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Diageo mulls fate of United Spirits boss Vijay Mallya

Published:  27 April, 2015

Diageo is mulling the fate of United Spirits boss Vijay Mallya, after its Indian- based subsidiary issued a vote of no-confidence in him over the weekend.

On Saturday, USL stated it had lost confidence in Vijay Mallya. In its financial statements and auditor's report for the year ending 31 March 2014, it confirmed it had asked him to step down as chairman, cited the inquiry into "certain dubious receivables, advances and deposits". It noted that in the event that Mallya declined to step down, it would recommend to its shareholders that he be removed.  

Mallya has indicated he will not step aside and as the majority shareholder of USL, with a 54.78% holding, Diageo today confirmed it was "considering its position" having received the inquiry report and all related materials.

In a statement issued this morning, the spirits giant said it noted the recommendation of the USL board and will now consider its position under its agreements with Mallya and United Breweries (Holdings) Limited ("UBHL").

However, it noted it has "certain contractual obligations to support Dr Mallya continuing as non-executive director and chairman of USL subject to certain conditions and in the absence of certain defaults."

Under the terms of the agreement, UBHL were able to nominate one director  - Mallya - to the USL board as long as it controlled a certain amount of USL's shares  and Mallya remained in control at UBHL. The company is therefore oblige  to support Dr Mallya continuing as non-executive director and chairman of USL. 

In July 2013, the company bought a controlling stake in the Indian spirits business, later boosting its stake by anouther 26% in April last year after launching a £1.1bn tender to shareholders.