The cardinal principle of company law, as enshrined under Section 129(1) of the Companies Act, 2013 (“Companies Act”), is that the financial statements (“FS”) should give a ‘true and fair view’ of the state of affairs of the company, comply with the accounting standards notified under Section 133, and also be in the form provided for different classes of companies under Schedule III.
Continue Reading Non-compliance with Accounting Standards – Will it amount to an FUTP Offence?
The legal position with respect to enforceability of put option clauses has not been a glorious chapter in the history of India’s securities law. The genesis of this vexed issue lies in – (i) the erstwhile Section 20 of the Securities Contracts (Regulation) Act, 1956 (“SCRA”) which had provided that all options in securities shall be illegal[1]; and (ii) a notification issued by the Ministry of Finance in 1969, which inter alia provided that any contract for sale or purchase of securities, other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities shall be prohibited[2] (“1969 Notification”).
“Forewarned is forearmed” is the cardinal principle underlying company law jurisprudence around the world and the foundation of all disclosure requirements.
Section 129(1) of the Companies Act, 2013 (“Act”), provides that the financial statements (“FS”) shall give a ‘true and fair view’ of the state of affairs of the company, comply with the accounting standards notified under Section 133 of the Act, and also be in the form provided for different classes of companies in Schedule III of the Act.
Context
In an earlier article under the ‘Gatekeepers of Governance’ series, the authors had discussed how the regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”), places ‘independent directors’ (“IDs”) at the forefront of India’s quest for better corporate governance. However, it is often forgotten that along with IDs, even non-executive non-independent directors (“NENIDs”) on the Board can play a pivotal role in acting as a ‘watchdog’, and safeguarding stakeholder interest.
Continue Reading Gatekeepers of Governance: Non-Executive Non-Independent Directors
The Ministry of Corporate Affairs (“MCA”) is entrusted with the responsibility of administering the Companies Act, 2013 (“2013 Act”). To this end, it has issued many a circulars to clarify the provisions of the 2013 Act and the rules made thereunder from time to time. On important matters like CSR, the ministry has issued detailed FAQs in the form of clarificatory circulars. Till date, the MCA has issued more than 210 clarificatory circulars under the 2013 Act.
Continue Reading Are Ministry of Corporate Affairs (MCA) Circulars constitutionally valid?
The Parliament took 16 years to implement the directions issued by the Supreme Court of India in 1997, in the landmark case of Visakha vs. State of Rajasthan[1] (“Visakha Guidelines”) to enact a law for the prevention of sexual harassment of women at the workplace. The enactment of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Act”) and the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013 (“Rules”) was very late, but better so than never.
The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”), envisages a key role for the Nomination and Remuneration Committee of the Board of Directors (“NRC”) – in ensuring that the company attracts and retains the best talent – and there is transparency in the process of appointment/ re-appointment and payment of remuneration to directors, key managerial personnel (“KMPs”) and senior management[1].
Continue Reading Gatekeepers of Governance – Nomination and Remuneration Committee
The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (LODR) Regulations, 2015 (“LODR”), places independent directors (“IDs”) at the forefront of India’s quest for better corporate governance. Given that approximately 75% of listed companies in India are promoter-controlled, the MCA and SEBI have envisaged that the IDs will play a key role in safeguarding minority shareholders’ interest.
Continue Reading Gatekeepers of Governance – Independent Directors
The judgments of the Delhi HC in Cruz City and SRM Exploration, discussed in Part 1, appears to ignore the earlier decision of the SC in Dropti Devi v Union of India[1], where the SC held (in the context of prosecution under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act) that the legislative objectives of FERA and FEMA are identical, namely, preservation of the foreign exchange resources of the country.
India is one of the few countries that still has exchange controls and does not have full capital account convertibility.
The Foreign Exchange Management Act, 1999 (“FEMA”), empowers the Reserve Bank of India (“RBI”) to frame regulations, master directions and issue circulars for the enforcement of the FEMA (“FEMA Regulatory Regime”). The FEMA Regulatory Regime contemplates prior RBI approval for certain categories of capital account transactions between residents and non-residents.
The enforcement of international arbitration awards in India, where there is going to be a remittance of foreign exchange from a resident to a non-resident, would invariably have FEMA implications. FEMA implications may also arise in situations where the foreign award provides for transfer of shares between residents and non-residents. If the foreign award is not in conformity with the FEMA Regulatory Regime, in such a situation, can the court, where the enforcement action is filed, decline enforcement on the ground that the foreign award would be contrary to the country’s ‘public policy’.