ArchiveJuly 2009

Issue of Banning Share Warrants to Promoters – SEBI order

I had written earlier on February 26, 2009 here on an issue titled “Is it time to sentence Share Warrants to Dishonorable Discharge?”. Essentially, I had argued that Share Warrants were heavily being misused by Promoters. They allotted, almost exclusively to themselves, Share Warrants at a price and terms that appeared to be absurdly below their fair value. The Companies would almost never have...

Lock-in for Real Estate FDI Clarified

According to Press Note 2 of 2005 issued by the Department of Industrial Policy and Promotion, there are certain conditions for foreign investment in the real estate sector. The relevant conditions are as follows: i. Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six...

Director and Officer Liability for Dishonour of Cheques

(The following post has been contributed by Avirup Bose. Avirup is an Indian lawyer, who has graduated from NUJS Kolkata and has an LL.M from the Harvard Law School) On July 6, a Division Bench of the Supreme Court passed a judgment in K.K. Ahuja v. V.K. Vora (MANU/SC/1111/2009, per R.V. Raveendran, J.) (“K.K. Ahuja”), where it considered the particular question as to who can be said to be...

SEC Issues Permanent Ban on Abusive Short Sales

In the aftermath of the financial crisis, the US Securities and Exchange Commission (SEC) had issued a temporary ban on the practice of “naked” short sales. By way of a recent press release, SEC has now made the ban permanent. The Press Release defines a “naked” short sale as one where “the investor sells shares “short” without first having borrowed them”. While the Indian securities...

SEBI clarifies on Insider Trading Regulations amendments of November 2008

SEBI had amended the Insider Trading Regulations 1992 vide a Notification dated November 19, 2008 which I had discussed it here and here. SEBI has now released a set of “Clarifications” on 24th July 2009 on certain issues arising out of the amendments made. I had opined on some of these issues in my earlier posts referred to above and hence me update on what are the clarifications so...

The Efficacy of Conventional Corporate Governance Instruments

Each time there is a corporate governance scandal (whether in India or elsewhere), the response has been to use a set of instruments (implemented through regulation or best practices) to avoid a repetition of such occurrences. It appears that these instruments have not always been successful as they come with certain innate limitations, but they are often applied in situations that are different...

The Tale of the Resigning Director

In the aftermath of events that occurred at Satyam and Nagarjuna Finance, there has been a mass exodus of independent non-executive directors from boards of Indian listed companies. More often that not, there is no apparent reason offered for resignation by such directors. As we had discussed in an earlier post, the SGX in Singapore has specified a template for notice of resignation of directors...

SEBI prohibits issue of shares with “superior” rights

SEBI has issued a circular dated July 21, 2009, to make amendments to prohibit issue of shares with superior voting rights by listed companies. This is pursuant to SEBI announcement discussed by Mr. Umakanth earlier in this blog here and that post makes an interesting analysis of the term “superior voting rights”, particularly in comparison with the existing term “differential...

Venture Capital – Foreign and Domestic: Some Comparisons

Consistent with the expansion of the venture capital industry in India, the regulatory regime has been formulated with a view to foster such growth. While the domestic venture capital industry is governed by the SEBI (Venture Capital Funds) Regulations, 1996, the foreign venture capital industry (investing into Indian companies) is governed by the SEBI (Foreign Venture Capital Investors)...

Greater Role for Judicial Intervention in Foreign Arbitration

The decision of the Supreme Court in Bhatia International and its implications are well known, and have been discussed on this blog on several occasions. In a recent judgment, the Supreme Court has further entrenched the decision. The decision, Citation Infowares Ltd. v. Equinox Corporation, (2009) 5 UJ 2066 (SC), raised the question as to whether a court can appoint an arbitrator under an...

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