In a previous post, I had discussed the preliminary and procedural aspects of the decision of the Madras High Court on legality of derivative transactions. This post considers the substantive aspects of the decision. A description of the nature of the transaction is available in the previous post. The challenge to its validity rested on two grounds – wagering and public policy. The effect in both...
SUPREME COURT RULES ON JURISDICTION IN CASE OF CONFLICT BETWEEN THE ARBITRATION ACT AND THE COMPANIES ACT
In the case of Sumitomo Corporation v. CDC Financial Services (Mauritius) Ltd. and Ors., delivered by a two judge bench of the Supreme Court, the basic issue was whether, in case of a conflict, Section 10(1)(a) of the Companies Act, 1956 would take precedence over Section 50 of the Arbitration and Conciliation Act. The facts of the case were as follows: In 1984, Sumitomo Corporation (appellant)...
Companies Bill: New Entities
The Companies Bill, 2008, which has been introduced in the Lok Sabha, contains two entities that are fairly novel in the Indian corporate scenario, and it might be useful to briefly discuss these two types of entities. They are: (i) one person company (OPC); and (ii) “small” company. One Person Company Under the existing Companies Act, 1956, a company can be incorporated with a minimum of two...
Misrepresentation by a Bank – Consequences – Rajshree Sugars v. Axis Bank
(In the following post, our guest contributor Karthik Seshadri examines the issue of misrepresentation arising out of the judgment of the Madras High Court in Rajshree Sugars v. Axis Bank. For a background of the case and issues involved, please see Niranjan’s earlier post) In what can be termed as a locus classicus on the subject pertaining to Derivative transactions and their validity, Mr...
Buyback and Takeover Regulations
The issue of whether a buyback of shares will trigger an open offer under the Takeover Regulations has been the subject-matter of extensive discussion on this Blog. In addition, one of our guest contributors, Somasekhar Sundaresan, has a guest column in the Business Standard, which details the issues involved and makes some proposals for change. He states: “It is true that promoters in control of...
New 5% creeping acquisition permission for 55-75% holders to go soon?!
Further to posts here regarding amendment to SEBI Takeover Regulations allowing persons holding 55-75% to acquire further 5%, see report in ET dated 5th November 2008 that says that this permission may soon be reversed. Readers may recollect that this new amendment allowing such 5% increase was without any time limit and also not a recurring annual feature. Apparently it was to allow Promoters to...
Exercise of Share Warrants and triggering of open offer – whether? when? at what offer price? – SAT decides
SAT has recently decided here on the issue on whether, when and at what price would an open offer have to be made when Share Warrants are exercised. I am highlighting here just some interesting facts and decisions, simplifying them a little, to emphasize some interesting issues. The Promoter of the target company, Genesis International Corporation Limited, was issued 3530000 Share Warrants...
Recent amendment allowing additional 5% creeping acquisition for 55-75% slab – some issues
1) SEBI amended vide notification dated 30th October 2008 the Takeover Regulations Takeover to, in essence, permit an acquirer, with persons acting in concert with him, to increase his holding by 5% by acquiring additional shares or voting rights upto 5% through open market purchases or pursuant to buyback of shares by the target company. This was following a Press Release discussed here and...
Amendments to Takeover Regulations for creeping acquisitions through market acquisitions/buyback made
SEBI has amended the Takeover Regulations to permit creeping acquisitions vide a notification dated 30th October 2008. I had highlighted here the Press Release that announced the decision of SEBI for this purpose. Following some queries by readers, and also certain points by Mr. Umakanth, more specifically on a concern expressed by me on whether increase in percentage holding arising out of...
The grounds for lifting the Corporate Veil
In an earlier post, I looked at a recent judgment of the England and Wales High Court by Justice Munby in Hashem v. Shayif. It appears from the judgment that the only case in which the corporate veil could be lifted was where the company was a façade. In order to support this conclusion, Justice Munby relied on several cases, but most prominently on the decision of the Court of Appeals in Adams v...
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