The new proposal to deal with the financial crisis involves the U.S. Government setting up a special fund to acquire toxic or illiquid financial assets on bank balance sheets. The Times Online has a report: “Henry Paulson, the US Treasury Secretary, hopes to nationalise the global risks associated with America’s sub-prime mortgages by setting up a toxic relief fund to buy up the mortgage assets...
Short Selling Restrictions Gain Traction
Due to allegations that the stock price of several financial institutions involved in the current crisis were beaten down by short sellers, several jurisdictions have recently introduced greater curbs on short selling. The U.S. Securities and Exchange Commission (SEC) has introduced temporary bans on short selling in securities of 799 financial companies (see this report on the Harvard Law School...
Easier Access to Foreign News Magazines
The Government has liberalised the policy for foreign print media, which now allows foreign news and current affairs magazines to publish Indian editions. This will allow Indian readers to access these magazines at more affordable rates. LiveMint has a report: “India has decided to allow the publication of local editions of foreign news and current affairs magazines, lowering a significant hurdle...
Non-Compete and Non-Disclosure Agreements: Are They in Restraint of Trade?
(In the following post, Venugopal Mahapatra and Gautam Bhatia discuss the Indian legal position regarding non-compete and non-disclosure clauses in employment and similar contracts in the context of a Bombay High Court decision. They also compare and contrast the Indian law on this topic with the position that prevails in the U.K.) V.F.S. Global Services Ltd. v. Mr. Suprit Roy is a December 2007...
Revenue Department Issues Guidelines to Prevent Tax Evasion
Recently, the Revenue Department issued a guideline to the Foreign Revenue Investment Board [hereinafter “FIPB”], instructing them to reject foreign direct investment in the telecom sector from companies based in tax havens. The issue arose when Daltotrade Ltd., a Cyprus-based company, tried to raise its stake in Meta Telecomm, an Indian company. Under the India-Cyprus DTAA, Cyprus residents are...
Intervention of Indian Courts in Foreign Collaboration Agreements
In the short span of a decade that the Arbitration and Conciliation Act has been in force, the Supreme Court has gradually carved for itself a wider and wider role in various stages of arbitration proceedings. Its role in the appointment of arbitrators, granting interim injunctions and reviewing arbitral awards on grounds of public policy are a few examples. Its 2002 decision in Bhatia...
Draw the line clearly for public shareholding
Last week the Economic Times reported here that listed companies would soon have to increase their public shareholding levels – possibly by 3 – 5% annually until they become compliant with continuous listing requirements. Whether the minimum public float should be 25% or 20% is a matter of policy wisdom. The law always has to draw a line somewhere and treat people on either side of the line...
Tax Implications of Demergers
(The following post is contributed by Mihir Naniwadekar) Generally, the gains arising from a demerger are exempt from capital gains tax, while those arising from a slump sale are not. But, then, what exactly is a ‘demerger’ for the purposes of the exemption from capital gains tax? Can a demerger ever be characterized as a ‘slump sale’? Several sections of the Income Tax Act, 1961 deal with these...
Cross-Border Mergers
Under the present provisions of Sections 391-394 of the Companies Act, 1956 it is possible for a foreign company to merge with an Indian company, but an Indian company cannot be merged with a foreign company. This is intended to ensure that the company that continues after the merger is an Indian company over which the Indian regulatory authorities continue to exercise control. Although there was...
Doing Business Report & India’s Performance
Earlier this week, the World Bank and its investment arm, the International Finance Corporation, published the Doing Business Report 2009. In this report, they rank a total of 181 countries in the world based on “tracking reforms aimed at simplifying business regulations, strengthening property rights, opening up access to credit and enforcing property rights.” This year, India has been ranked...
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