ICDR

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Background

India Inc’s initial public offering (“IPO”) landscape has witnessed significant growth in recent years, with numerous companies entering the capital markets to fund their growth and offer exits to existing investors. An IPO in India requires navigating a complex regulatory framework, complying with various provisions, and addressing stakeholders’ interests, including employees with stock options. In our post[1], we had assessed companies’ eligibility to undertake an IPO in situations where any individual holds rights entitling them to acquire equity shares of the company, or where there are any outstanding convertible securities that can be converted into the company’s equity shares.Continue Reading Amendment to make companies with outstanding Stock Appreciation Rights IPO eligible: A few steps closer, but not there yet

Proposal to make Companies with Outstanding Stock Appreciation Rights (SARs) eligible to undertake an IPO

Background

Historically, companies have provided employees with share-based incentives by way of employee stock options (“ESOPs”). However, with evolving corporate incentive structures, various new models have emerged, especially driven by start-ups. These incentives models include Stock Appreciation Rights (“SARs”), Restricted Stock Units (RSUs), Performance Stock Units (PSUs), Employee Share Purchase Schemes (“ESPS”), Phantom Stock Units (PSU), Save As You Earn Share Schemes (ShareSave), Non-qualified stock options (NSOs), Management Stock Options (MSOP), etc. Generally, employees look forward to an “exit event” to realise gains from these incentive structures, with an Initial Public Offering (“IPO”) being one of the most common “exit events”. Continue Reading Proposal to make Companies with Outstanding Stock Appreciation Rights (SARs) eligible to undertake an IPO

Managerial Remuneration – Should Promoters Be Disenfranchised?

Historical Context

The Government of India’s socialistic approach towards controlling managerial remuneration between 1960s and 1990s has been a painful chapter in the history of India’s company law. While the restriction applied only to those on the board of directors, the limits the then Department of Company Affairs had prescribed in its administrative guidelines under the Companies Act, 1956 in November 1969 was as low as INR 7,500 per month and further reduced to INR 5000 per month years later. Any payment beyond those limits required the Central Government’s approval, which was also a very cumbersome and time-consuming process. This led to the unhealthy practice of compensating Managing Directors and Executive Directors (“MD/EDs”) with cash reimbursements and many other inappropriate methods. Some MDs/ EDs also stepped down from the board to accept positions one level below the board. They were designated as presidents and vice presidents despite performing the role of the Managing Director.Continue Reading Managerial Remuneration – Should Promoters Be Disenfranchised?

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