The ability to undertake corporate restructuring and M&A through private or statutory arrangements has served as a touchstone in deal making globally. Statutory arrangements, at times, offer several advantages over contractual/ private arrangements. There are, however, several commercial, legal and tax considerations that have to be considered before opting between a statutory and private arrangement. The speed and ease with which a business can undertake an arrangement also plays an important part in such decision-making. In India, private arrangement is more popular than statutory arrangement for undertaking M&A as the latter is contingent on receipt of regulatory authorisation. Statutory arrangements in India were initially permitted only by way of National Company Law Tribunal (“NCLT”) approval.
It was a buzzing year for control deals in India. Year 2022 saw 93 control deals in the listed space, implemented through the tender offer route under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). This marks the highest number of tender offers in the last five years.…
Coinciding with the demonetisation of currencies by the Government of India in 2016, the Benami Transactions (Prohibition) Act, 1988, was substantially amended and renamed as the Prohibition of Benami Property Transactions Act, 1988 (“Benami Act”). The Benami Act was brought into effect from November 01, 2016. It was a well-timed move to ensure that demonetisation doesn’t become a futile exercise.…
The Securities and Exchange Board of India (“SEBI”) recently approved amendments to the SEBI (Mutual Funds) Regulations, 1996 (“MF Regulations”) at its December 16, 2020 board meeting, notified on February 4, 2021 through the MF Regulations by way of the SEBI (Mutual Funds) (Amendment) Regulations, 2021, with effect from March 5, 2021.
Currently, a Mutual Fund (“MF”) ‘sponsor’ is required to have a ‘sound track record’ i.e. having profits in 3 out of the last 5 years, including the fifth year. Recognising the role of emerging tech/ fintech companies in the Indian financial services space and to facilitate MF innovation/ geographic penetration, SEBI relaxed the above profit criterion for sponsors. Going forward, MF sponsors who do not meet the above, would still be eligible to, either set up a new, or acquire an existing, MF asset management company (“AMC”) and trustee company, if it has a minimum net-worth of INR 1 billion as contribution towards the AMC’s net-worth, which is required to be maintained till the sponsor makes profits for 5 consecutive financial years.
Continue Reading FIG Papers (No. 3: Series – 1) : Indian Mutual Funds – M&A Wave!
As the Covid-19 crisis deepens, and the number of positive cases and casualties continue to mount rapidly, governments across the world are enforcing stringent lockdown and social distancing measures. With the engines of economic growth grinding to a halt, the pandemic has mutated into an economic crisis, plunging the global economy into an unparalleled recession. India is no exception, and mergers and acquisitions (M&A) in India is sure to sniffle, snuffle and sneeze, at least in the short-term. From a legal standpoint, we believe that there will be consequent changes and fundamental shifts in the M&A landscape.
Continue Reading COVID-19 and M&A in India: Navigating Risks and Understanding Opportunities
This guest post is by Jaya Gupta, Head of India Desk, Corporate at Allen & Overy LLP
In 2019, global M&A activity switched down a gear although it was still the third-strongest year in a decade in terms of value and transaction volume.
With macroeconomic issues such as continuing trade wars between the US and China, tensions in the Middle East and, to some extent, Brexit, impacting cross-border activities, many investors resorted to strategic domestic megadeals.…
January to December 2018 was a more active year compared to 2017 for tender offers made under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations).
Non-banking financial companies (NBFCs) saw a particularly high number of tender offers. These included tender offers for Tourism Finance Corporation of India Limited, Pranami Credits Limited and LKP Finance Limited. But while the NBFC space may have had the greatest number of tender offers, the highest tender offers in terms of size/value were in banking (IDBI Bank Limited), healthcare (Fortis Healthcare Limited), pharmaceuticals (Merck Limited), and cable & broadband (Hathway Cable and Datacom Limited and Den Networks Limited) sectors.
Continue Reading Tender Offers in 2018: The Year That Was
Over the last few years, there has been considerable debate in Indian corporate legal circles around the interpretation of the term ‘control’ as defined under the SEBI (SAST) Regulations, 2011 ( “Regulations”). To those unaware of this issue, the question, simply put, is this: if an investor seeks to invest in an Indian listed entity (“Target”) and as a part of its investment terms requests for and obtains, certain contractual rights that are not available to other shareholders of the Targets (“Special Rights”), would such Special Rights amount to acquisition of ‘control’ of the Target by the investor for the purposes of the Regulations? The genesis of such debate may owe its origins to conflicting definitions of ‘control’ by Indian courts and legislators or interpretations of ‘control’ by Indian regulators but that would not be the focus of the current post. Nonetheless, there is no exhaustive definition of ‘control’ and recognising its impact on deal making and M&A in the public space in India, India’s securities markets regulator, the Securities and Exchange Board of India (“SEBI”) in March of 2016 initiated the process to define ‘control’ by proposing certain bright line tests (“BLTs”).
Continue Reading Brightlining ‘Control’