ArchiveJanuary 2010

Buyback, increase in shareholding and open offer requirement

Yesterday’s decision of SEBI revives the discussion on whether an increase in shareholding on account of a buyback could result in an open offer. The issue can be explained mathematically as follows. A company, has, say, Rs. 100 of share capital. It carries out a buyback of Rs. 20 shares in which some shareholders do not participate fully. Since the share capital reduces to Rs. 80, the...

Political Contributions by Companies

Last week, the U.S. Supreme Court pronounced an important judgment in Citizens United v. Federal Election Commission on the issue of political spending by corporations in elections. The New York Times has a summary: Overruling two important precedents about the First Amendment rights of corporations, a bitterly divided Supreme Court on Thursday ruled that the government may not ban political...

U.S. Financial Reforms: The “Volcker Rule”

Last week, the U.S. unveiled a series of reforms to deal with some of the lessons learnt from the financial crisis. Following is an extract of the President’s remarks that outline the proposals: First, we should no longer allow banks to stray too far from their central mission of serving their customers. In recent years, too many financial firms have put taxpayer money at risk by operating hedge...

Duties of an Official Liquiator: TCI Distribution v. OL

I had previously posted on a decision of a Single Judge of the Madras High Court on the role and duties of an Official Liquidator. The facts in TCI Distribution Centres v. Official Liquidator (C.A. 1953/2008 in C.P. 526/2000) were that the Official Liquidator had sold certain properties through an auction-sale. The auction-purchaser later found out that the properties were not exactly the same as...

From ‘Oppression’ to ‘Prejudice’?

In this post, I had noted that the proposed Companies Bill appears to introduce some substantive changes in the law dealing with oppression (covered under Section 397 of the present Act). The proposed Companies Bill, 2009 states, in Section 212: “212. (1) Any member of a company who complains that—  (a) the affairs of the company have been or are being conducted in a manner prejudicial to...

‘Manufacture’ in Income Tax

The decision of the Supreme Court in CIT v. Oracle Software is set to add another controversy to the many that already exist with respect to taxation. Involving the interpretation of the term ‘manufacture’, which has been a contentious issue in the excise law context, the decision gives rise to a couple of interesting issues. The assessee was a wholly owned subsidiary of Oracle Corporation, USA...

Southern Technologies and Sticky Interest – Part II

We discussed the recent decision of the Supreme Court in Southern Technologies that rejected a challenge to the constitutionality of ss. 36(1)(vii) and 43D of the Income Tax Act, 1961. The Court held that non-banking-financial institutions [“NBFC”] must account as income interest received from loans that are, for commercial purposes, bad debts. Four important issues were considered in the case:...

Expansion of Currency Futures Trading

Currently, only US Dollar-Indian Rupee (INR) currency futures contracts can be traded on Indian stock exchanges. It has been decided to expand the market by introducing trading on currency futures in 3 other currencies: Euro-INR, Japanese Yen (JPY)-INR and Pound Sterling (GBP)-INR. Both SEBI as well as RBI have issued notifications to that effect. OTC Derivatives: On the OTC side, there have been...

Newer Pricing Options in Public Offerings

A couple of months ago, SEBI permitted companies undertaking follow-on public offerings (FPOs) to price their shares freely above a floor price and on the basis of the price the bidders have quoted. However, retail investors would be allotted shares at the floor price. This was also in preparation for a slew of offerings by public sector undertakings (PSUs). The Hindu Business Line reports that...

ACGA White Paper on Corporate Governance

Continuing with the spate of reform-related activity surrounding Indian corporate governance, the Asian Corporate Governance Association (ACGA), based in Hong Kong, yesterday issued the ACGA White Paper on Corporate Governance in India. I find the White Paper of interest for two reasons. First, it seeks to supplement the existing reform process in India that is already underway and one that has...

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