Ola reportedly clips investors' rights to strengthen Founders' rights

Seeing the growing clout of SoftBank in the Indian startup industry, cab-aggregator Ola has reportedly decided to restrict investors' rights and strengthen those of its founders. To that effect, Ola has made some crucial changes in its shareholder terms as a protectionist move to safeguard them against potentially hostile action by powerful shareholders, reports Livemint.

In the changing startup scenario where investors are increasingly taking control over the affairs and fate of the company, Ola will be issuing additional shares to co-founders Bhavish Aggarwal and Ankit Bhati to keep their composite shareholding in the company at between 10.9 percent and 12.38 percent, according to the latest articles of association (AoA) filed by Ola’s holding company ANI Technologies Pvt Ltd.

Apparently, this will ensure that their shareholding doesn’t fall below 10.9 percent after a new fundraise. The agreement also says that SoftBank, in particular, cannot buy more equity shares in Ola without approval from the company’s founders and board of directors. Softbank is the largest shareholder in Ola, and already owns nearly 40 percent of the company.

Not just this, to further contain SoftBank's influence on boardroom matters, the agreement gives SoftBank, which currently has one representative on Ola’s board, the right to appoint one more director “provided that such person is reasonably acceptable to the founders, and all other shareholders”.

Founders are increasingly finding themselves at disadvantage with investors calling the shots in their companies. In 2015, SoftBank was in news for its issues with Housing CEO Rahul Yadav, who’d called its representatives “intellectually incapable”. A month later, Yadav was fired from Housing and Softbank, which was the largest investor in the company, had installed a new CEO in his place.

In the current scenario, Tiger Global's Kalyan Krishnamurthy replacing Binny Bansal from CEO position at Flipkart repeated the same story in respectable terms. Zivame founder and CEO Richa Kar also stepped away from day-to-day operations of the company last year and was replaced by a newly-hired CEO.

Meanwhile, SoftBank is once again architecting a new move, selling Snapdeal to rival Flipkart despite founders Kunal Bahl and Rohit Bansal's discontent.

Ola's latest moves will hopefully not only safeguard founders' interests but also those of other smaller investors that include Matrix Partners, Tiger Global, Sequoia Capital, Steadview Capital, and Accel Partners.