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Partner and Head of the Mergers and Acquisitions practice at the Delhi office of Cyril Amarchand Mangaldas. Akila has over 19 years of experience in matters pertaining to mergers & acquisitions, joint ventures, corporate restructuring, general corporate and employment law. She has extensively handled acquisitions, disposals, takeover offers, delisting offers, commercial contracts and SEBI related matters. Akila has considerable national and international experience having served several significant clients across a broad range of industries and sectors.

Chambers Global and Chambers Asia Pacific, has consistently ranked her for Corporate and M&A practice for several years. IFLR and AsiaLaw leading lawyers features Akila amongst the top rated lawyers in India for Corporate M&A. She has also been recognized in Legal 500 and Who’s Who Legal; and recommended by RSG Consulting for excellence in M&A. She can be reached at akila.agrawal@cyrilshroff.com

USING SPAC VEHICLES AS A MEANS OF LISTING OUTSIDE INDIA

An overview 

Special Purpose Acquisition Companies (“SPACs”) have made a comeback on the Wall Street. SPACs are essentially investment companies backed by sponsors to raise capital from the public in an initial public offering (“IPO”) in the USA for the sole purpose of using the proceeds to acquire targets that are to be identified after the IPO. The eventual objective is to list the target. As of July 31, 2020, SPACs have raised close to USD 24 billion globally this year. The buzz around SPACs with available funding has reached Indian shores on the possibility of Indian companies being potential SPAC targets or Indian companies teaming up with SPACs to potentially list themselves in overseas markets.
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GOODBYE CHINA; HELLO INDIA

The noise around large companies shifting their manufacturing bases out of China has gotten shriller with the advent of Covid-19 related disruption. The theme is not new. Since the trade war between the United States and China, much has been written about companies shifting their operations from China to other South East Asian countries such as Vietnam, Thailand and Taiwan. India is hopeful of getting it right this time around and is competing with other South East Asian countries in rolling out the red carpet to companies exiting China. In anticipation of any announcements that may be made by the Government in this regard, this article examines some of the key factors that are relevant for companies contemplating a shift to India.
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SEBI CONSULTATION PAPER FOR LISTED COMPANIES WITH STRESSED ASSETS - CURE FOR THE SICK COULD BE VACCINE FOR ALL 

With the slowdown in the economy and unprecedented business disruption due to Covid 19, several Indian listed companies, which were already heavily leveraged, will soon be looking at avenues for further funding to meet working capital requirements and liquidity challenges. Given the current regulatory regime surrounding raising of equity capital, it is possible that some of the over-leveraged ones may become insolvent. With a view to facilitate fund raising by such listed companies that have stressed assets, the market regulator has come up with a consultation paper, that provides certain procedural relaxations to the SEBI (Issue of Capital and Disclosures Requirements) Regulations, 2018 (ICDR Regulations) and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations).
Continue Reading SEBI Consultation Paper For Listed Companies With Stressed Assets – Cure For The Sick Could Be Vaccine For All

Innocent Tippee Liability under Insider Laws

The SEBI Insider Trading Regulations prohibit trading in securities whilst in possession of unpublished price sensitive information (UPSI). It also states that when a person holds UPSI and trades in securities, his trades would be ‘presumed’ to have been motivated by the knowledge and awareness of such information in his possession.

Given that the burden of proof is on the insider to establish that his trade was not motivated by awareness of such information, the Regulations to provide statutory defences for the insider to prove his innocence. The stated defences, which are illustrative in nature, however, do not include a circumstance where a person has received UPSI and relied on it to make a trade under the assumption that it is publicly available information. The ‘innocent recipient’ was proposed as a statutory defence in the NK Sodhi High Level Committee Report, but did not find its way into the final form of the amended regulations. This defence was meant to be available if the recipient had no reason to believe that the information in his possession was UPSI or the person who communicated it to him violated any law or confidentiality obligation. As per the report, the insider would need to prove that he did everything reasonably in his power to confirm that the information in his possession was not UPSI (i.e. exercise of diligence expected of a reasonable man) and that he traded bona fide.
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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.
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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.
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Shares with Differential Voting Rights

The Securities Exchange Board of India (SEBI) has recently circulated a consultation paper on Differential Voting Rights (DVRs). Issuance of shares with differential voting or dividend rights is not a novel concept for India. It has been around since 2000 and a few listed companies, like Tata Motors and Pantaloons, have issued shares with differential voting / dividend rights.

However, ever since, SEBI amended the Listing Regulations in 2009, to state that listed companies are not permitted to issue shares with ‘superior rights’, there have hardly been any takers for this instrument. SEBI’s current proposal appears to be an attempt to breathe some life into such instruments by providing more flexibility in structuring the terms of such issuances, albeit with some checks and balances.  
Continue Reading Shares with Differential Voting Rights – SEBI’s Sequel Trumps the Original