The new rules reportedly limit the rights of investors while strengthening the rights of founders.

Ola changes shareholder policy to avoid potential hostile takeover by SoftBank
news Corporate Affairs Thursday, May 18, 2017 - 15:49

Leading cab aggregator Ola has reportedly made significant changes in its policy for its shareholders in order to avert a potentially hostile takeover by its larger investors—Japan’s SoftBank.

The new rules of engagement reportedly limit the rights of its investors while strengthening rights of its founders.  

The Mint notes that the step by Ola co-founder and CEO Bhavish Aggarwal is the first such instance when a startup is acting in order to protect itself from powerful shareholders over business decisions.

“After the Snapdeal issue, obviously entrepreneurs and VCs (venture capitalists) have become wary of SoftBank. From the point of view of (the boardroom battle at Snapdeal), Bhavish has always been ahead of the curve. He hasn’t let any one investor, be it Tiger or SoftBank, become too powerful,” an Ola insider told the newspaper.

This development comes after eCommerce company Snapdeal is in the process of being acquired by larger rival Flipkart at the behest of Softbank, despite opposition from Snapdeal co-founders Kunal Bahl and Rohit Bansal.

VC Circle reported that as per documents filed with the Ministry of Corporate Affairs, SoftBank now needs approval of Ola founders Bhavish Aggarwal and Ankit Bhati, Ola’s chief technology officer to buy additional shares.

The Mint report said that for this to happen, the company will issue additional shares to Bhavish Aggarwal and Ankit Bhati to keep their stakes at 10.9% and 12.38% respectively, going by the latest Article Of Association (AoA).

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