ArchiveOctober 2008

Would increase in percentage holding because of buyback trigger the Takeover Regulations?

(Note:- SEBI had issued a press release on October 27, 2008, that I had discussed here, whereby, inter alia, SEBI announced its decision to exempt increase in shareholding on account of buyback upto 5% from applicability of creeping acquisition requirements. I had pointed out that a view is possible to hold that the increase on account of buyback should not trigger the Takeover Regulations and...

Systemically Important Non-Deposit accepting NBFCs allowed to raise funds by Perpetual Debt Instruments

Reserve Bank of India has amended, vide a circular/notification, the Directions relating to acceptance of deposits and Prudential Norms for Non-Deposit accepting NBFCs and has enabled raising of funds through Perpetual Debt Instruments by systemically important non-deposit accepting NBFCs. This would help them, inter alia, raise their Capital for capital adequacy purposes. It would help such an...

Creeping acquisition allowed between 55-75%/increase through buyback exempt upto 5%

Vide a press release dated October 27, 2008, SEBI has announced its decision to allow upto 5% creeping acquisitions between 55%-75% holding. However, the creeping acquisition between this slab can be only by “open market purchases in the normal segment” and not through bulk/block/negotiated deals or through preferential allotment.It is not clear whether a person holding between 50 and 55% and who...

Companies Bill Introduced in Parliament

Close on the heels of the Limited Liability Partnership Bill, the much anticipated Companies Bill, 2008 was introduced in Parliament on October 23, 2008. The Government’s press release carries the salient features of the Bill, which is set to usher in the most significant changes to company law since perhaps 1956 when the current Companies Act was brought into being.Both the Limited Liability...

Amendment to Clause 49 – some thoughts

Some thoughts on the amendment to clause 49 vide circular dated 23rd October 2008 as referred to in my earlier brief note here. Clause 49 of the Listing Agreement requires that the Board of a listed company should consist of at least 50% non-executive directors. Further, if the Chairman is an Executive Director, at least 50% of the Board members should be Independent Directors and one-third...

Amendments to Clause 49 of Listing Agreement

SEBI has issued a circular dated 23rd October 2008 and amended 49 of the Listing Agreement to provide a clarification regarding independent directors. The clarification is to the original circular which, inter alia, provided for change in the proportion of independent directors depending on whether or not the Chairman is a Promoter or related to the Promoters, etc.This amendment provides an...

SUPREME COURT RULES ON THE MEANING OF “INTERNATIONAL COMMERCIAL ARBITRATION”, WITH CONSEQUENCES FOR FORUM SHOPPING

The case of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd., decided by a single judge bench of the Supreme Court in May 2008, is an important judgment dealing with the issue of forum shopping with respect to seats of arbitration, and arbitration laws. In TDM Infrastructure, the facts were these: the two parties to the dispute were companies registered under the Companies Act of...

LLP Bill Introduced in Parliament

The new Limited Liability Partnership Bill, 2008 was introduced in Parliament on October 21, 2008. This supersedes the previous Bill of 2006, which was withdrawn. The salient features of the new Bill are set out in the Government’s press release as follows:“(i) The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members...

British decision on lifting the corporate veil: Clarity or more confusion?

Considerable difficulty arises in trying to find a coherent set of principles to govern issues related to ‘lifting the corporate veil’. Courts have relied upon several factors in deciding whether to ignore the existence of the corporate entity – ‘fraud’ or ‘sham’, ‘single economic entity’, ‘agency’, ‘tax evasion’, ‘determination of nationality’ etc. In the early 1990s, in a landmark...

Supreme Court exempts Co-Operative Banks from claiming under Recovery of Debts Due to Banks and Financial Institutions Act

The case of Greater Bombay Co-Op Bank Ltd. v. United Yarn Tex. Pvt. Ltd. and Ors., decided by a three judge bench of the Supreme Court finally settles the long-ranging debate about the interplay between Debt Recovery Tribunals and Co-operative Banks that had brought about a series of conflicting High Court decisions. The question in this case was whether the mechanism for the recovery of debt by...

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