybharat Textiles and Real Estate which held 48.5% stake in Asahi Fibres as on 31 March 2009. However, according to the Asahi auditor report, there are no companies under the same management within the meaning of Section 370 (1-B). The auditors, however, are silent on disclosure required under Section 372(B) of the Companies Act.
Surprisingly, Asahi Fibres’ corporate governance report for FY09-10 states that “none of the transactions with any of the related parties were in conflict with the interests of the company”.
The report also noted that the company has taken an unsecured loan of Rs117 crore during the financial year ended March 2009 primarily to fund addition to assets. However, there is no disclosure about the corporate bodies from whom Asahi took the loan.
 
Asahi Fibres has initiated the process of obtaining a special resolution through postal ballot to seek consent of the shareholders for extension of the corporate guarantee. The company, in its notice for postal ballot, has blamed “exceptional circumstances” for preventing the Board from obtaining prior approval from members in 2008. Asahi Fibres’ shares are suspended from trading on the Bombay Stock Exchange (BSE).

Moneylife sent an email to Asahi Fibres seeking a clarification on the “exceptional circumstances” that prevented it from following the due process of law and applicable mandatory disclosures. However, the email remains unanswered, till date.
Meenakshi with Sanket Dhanorkar [email protected]

-- Sucheta Dalal



 



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