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Substantial Issues in Defining “Substantially the Whole of the Undertaking”

Section 180(1)(a) of the Companies Act 2013 (“2013 Act”) requires a company to obtain prior approval by a special resolution to sell, lease or dispose of the whole or substantially the whole of the undertaking of the company or, when the company owns more than one undertaking, of the whole or substantially the whole of any of such  undertakings.

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Permissibility of Pledges: Decoding SEBI’s View

The efficiency of the securities market depends on equal access to information and ensuring information symmetry for all stakeholders. Many Indian listed entities have significant promoter/ promoter group shareholding, which gives them the advantage of asymmetrical access to unpublished information. For free and fair trade in the financial market, a level-playing field between the promoter/ promoter group and retail shareholders is crucial. This is why there is prohibition on communication of Unpublished Price Sensitive Information (“UPSI”) and insider trading.

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Recommendations on Changes to SEBI ICDR Regulations for Ease of Doing Business – Missing the Point

On January 11, 2024, SEBI issued its consultation paper on interim recommendations of its expert committee to harmonise the SEBI ICDR and LODR regulations.  The public has been invited to share comments on this paper.

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Ever since the introduction of framework for prevention of insider trading (“PIT”), the Securities and Exchange Board of India (“SEBI”), as the primary regulator of securities markets has consistently been sharpening its tools to effectively discharge its duty of ensuring market integrity, curbing malpractices and safeguarding interests of investors.

Continue Reading Decoding SEBI’s Tech Arsenal for Insider Trading: Structured Digital Database (Part I)
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Increasing the role and relevance of ‘Proxy Advisory Firms’ in corporate governance

Until very recently, the recommendations of proxy advisory firms did not impact companies much, as it did not have the power to influence or fail/ stop a resolution from being passed. However now, the recommendations of proxy advisory firms are becoming increasingly relevant given that many institutional investors are basing their positions while voting on resolutions on such advice. This is evidenced from the fact that a proxy advisory firms have recently managed to prevent a resolution for granting employee stock options to employees of a group entity of a very large Indian bank from being passed due to the absence of “any compelling reasons”.[1] In another interesting case, a proxy advisory firm came very close to preventing a resolution pertaining to an increase in the remuneration of a director from being passed on account of this increase being “skewed” and “guaranteed”.[2]

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FIG Paper - Navigating SEBI’s Definition of UPSI


The objective of the PIT Regulations is to prohibit insiders with access to Unpublished Price Sensitive Information (“UPSI”) from making illicit gains and to ensure timely, adequate and even disclosure of UPSI to the public. Hence, the determination of what constitutes as UPSI becomes necessary. In this regard, the Securities and Exchange Board of India (“SEBI”) has signalled a shift from a principle-based regime to a more prescriptive regime, which is likely to result in increased compliance obligations for the listed companies.

Continue Reading FIG Paper (No. 26 – Series. 3): Navigating SEBI’s Definition of UPSI
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Market Rumours SEBI’s New Prescription and India Inc’s Dilemma SM


With effect from October 1, 2023, India’s top 100 listed entities (based on market capitalisation) would have to mandatorily confirm, deny, or clarify market rumours to the stock exchanges, and this requirement extends to the top 250 listed entities with effect from April 1, 2024. The Securities and Exchange Board of India (“SEBI”), by way of notifying amendments to the LODR Regulations on June 14, 2023 (“LODR Amendments”), has introduced this mandatory requirement under Regulation 30 read with Schedule III of the LODR Regulations (referred to below as the “Market Rumours Amendment”).

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The Securities and Exchange Board of India (“SEBI”) has recently introduced significant changes to the governance framework for listed companies through an amendment to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”).

The amendments were signaled by various consultation papers issued by SEBI over the last 6-9 months, including consultation papers on ‘Review of disclosure requirements for material events or information under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015’ and ‘Strengthening Corporate Governance at Listed Entities by Empowering Shareholders – Amendments to the SEBI (LODR) Regulations, 2015’.

Continue Reading SEBI Amendments to the LODR – An Overview of Key Changes
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I. Background:

(i) SEBI notified the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2023 (“Amendment”), on June 27, 2023. The Amendment follows a Consultation Paper on Review of Regulatory Framework for Sponsors of a Mutual Fund, which the SEBI had released on January 13, 2023 (“Consultation Paper”).

(ii) The Amendment strengthens the existing eligibility criteria for sponsors of a mutual fund, which requires sponsors to have vintage in the “business of financial services” (“Original Criteria”), and requires the sponsor to have,

a. a net profit in all of the preceding five years (as opposed to the erstwhile requirement of profit in three out of five years);

b. minimum average net profit of INR 10 crore in preceding five years; and

c. positive “liquid net worth” i.e. (cash, money market instruments, T-Bills and G-Secs), greater than the proposed capital contribution of such sponsor.

(iii) The Amendment also introduces alternate eligibility criteria (“Alternate Criteria”), which allows non-financial services entities and “a private equity fund or a pooled investment vehicle or a pooled investment fund”, to become sponsors, subject to,

a. capital infusion of INR 150 crore into the asset management company (“AMC”);

b. shareholding equivalent to the initial capitalisation of INR 150 crore to be locked-in for a period of five years;

c. appointment of experienced senior management officials, having a combined experience of at least 30 years; and

d. in cases of acquisition of an existing AMC, maintaining liquid net worth equal to the incremental capitalisation to bring the net worth of the AMC to INR 150 crore.

(iv) The Amendment provides a framework for ‘existing’ sponsors to “disassociate” from an AMC, basis conditions to be prescribed by SEBI, and subject to,

a. AMC having diversified shareholding (no single shareholder with more than 10% shareholding); and

b. AMC having 2/3rd independent board of directors (as opposed to the 50% independent board of directors for AMCs with a sponsor).

(v) The Amendment replicates many monitoring and investor protection responsibilities for the board of directors of the AMC, in addition to the trustees.

The amendments in Paragraphs I(ii), (iii) and (iv) above shall come into force on August 1, 2023, in Paragraph I(v) above shall come into force once it is notified by SEBI.

II. Analysis:

(i) Original Criteria:

a. INR 10 crore profit floor may impact smaller players; requirement to maintain positive “liquid net worth” may affect investment strategy at the sponsor level.

b. Given the August 1, 2023 enforcement date for Paragraph I(iii) above, greenfield applications/ brownfield acquisitions currently being contemplated, may be accelerated; but the status of pending sponsor applications with SEBI is unclear.

c. The exemption that had introduced a window for early stage Technology/ FinTech companies to ‘sponsor’ a mutual fund (i.e. by bringing INR 100 crore net worth, if the original criterion of profitability in three out of five years is not met), has been deleted. Loss-making early-stage players who have recently ‘sponsored’ mutual funds, either through fresh applications or acquisition of existing AMCs, will not have this flexibility going forward.

(ii) Alternate Criteria:

a. PE/ VC funds are now permitted to sponsor mutual funds, without support from a strategic player. This is a big move by SEBI.

b. The 40% shareholding lock-in requirement, as contemplated under the Consultation Paper, has been dropped, in favour of a blanket INR 150 crore capitalisation lock-in for five years. This may possibly enable sponsor “disassociation”for high net worth AMCs.  

c. “Sponsor-less” AMCs: Once SEBI prescribes the conditions, as mentioned in Paragraph I(iv) above, when a sponsor’s shareholding falls below 10%, “de-sponsorisation” will now be available (especially for listed AMCs), akin to “de-promoterisation”. Given the onerous ‘sponsor’ compliance requirements, this is a welcome step.

III. Implications:

Strategic InvestorsHigher obligations imposed.  
PE / VC FundsPositive, PE/ VC funds can now ‘sponsor’ MF AMCs.  
Early Stage PlayersAs 3/5 years profitability exemption has been dropped, early stage players would have to explore alternative criteria.

IV. Conclusion:

Mutual Fund sector was the only space which lacked clarity on the status of financial sponsors. These Amendments are a step in the right direction as it will now enable PE/ VC funds to enter the Mutual Fund space as ‘sponsors’, and trigger fresh deal activity.

Fixing of a higher accountability on the board of directors of AMCs will help improve corporate governance standards, thereby benefitting investors/ unitholders.

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On June 15, 2023, Securities and Exchange Board of India [“SEBI”] had released— (i) Master Circular for Investment Advisers; and (ii) Master Circular for Research Analysts.

The Master Circulars serve as comprehensive compilations of all directions issued by SEBI pertaining to Investment Advisers [“IAs”] and Research Analysts [“RAs“]. SEBI’s Master Circulars for IAs and RAs aim to provide easy access to relevant guidelines and promote compliance among IAs and RAs.

Continue Reading FIG Paper No. 22: Decoding SEBI’s Master Circular for Investment Advisers and Research Analysts