Prof. TT Ram Mohan has posted an entry on the ICICI - Subhiksha rift. "Subiksha MD R Subramaniam holds 59% of equity but he apparently contends that the company is actually controlled by ICICI Venture because the latter has the right to appoint a majority of directors."
I have long argued with my friends in private equity that if they sign those wholly one sided agreements with the promoters (persons in control) of the investee company, they would become in charge of the company for various purposes including becoming promoters for the sake of disclosure norms. A vast majority of shareholder agreements and investment agreements between private equity and investee companies (I have drafted many) provide for wholesale unilateral powers not just for appointment of large number or majority of directors, but to take the PE's permission before any major transaction or vote - giving them powers even superior to that of the board of directors.
The whole point of private equity is to have a non passive investment - people who can help in the management of the business (though it may not always be the case factually). I'm therefore in support of the argument of the CEO of Subhiksha - if ICICI Ventures has legal powers to nominate the majority of directors of the company. You can't have power without responsibility - on the other hand whether you in fact exercised the overriding power assumed in the agreement may be relevant to dilute the investor's liability.
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