Holding-Subsidiary Relationship – Legal & Regulatory Architecture

Background

Companies, as the business grows, operate through their subsidiaries for various reasons such as flexibility in operation of different units, expansion in different geographies, etc. While subsidiary is an entity over which the wholly owned subsidiary has control, the Companies Act, 2013 (“CA 2013”) recognises subsidiary companies as a separate legal entity.Continue Reading Holding-Subsidiary Relationship – Legal & Regulatory Architecture

When is a Holding Company liable for the acts and omissions of its Subsidiary? A Jurisprudential Analysis

The Companies Act in India and jurisdictions all over the world have statutorily recognised subsidiaries as a separate legal entity. Section 2(87)[1] of the Companies Act, 2013 (“CA 2013”), defines “subsidiary company” or “subsidiary” as a company in which the holding company controls the composition of the Board of Directors; or exercises or controls more than one-half of the total voting power either on its own or together with one or more of its subsidiary companies.Continue Reading When is a Holding Company liable for the acts and omissions of its Subsidiary? A Jurisprudential Analysis

Substantial Issues in Defining “Substantially the Whole of the Undertaking”

Section 180(1)(a) of the Companies Act 2013 (“2013 Act”) requires a company to obtain prior approval by a special resolution to sell, lease or dispose of the whole or substantially the whole of the undertaking of the company or, when the company owns more than one undertaking, of the whole or substantially the whole of any of such  undertakings.Continue Reading Substantial Issues in Defining “Substantially the Whole of the Undertaking”

Purpose & Effect Test for RPTs – How should Audit Commitees navigate it?

Regulatory Context

The definition of ‘Related Party Transaction’ (“RPT”) under Regulation 2(1)(zc) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), inter alia provides that with effect from April 1, 2023, a transaction involving transfer of resources, services or obligations between “a listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of its subsidiaries,” will also be regarded as an RPT (referred to below as the “Purpose and Effect Test”).Continue Reading Purpose & Effect Test for RPTs – How should Audit Commitees navigate it?

Permissibility of Pledges: Decoding SEBI’s View

The efficiency of the securities market depends on equal access to information and ensuring information symmetry for all stakeholders. Many Indian listed entities have significant promoter/ promoter group shareholding, which gives them the advantage of asymmetrical access to unpublished information. For free and fair trade in the financial market, a level-playing field between the promoter/ promoter group and retail shareholders is crucial. This is why there is prohibition on communication of Unpublished Price Sensitive Information (“UPSI”) and insider trading.Continue Reading Permissibility of Pledges: Decoding SEBI’s View

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

The year 2023 saw 85 public takeovers implemented through the tender offer route under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). The number of takeovers were only slightly below the number of takeovers in CY22 (93 in all). The aggregate transaction size (i.e. the aggregate size of the negotiated deal and tender offer) of takeovers announced in CY23 was ₹274.27 billion, 77% lower than that of the takeovers announced in CY22, which was ₹1,180 billion. Primarily, the deal activity in CY23 was driven by domestic acquirers. Foreigners executed only three deals in this space (including only one deal by a PE player), which was substantially lower than CY22 (being 11 ).Continue Reading Public Takeovers in India: Flashback 2023

FIG Paper No 29 – Data Law Series 3: (Implications of Digital Personal Data Protection Act, 2023, on Asset Management Companies)

Background:

  • Asset Management Companies (“AMCs”) act as fiduciaries of unitholders (i.e. investors who hold units in funds managed by an AMC), due to which the Securities and Exchange Board of India (“SEBI”) has mandated various data privacy obligations for AMCs, either directly or through the Association of Mutual Funds of India (“AMFI”).
  • SEBI, in a private letter to AMCs, AMFI and registrar and transfer agents (“RTAs”) dated July 10, 2020 (“SEBI Letter”), required that digital platforms involved in distribution/ advisory and AMCs/ RTAs must respect unitholder’s data privacy. The letter included the following two mandates:
    • unitholder data should not be shared with group entities having multiple business/ products; and
    • products and services of group companies cannot be cross marketed.

Continue Reading FIG Paper No 29 – Data Law Series 3: (Implications of Digital Personal Data Protection Act, 2023, on Asset Management Companies)

Ever since the introduction of framework for prevention of insider trading (“PIT”), the Securities and Exchange Board of India (“SEBI”), as the primary regulator of securities markets has consistently been sharpening its tools to effectively discharge its duty of ensuring market integrity, curbing malpractices and safeguarding interests of investors.Continue Reading Decoding SEBI’s Tech Arsenal for Insider Trading: Structured Digital Database (Part I)