The leading player in FMCG, Nestle India, announced on Wednesday that, following the rejection of its proposal to increase royalties by shareholders, it will keep paying the current rate of 4.5% of net sales to its parent company.
Nestle India released a statement after the board of the firm decided to keep paying general licensing fees (royalty) to the licensor, Société des Produits Nestlé S.A., at the current rate of 4.5%. The board also suggested that the members of the company support this payment.
The board of Nestle India decided in April of this year to raise the royalty payment to its parent company to 5.25% of net sales by adding 0.15% annually over the following five years.
It had been suggested that the hike take effect on July 1, 2024. It had then sent out a ballot to its shareholders to request their approval as an ordinary resolution.
But last month, the idea was rejected by the shareholders, who cast 42.82% of their votes in favor of the regular resolution and 57.18% of their votes against it.
The ordinary resolution failed to pass because it did not receive the necessary majority of votes. The executive directors abstained from voting, and only the independent directors did.
In a regulatory filing, Nestle India stated that the board had “approved the continuation of payment of general licence fees (royalty) by the company to Société des Produits Nestlé SA… on the recommendation of the audit committee… at current rate of 4.5%, net of taxes, of net sales of the products sold by the company as per the terms and conditions of the existing general licence agreements with the licensor.”
It further stated that a regular resolution at the 65th AGM has been recommended for the approval of the same by the company’s members.
The corporation further stated, “The aforementioned approval of members shall be sought by the company every five years in compliance with the applicable laws and regulations, following high standards of corporate governance, including shareholder rights.”
In addition, Sidharth Kumar Birla was appointed by the board to the position of Independent Non-Executive Director of the business.
For a period of five years, starting on June 12, 2024, Birla will hold this position.
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