At yesterday’s extraordinary general meeting of London- and Kazakhstan-listed KazMunaiGas Exploration & Production (“KMG EP”), controlling shareholder and Kazakh state oil company NC KazMunaiGas (“NC KMG”) failed to convince a sufficient number of independent shareholders that its proposals would serve in their best interests.

Back in June, NC KMG, which controls 57.9% of KMG EP, put forward an agenda intending to reform its existing relationship agreement with the company, as well introduce extensive changes to the articles of association. One of the most noteworthy changes was the inclusion of a veto right for NC KMG over all nominations made by the board’s nomination committee, an amendment which was later removed following backlash from other investors, as well as the independent board members.

Despite its removal, the independent directors maintained that the revised amendments would weaken minority shareholder protections and undermine the company’s corporate governance structures. KMG EP has thus far remained independent of the parent company, a principle put in place at the time of the company’s IPO in 2006 – and a key to the willingness of investors in London and elsewhere to buy-in to the offshore issuer.

If the proposals had passed, NC KMG was also offering to purchase any shares and GDRs of shareholders who wished to withdraw from the company. Insisting it was not in its plans to buyout shareholders nor was it seeking to increase its stake in the company, NC KMG originally set the purchase price at $7.88 per GDR, $47.28 per common share, and $27.62 per preferred share, which by July had been sweetened to the loftier heights of $9.00, $54.00 and $31.55, respectively. Regardless, given the proposals failed to pass, the purchase offer will no longer go ahead.

With NC KMG excluded from the vote, 75.5% of participating minority shareholders (representing approximately 22% of the company’s total voting capital) voted against the proposals with the remaining 24.3% voting in favour. While NC KMG expressed disappointment with the result, perhaps not all love’s lost just yet between the two companies, as the independent directors “look forward to working collaboratively” with NC KMG going forward. For their part, minority shareholders are likely relieved to have avoided another ENRC-situation (at least for now).