ArchiveMarch 2009

RTI and the Corporate Sector

The Right to Information Act, 2005 has been successful in inducing transparency in the decision-making process of the government. However, it has been reported, quoting the Chief Information Commissioner, that the there is a need for the concept of right to information (RTI) under the Act to be “directly applicable to corporate houses”. The report further states: “[The Chief Information...

A Recent Corporate Governance Survey

Business Standard reports a recent study by Grant Thornton-FICCI of corporate governance practices in Indian companies. The “India 101-500 CGR 2009 was designed to analyze corporate governance practices at ‘mid-market’ listed companies in India. The review methodology was based on a survey to gauge the nature and extent of corporate governance practices and approximately 500 companies across...

Partnerships and the Effects of Non-Registration: Section 69(2A) declared unconstitutional

In a judgment delivered last week, V. Subramanium v. R. Rao (Civil Appeal 7438/2000; MANU/SC/0417/2009), the Supreme Court declared unconstitutional a significant state amendment to the Partnership Act, 1932. Section 69 of the Partnership Act reads: 69. Effect of non-registration. (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by...

FDI: Compulsorily Convertible Debentures

It is quite common for foreign investors to take up convertible instruments in Indian companies. These instruments are issued as either preference shares or debentures to begin with and are convertible into equity shares of the Indian company at a later date. The conversion may occur in one of two ways: either at the option of the investor, or compulsorily (without any option whatsoever). Such...

National Law School of India Review: Symposium on Arbitration

The National Law School of India Review will be holding its 2nd annual Symposium on 18th – 19th April, 2009. The theme of the Symposium is “Towards Unification: Perspectives on Investment and Commercial Arbitration”; and it is intended to cover international commercial arbitration as well as investment treaty arbitration. According to the organizers: This year, the NLSIR Symposium looks...

The AIG Bonus Payments Controversy: Issues of Contract Law

There has been a significant outrage since the controversy over bonus payments to some AIG employees began about a week ago. One of the justifications of the AIG management for pressing on with the payments is that the company is legally obligated to pay their employees failing which it could be liable to suits for breach of contract. Although the controversy has taken a different shape owing to...

SEBI’s Proposal to Revitalise Rights Issues

Rights issues offer an important avenue for companies to raise capital, especially when bank financing may be difficult owing to a credit crunch as we are currently witnessing. However, in the Indian context, the procedure for carrying out a rights issue has been as onerous as it is for a full-blown public issue. This is because the disclosure requirements and the timing involved in a rights...

Differential Voting Rights: Ruling by CLB

Several months ago, we had mentioned that the validity of shares with differential voting rights (DVRs), particularly as a defence against takeovers, was challenged before the Company Law Board (CLB) in the Jagatjit Industries Case. Today’s Economic Times reports that the CLB has passed its order upholding the resolution to allot shares with DVRs to the promoter of the company. A brief background...

Regulation of Stock Exchanges

The proposed establishment of a new stock exchange in India has caused a revival of the debate pertaining to regulation of stock exchanges. There are unique issues: stock exchanges are not only profit-making institutions that are companies in form and substance, but they also carry out a regulatory role in respect of companies that are listed on them. This creates an inherent conflict of interest...

NCLT and NTT: Questions of “Intrinsic Judicial Functions”

Recently, a Constitution Bench of the Supreme Court (headed by Balakrishnan C.J.) finished hearing arguments on the constitutionality of the proposed National Company Law Tribunal (NCLT), and judgment has been reserved. The matter arose out of an appeal against a Madras High Court decision in R. Gandhi v. Union of India. The principal challenge to the constitutionality of the NCLT is based on the...

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