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Debt capital markets - a bumpy road ahead

The novel coronavirus pandemic (“Covid-19”) has brought about a new set of challenges for the Indian economy. While our economy successfully weathered the 2008 financial crisis, the current scenario has halted economic activity for most of the sectors. While the reasons for the previous and current crises are different, some trends are similar. One of these is the inability of borrowers to service debt.

The 2008 financial crisis was characterised by defaults in various debt instruments such as term loans, external commercial borrowings and FCCBs. To combat this, the Reserve Bank of India introduced a host of measures such as relaxation on restructuring of various loan accounts[1] and allowance to firms to use rupee amounts to buy back FCCBs. Simultaneously, in order to create a vibrant market for corporate bonds[2], the Securities and Exchange Board of India introduced the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (the “SEBI ILDS Regulations”). Continue Reading Debt Capital Markets – A Bumpy Road Ahead

Hovering over us - Drones in civil use

Drones are the game changing marvel of technology representing boundless possibilities for innovation and utilisation. In the initial days, they were primarily used by governments across the world as a way to supplement their militaristic operations. However, given that the technology has immense capability for application in the civil sphere, different jurisdictions have already come up with frameworks to regulate the subject matter.

Drones can indeed be used for multiple purposes, including, (a) monitoring and inspection of infrastructure like railways[1]; (b)  improvement in agriculture through crop and soil health monitoring system[2]; (c) ‘general use’ by civilians; (d) media and entertainment; (e) conservation of wildlife[3], etc.  The multi-use capability of drones has become even more apparent in light of the spread of Covid-19 pandemic. Authorities are increasingly opting to use them for monitoring the situation as well as ensuring contactless operations and services to the public at large.

With use of drones set to only increase over time, it is important that such uses be regulated in an effective way to ensure that the right to privacy is respected, and the safety and security at large is not compromised. Continue Reading Hovering over us – Drones in civil use

FORCE MAJEURE IN THE TIMES OF COVID -19

The onset of the Covid-19 pandemic in India has proven not only to be a humanitarian crisis, but also an economic crisis of an unprecedented scale. Specifically, restrictions on movement of persons and goods, save for those involved in essential services, have raised serious doubts on the ability of parties to perform their obligations under contracts when these are not ordinarily classified as ‘essential services’. Uncertainty as to the performance of contracts has led to parties envisaging breaches of contract and assessing their rights and remedies in relation to the same. Continue Reading FORCE MAJEURE IN THE TIMES OF COVID -19

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

FRUSTRATION (OF CONTRACT) IN THE TIME OF SARS-CoV-2

Overview

On March 11, 2020, the World Health Organization (WHO) declared the novel coronavirus disease a pandemic. On the same day, the Government of India imposed visa and other travel restrictions. Soon thereafter, many states in India declared a ‘lockdown’, an emergency measure [under the Epidemic Diseases Act, 1897 and the Disaster Management Act, 2005 (“Disaster Management Act”)] to prevent and contain the spread of SARS-CoV-2, and also issued prohibitory order(s) under Section 144 of the Code of Criminal Procedure, 1973. A stricter lockdown was then imposed by the Central Government, which will presently remain in effect till May 3, 2020. During the lockdown, whilst certain commercial activities have been classified as essential and are permitted to continue operations, subject to following preventive measures (including social distancing), several others remain stalled and suspended. Continue Reading FRUSTRATION (OF CONTRACT) IN THE TIME OF SARS-CoV-2

Vote from Home – A Positive Move for Shareholder Meetings

The Companies Act, 2013 does not contemplate shareholder meetings being held electronically. However, as social distancing becomes de rigueur and the temporary lockdown has been extended to May 3, 2020, due to the COVID-19 pandemic, it has become difficult, impractical and illegal in many cases for companies to hold shareholder meetings physically. At the same time, companies need to plough through these difficult times, and crucial decisions on matters such as fund raising and restructuring, all of which require shareholders’ approval, cannot be suspended. Responding to this dilemma, the Ministry of Corporate Affairs (MCA) has issued circulars[1] relaxing the requirement to hold physical general meetings and permitting meetings to be held remotely through electronic means.

The MCA has requested companies to hold general meetings to take decisions of urgent nature (other than for items of ordinary business[2] and items where any person has a right to be heard) through electronic voting or postal ballot, according to the procedure under Section 110 of the Companies Act, 2013 (Companies Act) and Rule 20 of the Companies (Management and Administration) Rules, 2014, and the additional measures prescribed under the circulars. Continue Reading Vote from Home – A Positive Move for Shareholder Meetings

Current Issues in the Mutual Funds Industry

Things indeed have been less than perfect for the mutual funds industry as a result of economic slowdown as well as specific events, key among which is the value deterioration across a number of industries and asset classes. The onset of COVID-19 has served to exponentially compound these problems. The most recent victim of the current situation is Franklin Templeton India, which announced its decision to wind-up six debt schemes, citing this as the only viable option to preserve value for unitholders and enable an orderly and equitable exit for all investors.

AMFI, the mutual fund industry body, has tried to assure investors that majority of fixed income AUM is invested in superior credit quality securities and schemes have appropriate liquidity to ensure normal operations. Mutual funds are not one homogenous mass and separate schemes have different investment strategy and underlying assets, but the supervening effect of the ongoing pandemic has created such redemption pressures and corresponding lack of cash flows, that the mutual fund industry has been dealt a body blow by the ensuing demand-supply liquidity mismatch. Continue Reading Current Issues in the Mutual Funds Industry

PRIVATE EQUITY IN A COVID-19 WORLD - ASSESSING THE IMPACT OF THE PANDEMIC ON PE INVESTMENTS IN INDIA Blog

As the global tally of COVID-19 cases rises steadily, the pandemic has proven to be an unprecedented public health emergency of our time. With nations enforcing social distancing, lockdowns and travel restrictions, the global economy has witnessed a drastic downturn. Closer to home, in India, RBI has warned of a growth slowdown, and the capital markets have slumped. Private equity investments in the country have taken a hit, and the pandemic has caused investors to reassess new and existing investments.

Given the likely economic aftermath of COVID-19, key issues that have come to the forefront are: (a) whether COVID-19 constitutes ‘material adverse effect’ or ‘material adverse change’ (hereinafter, referred to as “MAE”) under existing agreements; and (b) with the economic uncertainty in the backdrop, the manner in which price or value of new deals can be accurately determined, going forward. This post sheds light on the abovementioned issues and chalks out ways to redress the same. Continue Reading Private Equity In A COVID-19 World: Assessing The Impact Of The Pandemic On PE Investments In India

Enforcement of Foreign Awards in India – Have the brakes been applied

In NAFED v. Alimenta S.A.,[1] the Supreme Court held a foreign award to be unenforceable, on the basis that the transaction contemplated would have violated Indian law, and was therefore contrary to the public policy of India. 

The narrow scope of public policy:

Over the last decade, the judiciary and the legislature have been at pains to change the .existing judicial discourse and legislative intent to make India a regional hub for arbitration. A logical corollary has been a concerted effort to minimise judicial interference. Particularly in the context of foreign awards (where even after a ruling of enforceability, actual recovery may take years), Indian courts have to the most part, refused to interfere. Continue Reading Enforcement of Foreign Awards in India – Have the Brakes been Applied?

Reimagining the Good Times - Start-ups and the Covid-19 Crisis

In recent years, the start-up ecosystem in India has emerged as a reckoning force, largely due to efforts of stakeholders and initiatives implemented by the government to facilitate growth. Investments in start-ups surged from $550 million in 2010 to $14.5 billion in 2019.[1]

The Covid-19 pandemic has now adversely impacted the overall investment climate. While businesses across sectors have felt repercussions of the Covid-19 pandemic, start-ups have been particularly vulnerable and are facing formidable challenges both from a business and operations perspective. Most start-ups have witnessed a decline in supply/demand, except those engaged in supply/delivery of ‘essential services’ and edu-tech/gaming/streaming services. However, despite this increased demand, glitches in the supply chain network have presented challenges. The start-up ecosystem has been striving to adapt to the present situation by focussing on the need to innovate and diversify. Continue Reading Reimagining the Good Times: Start-ups and the Covid-19 Crisis