Sridhar Vembu, Pramila Srinivasan & The Zoho Shareholding Saga

Celebrity divorces typically attract a media circus because of the potential legal battle, but there have also been recent cases where the two parties have decided to part ways amicably – Jeff Bezos’ split with MacKenzie Scott for instance. Unfortunately for Indian SaaS giant Zoho, the divorce proceedings between founder and CEO Sridhar Vembu and his wife Pramila Srinivasan is anything but that.

Zoho’s Vembu is one of the most respected names in the Indian startup ecosystem. However, over the past few days, serious allegations have been levied against Vembu by his wife, as the pair goes through a divorce in San Francisco, California, where the duo used to live with their son.

“My husband not only abandoned me and his son with special needs in 2020, he decided to make fictitious transfers or ‘sales’ of our most valuable community asset to his family members without their paying any cash or other consideration, and without ever telling me or asking my permission,” Srinivasan stated in a January court filing accessed by Forbes.

A day after the Forbes article went live, Vembu responded to the allegations on Twitter, in what he called a “deeply painful personal” thread, claiming that he ‘did not financially abandon his wife or their child, nor did he transfer his shares to anyone.

Amid the legal angle and the highly sensitive nature of the discussions around the divorce, what exactly is happening in San Francisco and Mathalamparai?

Sridhar Vembu Vs Pramila Srinivasan

The events leading up to the Sridhar Vembu-Pramila Srinivasan divorce go back to early 2020 when the Zoho cofounder decided to move to Mathalamparai village in Tamil Nadu to create more value for India’s rural innovation ecosystem by moving the entire Zoho operations to the village.

Vembu is said to have asked Srinivasan in November 2020 for a divorce, before filing papers for the same in August 2021.

In the divorce case in California, Srinivasan reportedly claimed that Vembu deliberately got rid of a big chunk of his Zoho stake in a complex transaction that moved Zoho’s intellectual property to India and eventually placed the majority of the shares with his sister and her husband, without even telling her.

Under California’s community property law, a spouse during marriage can’t secretly dispose of assets without obtaining the other spouse’s consent. According to Srinivasan, Vembu allegedly did just that, jettisoning his stake in Zoho to his siblings, Radha and Sekar. 

However, Inc42 couldn’t independently verify the statement.

Following the allegations, Vembu tweeted on Tuesday (March 14) that his paternal uncle, Ram Srinivasan, was largely to blame for the ‘messy legal dimension’ to his personal story, which he described as ‘tragic’.

He had also shared a very similar statement with Forbes, stating that the couple had been struggling with their son’s autism. 

“My wife Pramila and I were in this fight against autism for over 15 years. She is a super mom and her passionate cause is curing our son of autism,” Vembu said in a tweet, adding that he had thought that their son would have been better off in rural India, surrounded by loving people.

“She felt I was giving up. Our marriage collapsed under that stress,” Vembu added.

Zoho’s Shareholding Pattern

According to Zoho’s FY22 filings with the Ministry of Corporate Affairs, Sridhar’s sister Radha is the majority shareholder in Zoho, holding a 47.8% share in the company. Sekar, Sridhar’s brother, holds another 35.2% stake in Zoho.

One of the cofounders, Tony Thomas, holds an 8% equity stake in Zoho, while Sridhar holds just 5% in the company. Zoho’s filings describe Radha as key managerial personnel, while Sekar is the founder of a subsidiary, Vembu Technologies.

The core of the conflict lies here.

Following a series of transactions dating back to December 2010, as detailed by Forbes, Vembu and Thomas saw their stakes in the company reduced to 5% and 8%, respectively.

The duo had also founded a SaaS company in San Francisco called AdventNet. After the company recorded initial success, the founders decided to shift the company to India.

Separately, Zoho Corporation Private Limited was set up in India by Vembu and his brother-in-law Rajendran Dandapani in December 2010. According to a memorandum of association seen by Forbes, Vembu held a 43% stake in the company, while Dandapani held the remaining stake.

Towards the end of 2011, Zoho Corp filed a new shareholding structure, which saw Radha Vembu get a 49% stake and her husband’s stake falling to 34%. Thomas and Vembu sold AdventNet’s IP to Zoho Corp for $50 Mn, gaining an 8% and 5% stake in the company, respectively.

However, Dandapani’s equity in Zoho was down to zero in 2015, and he was replaced by Sridhar’s brother Sekar, who now holds a 35.2% stake.

Coming back to Ram Srinivasan, who has been cited in the Forbes article as stating that Radha was allegedly holding the stake for Sridhar.

“In my opinion, after his divorce is all done, the whole money will go to [Sridhar] one way or another,” the paternal uncle of the Zoho cofounder was cited as saying.

Vembu, on his Twitter, alleged that Ram, who has no relation with his wife Pramila, has been spreading rumours about the Vembu siblings.

“All of this mess was caused by my uncle Ram (my father’s younger brother) living in the US, who I gave shelter to due to his terminal cancer, taking out his long-running frustrations with my father. He is doing that by spreading malicious rumours about me and my siblings,” Vembu tweeted.

Whatever the case may be, this is a highly sensitive case that should be talked about, without favouring any party involved. The case is currently sub-judice in a California court, and while the truth will come out eventually, the matter has attracted massive media attention nevertheless.