Mumbai, Aug. 26: The battle to force a change in the corporate governance structure at Orient-Express Hotels (OEH) has finally reached a head.

Frustrated by over eight months of stonewalling on the issue, David Shaw and Steven Cohen — the two hedge fund financiers who together hold 14.3 per cent of the NYSE-listed Class A shares in the luxury hotel chain — have written to the OEH management demanding a special general meeting to consider a resolution to scrap the super-voting Class B shares.

They said the management should kickstart the process for convening the meeting in the next 21 days. The date for the meeting itself should be set “not less than 10 days and not greater than 50 days” after the receipt of the shareholders’ request to enable them to collect the requisite proxies.

Shaw and Cohen have threatened to call a meeting of the shareholders on their own under the provisions of Bermuda’s company laws if the OEH management doesn’t convene the special general meeting.

Last December, the Tatas-owned Indian Hotels Company was rudely rebuffed when it proposed an alliance with the Bermuda-based luxury hotel chain which operates 52 hotels around the world, including Hotel Cipriani in Venice and the Copacabana Palace in Rio de Janeiro.

It also runs three luxury trains, including the Venice Simplon Orient-Express whose precursor formed the backdrop to one of Hercule Poirot’s most famous murder mysteries.

Indian Hotels owns 11.5 per cent of Orient-Express stock and is its single largest shareholder, but this translates into a voting right of just 2.2 per cent. The Tatas have maintained a studied silence on the issue, allowing the hedge funds to fire broadsides against the OEH management that started in February.

Two resolutions

The two hedge fund financiers plan to move two resolutions at the meeting. The first seeks to treat the Class B share — which carries a voting right that is 10 times the Class A share — as “treasury shares” under Bermuda law which the management cannot vote.

“We propose the first resolution because a Bermuda company cannot hold its own shares except pursuant to the treasury share rules,” representatives for the two hedge fund owners said in a letter sent to the OEH management on Monday. The second resolution seeks to force the company to scrap the Class B shares altogether. “We see no legitimate reason for the Class B shares to be outstanding, even as non-voting treasury shares,” the letter added.

“We propose these resolutions as a practical compromise to avoid litigation and we reserve all rights,” they added.

Fourteen directors and executives of the company together hold just over 18 million Class B shares and 643,245 Class A shares, which together confer an overwhelming voting right of 81.2 per cent.

The hedge funds said the proposed change would not in any way affect the moat of anti-takeover provisions that the company created when it went public in 2000.

“The company’s shareholder rights plan, voting restrictions on large shareholders, special limitations on removing directors other than at an annual general meeting, and other ‘anti-takeover’ protections are unaffected by the proposed amendments,” the letter added.

The letter comes three weeks after an earlier one in which the two hedge funds claimed that the corporate governance structure at OEH violated the company laws of Bermuda.