AGS crisis: Boardroom exits catch proxy cos' attention

Proxy firms are questioning if independent directors could have limited AGS' cash crunch

- Varun Sood & Shayan Ghosh

Within days of AGS Transact Technologies Ltd acknowledging that a cash crunch had forced it to default on bank loans, statutory payments, and staff salaries, all four independent directors on its board resigned in quick succession.

This caught the attention of proxy advisory firms, which are questioning the overall role of independent directors, and if they could have intervened to limit AGS' cash crisis, which impacted cash dispensers of some of India's top domestic banks.

AGS, India's second-largest manager of ATMs, had a total board strength of eight directors before the latest resignations. It currently has three executive directors and one non-independent non-executive director.

"This raises two issues," said Amit Tandon, founder and managing director at Institutional Investor Advisory Services (IIAS), a proxy advisory firm. "The first is for regulators. In the past, the corporate veil has been lifted and the personal assets of the directors have been frozen."

Tandon said the gut reaction of independent directors in such situations may be to resign because there is still no regulatory clarity on whether their personal assets can be ring-fenced from those of the company.