Photo of Cyril Shroff

Managing Partner of Cyril Amarchand Mangaldas. With over 33 years of experience, Cyril is regarded as the leading and authoritative figure in corporate law in India. He can be reached at cyril.shroff@cyrilshroff.com.

A Brief Conceptual Background

The discourse on corporate governance has been garnering considerable attention in the public domain in India, mainly due to the introduction of the Companies Act, 2013 (“Act”), the steps being taken by the Securities and Exchange Board of India (“SEBI”) in promoting governance, and the escalating activism of shareholders and proxy advisory firms (“PAFs”) in the public markets.

The corporate governance regime in India has been implemented mostly reactively, thus far. One of the reasons could be the prevalence of the family-owned businesses in India which present a distinct and additional set of governance concerns such as safeguarding the interests of minority shareholders, the fiduciary duty (if any) of the promoter(s) to minority shareholders and the duties of the board of directors in conflict situations. As such, this feature may have effectively prevented Indian regulators from adopting the governance frameworks implemented in more evolved jurisdictions like the UK or the USA. Even Germany, where the corporate ecosystem is comprised of large family-owned businesses like India, could not have an appropriate reference point for Indian regulators, given the board structures there. To elaborate, German corporations have adopted a two-tier board structure whereby representation is mandatorily available to employees on the upper tier (supervisory) board. As such, this prevalence of family owned concerns could have been one of the reasons why the Indian corporate governance regime has largely remained prescriptive and reactive.

Continue Reading Corporate Governance & Shareholder Activism

Over the last few years, there has been considerable debate in Indian corporate legal circles around the interpretation of the term ‘control’ as defined under the SEBI (SAST) Regulations, 2011 ( “Regulations”). To those unaware of this issue, the question, simply put, is this: if an investor seeks to invest in an Indian listed entity (“Target”) and as a part of its investment terms requests for and obtains, certain contractual rights that are not available to other shareholders of the Targets (“Special Rights”), would such Special Rights amount to acquisition of ‘control’ of the Target by the investor for the purposes of the Regulations? The genesis of such debate may owe its origins to conflicting definitions of ‘control’ by Indian courts and legislators or interpretations of ‘control’ by Indian regulators but that would not be the focus of the current post. Nonetheless, there is no exhaustive definition of ‘control’ and recognising its impact on deal making and M&A in the public space in India, India’s securities markets regulator, the Securities and Exchange Board of India (“SEBI”) in March of 2016 initiated the process to define ‘control’ by proposing certain bright line tests (“BLTs”).

Continue Reading Brightlining ‘Control’