2020

SEBI-Streamlines-Rights-Issue-Process

The SEBI has streamlined certain aspects of the rights issue process that is expected to not only reduce the timelines but also provide clarity on the renunciation and trading of rights entitlements. These are welcome changes and will potentially make rights issues a preferred option to raise capital for listed companies.

Whilst rights issues are offerings to existing shareholders, it typically takes 55 to 58 days to complete the process (excluding SEBI review and the time taken for due diligence and drafting the offer document). The process involves (i) a minimum 15-day rights issue application period, (ii) mandatory participation by certain investors only through the non-ASBA process (such as through cheque) and (iii) a seven clear working days intimation prior to the record date. SEBI has addressed some of these concerns through amendments to the SEBI ICDR Regulations, SEBI Listing Regulations (both effective from December 26, 2019) and a circular with effect from February 14, 2020.
Continue Reading SEBI Streamlines Rights Issue Process

Arbitration Agreements in Unstamped Documents

Introduction

There has been constant confusion with respect to admissibility of unstamped documents. Section 35 of the Indian Stamp Act, 1899 (“Stamp Act”), provides that an unstamped or inadequately stamped document is inadmissible in evidence. Applying Section 35 of the Stamp Act, the Supreme Court in Garware Wall Ropes Ltd v. Coastal Marine Construction & Engineering Ltd [1](“Garware Judgement”) held that an arbitration agreement contained in an unstamped contract cannot be taken in evidence and invoked. It was further held that, in case the Court is faced with an unstamped document, it must proceed to impound the same, in accordance with the provisions of the Stamp Act; only once such an impounding is done — the deficit stamp duty and penalty paid, can the Court proceed on the basis of the arbitration agreement.
Continue Reading Invoking Arbitration Agreements in Unstamped Documents – A Case Comment on Garware Wall Ropes v. Coastal Marine Constructions & Engineering

Global trends in private M&A

This guest post is by Jaya Gupta, Head of India Desk, Corporate at Allen & Overy LLP
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In 2019, global M&A activity switched down a gear although it was still the third-strongest year in a decade in terms of value and transaction volume.

With macroeconomic issues such as continuing trade wars between the US and China, tensions in the Middle East and, to some extent, Brexit, impacting cross-border activities, many investors resorted to strategic domestic megadeals.Continue Reading Global Trends in Private M&A

CHAIRMAN OR MANAGING DIRECTOR SEBI Regulation

Section 203(1) of the Companies Act states that an individual shall not be appointed or reappointed as the chairperson, of the company as well as the managing director (MD) or the chief executive officer (CEO) at the same time, unless the articles of the company provides otherwise or the company does not carry on multiple businesses. Further, this restriction is not applicable to certain specified class of companies engaged in multiple businesses and which have appointed one or more CEOs for each such business.
Continue Reading Chairman or Managing Director? – Eenie Meenie Miney Mo

Indian Labour Laws Recap 2019 and Outlook 2020

The year 2019 can be said to be a watershed year in relation to the employment law regime in India. The Indian government took various steps to simplify and streamline the dated employment legislations, veritably in a bid to rise up in the index of Ease of Doing Business in India. The courts in India too played their part in interpretation of the existing legal regime. Here, we not only look at some of the key, impactful developments, but also look forward to what 2020 may have in store for India Inc., in relation to the same:
Continue Reading Recap of Key Labour Law Developments of 2019 & Looking Forward to 2020

Cross-border demergers – lack of legislative intent?

In the matter of Sun Pharmaceuticals Industries Limited, the Ahmedabad bench of the NCLT has ruled that Section 234 of the Companies Act, 2013 and the FEMA Cross Border Merger Regulations, 2018, do not permit cross-border demergers. Sun Pharma sought to demerge two of its investment undertakings in India into two overseas resulting companies, based in the Netherlands and the US. Being a listed entity, it obtained prior approval of SEBI through the relevant stock exchanges and the requisite corporate consents of its shareholders and creditors. The RBI granted its implied deemed approval by stating that the demerged company is required to abide by the applicable rules and regulations, which it had undertaken that it would. None of the other stakeholders to whom notices were issued by the tribunal, including the Registrar of Companies (ROC), objected to the demerger on the ground that it was not permitted by law.
Continue Reading Cross-border Demergers – Lack of Legislative Intent?

Mutual Funds and Alternative Investments - Stewardship Code

Introduction

On December 24, 2019, Securities and Exchange Board of India (“SEBI”) released a circular setting up a stewardship code for Asset Management Companies (“AMCs”), Mutual Funds (“MFs”) and all the categories of Alternative Investment Funds (“AIFs”) investing in listed Indian companies (“Stewardship Code” or “Code”). In keeping with global trends, SEBI has made it necessary for the power wielding cash-rich institutional investors, to act in accordance with the responsibilities that invariably accompany and behoove such powers and formulate a policy adopting the principles enshrined in the Code.

The Stewardship Code prescribes certain principles which, aim at enhancing the responsibilities of the AMCs/ AIFs to protect the interests of their investors/beneficiaries. The requirements pertaining to the Stewardship Code shall come into effect on April 1, 2020.
Continue Reading Being Responsible Corporate Citizens – How Mutual Funds and Alternative Investment Funds will Rise Up to the Stewardship code

Evolving Private Equity Trends in India – Buyout Transactions

INTRODUCTION

Private equity (PE) transactions in India conventionally comprised minority investments in Indian companies. However, maturing market conditions and an increasingly favourable regulatory landscape have been providing tailwinds to PE firms to undertake buyout transactions. Many PE firms investing in India have gained significant experience to deal with the governance and regulatory risks that Indian markets pose. This enables them to leverage their expertise from running businesses globally to managing businesses in India.
Continue Reading Evolving Private Equity Trends in India – Buyout Transactions

Control deals Tender offers 2019 - Takeover regulations

Control deals are gaining popularity because of the ability of the incoming controlling shareholder to control the ‘when’ and ‘how’ of the functioning of the business that is housed in the company. Additionally, the stigma associated with promoter’s relinquishing control of their companies is on the wane in India. Despite the market conditions, 2019 saw a fair deal of control transactions in the country. For such category of deals, calendar year 2019 was comparable to calendar year 2018 in number and value terms.

In this blog, we are sharing with you our analysis of control transactions in which exit was offered to public shareholders through the tender offer route in 2019[1], under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). We will be sharing a detailed report on the 2019 activity of such transactions separately.
Continue Reading Control Deals Involving Tender Offers: Flashback 2019