DiaryOfAnInsaneWriter has been following the story of Franklin Templeton’s winding up of six fixed income schemes since April 2020. Through this blogzine, we analysed and addressed speculations on whether Franklin Templeton is winding up business in India? Before the Karnataka ruling, the company had planned to conduct an e-voting process, we had written about it along with answers to investor’s questions.
Once again, Sanjay Sapre, President, Franklin Templeton India spoke to Finance Bloggers and Vloggers through a Video Chat and Interactive Q&A Session of DiaryOfAnInsaneWriter was part of this session.
What is Franklin Templeton’s story behind the winding up of six fixed income schemes?
On April 23, 2020, Franklin Templeton Trustee Services Private Limited voluntarily decided to wind up its suite of six fixed income funds on April 23, 2020. The company says that the decision was taken in light of the severe market dislocation and illiquidity caused by the COVID-19 pandemic but it was taken with the objective of safeguarding the interest of their investors.
There has been order passed by the Honorable Supreme Court and their way forward on the Voting exercise. The Karnataka court felt that it was necessary to seek unitholders consent before winding up the six schemes under regulation 18(15) (c).. Thus, Franklin Templeton will be holding an e-voting process for the same. You know that the company has always been keen to move forward with the consent voting. They had started this process in May and announced voting in June but that got into a legal spiral and the e-voting couldn’t be held.
Why did the matter go to the Supreme Court?
After the Karnataka Court’s ruling, it was unclear whether the fund is to remain open or closed for dealing. That’s when Franklin Templeton approached the Supreme Court requesting them to review so they can seek the e-voting and the fund remains stayed during this period. The company felt that it was in the best interest of the unit holders. Across two orders, one on December 3 and another on December 9, the SC gave them the order.
What does the Supreme Court order for Franklin Templeton say?
The Supreme Court said without prejudice to the argument all petitioners including SEBI, Franklin Templeton and others may put forward, without setting any kind of precedent, the trustees are permitted to go forward and seek consent of unit holders under regulation 18 (15) (c). This consent will be by a simple majority through an e-voting process to ensure that COVID-19 regulations are met and also they can reach a larger number of unit holders as compared to a physical meeting. The SC stated that the redemptions continue to be stayed till the date of the next hearing scheduled in the third week of January 2021.
In the December 9th order, Supreme Court added that:
• SEBI will appoint an observer to monitor the voting process under regulation 18(15) (c).
• The voting results, and the report of the observer will be submitted to the Hon’ble Supreme Court in a sealed envelope.
The matter will be up for hearing on the 18th of January, 2021. The company expects the results to be made known at that point of time.
When will the e-voting process for Franklin Templeton unitholders consent e-vote be held?
The Portal will remain open for voting from 09:00 a.m. (IST) on December 26, 2020 till 06:00 p.m. (IST) on December 28, 2020. This will be followed by the Unitholders meeting through Video Conference on December 29, 2020. Unitholders who have not voted previously and are attending the Unitholders meet will be allowed to vote during the time of the meeting
Role of the Franklin Templeton investors in the unit-holders consent e-vote:
In order to ensure maximum participation, the process of seeking unitholder’ consent will be through an “Electronic Vote” followed by a meeting through video conference. Unitholders who have not voted previously and are attending the Unitholders meet will be allowed to vote during the time of the meeting. Over the next few days, investors will receive the user id and password from KFin Technologies.
‘Yes’ or ‘No’ which choice is best for a Franklin Templeton investor?
A participating unitholder, has two choices:
• Vote “Yes” in favour of the orderly winding up – A “Yes” vote will allow us to proceed with the next step which is seeking unitholder authorization under Regulation 41. Post this, the Trustee or any other authorized person can proceed with monetization of assets and distribution of monies to Unitholders. This will also mean that the schemes will not be required to make a distress sale of portfolio securities to fund redemptions.
• Vote “No” against the orderly winding up – A “No” vote will mean the funds will be required to re-open for purchases and redemptions. The schemes may suffer significant losses due to the need to sell securities at distress prices to fund heightened redemption volumes.
The company believes that voters should vote “Yes” in favour of the Trustee’s decision to orderly wind up the six schemes. Franklin Templeton is seeking unitholder’s consent for the orderly winding up and believe this will result in the best possible outcomes for unitholders under the current circumstances. In normal market conditions, the opportunity to liquidate assets at fair value will increase with time.
Who are the external parties involved in the e-voting process for Franklin Templeton unitholders consent e-vote?
Franklin Templeton has tried to make the process as transparent as possible.
- KFintech – User id password, voting process will be done on KFintech systems
- SEBI Observer – who will observe the process and seal the results and submit to the Supreme Court
- A law firm will act as a scrutinizer and also add their observations and comments in the sealed envelope
What are the links for e-voting and unitholder’s meet?
Note: The user id and password are common for e-voting and unitholders meet. For queries related to the user id and password for the e-voting and unitholders meet, please call 18003454001.
Meanwhile, Sanjay Sapre, President, Franklin Templeton India and his colleagues promise to be available to answer any questions investors may have.
Where can a unit holder get the Latest News on Franklin Templeton’s Unit holders e-vote and winding up of specific schemes?
The Franklin Templeton website has a section dedicated to this. Click here.
They have also built a list of FAQs with answers for ORDERLY WINDING-UP OF 6 FIXED INCOME SCHEMES, E-Voting & Unitholders E-Meet: Click here.
- What process has the Trustee followed to seek unitholders consent vote for winding up under regulation 18(15(c)? What timelines are you looking at?
- What are the options available in a consent vote?
- Can you explain the next steps for the funds which vote Yes or No in the consent vote under regulation 18(15(c)?
- Can you undertake active monetization for the funds which give a ‘Yes’ consent vote to the winding up?
- What are the various procedures to be completed prior to returning monies to investors?
- How do each of these options work for unitholders?
- How will the consent e-voting process work? Can unitholders vote differently for each of the products or will it be a common vote for all funds?
- Why do you need to go through the voting exercise twice? Why can’t you finish it together rather than prolonging it further?
- What is the sequence of events for the voting exercise under regulation 18(15)(c)? Please provide exact dates.
- What is the agenda for the unitholders’ meet to be held on 29 December 2020? Will there be a unitholder meet in both the votes? If yes, how is the agenda different in both?
- Does FT need to get a simple majority to decide the YES / NO vote in each scheme for orderly winding-up. What do you mean by simple majority?
- How do you propose to actively monetize the securities in the secondary market post the YES vote?
- Where can I find the latest portfolio statement and maturity profile for the 6 funds?
- Where can I find more information on the Voting exercise to take an informed decision?
- What about investors who have opted for physical communication or have not got their email id registered?
- What are the important Guidelines for Unitholders E-Voting and Unitholders Meet?
- Will the user ID and password be the same for consent vote under regulation 18(15)(c) and authorization vote under regulation 41(1)?
- Is an Institutional investor treated differently from a retail investor for the voting process?
- Does having a higher number of units in the folio have a higher weightage?
- Does having more folios in the same fund give an added advantage?
- If an investor has invested in more than one scheme can he/she cast his vote once as a consolidated vote?
- If husband and wife both are primary investors in both these funds in their individual capacity and they have the same email id, will they get two separate mails since there are separate investors?
- Will electronic voting be extended to NRIs and how will the cut-off time work for casting votes?
- What happens if investors miss voting during this period?
- When will the voting results be declared? How will I get to know of the results?
- What if an investor does not cast his/her vote?
- If investors face a technical error in casting my vote, whom do I call / write to?
- What steps does an investor need to take to participate in the Unitholders meeting via Video Conferencing (VC)?
- Will there be a separate user id for the VC or the one given for voting can be used?
- How many Unitholders are we going to allow in the VC?
- When will the voting begin? What are the dates and the time slots?
- What steps does an investor need to take to complete the electronic voting process?
- What is the status for Hindu Undivided Family (HUF) unitholders under e-voting? Do they come under Non-individual or Individual?
- What is the status of Trust and AOP (Association of People)?
- In what format does non-individual unitholders need to submit the voting authorization/power of attorney (POA)/ resolution?
- Should non-individual unitholders first vote and then upload the resolution/POA/ authorization or the same can be uploaded later (or is there any last date to upload the same)?
- Will there be any confirmation given by K Fintech/ FT on successful uploading of resolution/POA/ authorization document?
This blogpost may be read with a pinch of salt by many. However, I believe that it takes a lot of guts for a company to stand by failure and face the unitholders. Hats off to Sanjay Sapre, President, Franklin Templeton for leading this from the front. It would have been easy for him to step down, and make the company sort the mess, after all he is only an employee and not the owner of the company. For him to sit before 45 bloggers and answer pointed questions must have been really tough, and he did it patiently, with panache. All his answers evoked faith and trust for Franklin Templeton. Personally, I feel that this is a lesson in leadership that can be quoted in case studies across the world. The test of his true grit, however, will be when Franklin Templeton returns the last penny of the unit holders.
Please leave your comments in the comment box below, I want to know what you think of this entire issue.
Source of information: Franklin Templeton Website & Video Conference with Sanjay Sapre, President Franklin Templeton, India.