ArchiveMay 2010

Insurance policies and the tax/fee distinction

Recently, the Bombay High Court had occasion to consider an important issue regarding the transferability of life insurance policies, and the restrictions that the LIC has the powers to place on such transferability. The background to the facts of this case is provided by another decision of the Bombay High Court in Insure Policy Plus Services v. LIC, decided in 2007. The petitioners in this case...

Depository Receipts and Voting Rights

SEBI has written to the Ministry of Finance and the Reserve Bank of India to curb the practice whereby holders of ADRs/GDRs pass on their voting rights to boards or managements of the companies in which they hold these instruments. As the Economic Times reports: The Securities & Exchange Board of India (Sebi) has recommended a change in current rules to allow holders of American Depository...

Enforcement of Corporate Governance Norms: Anecdotal Evidence

A constant quibble with corporate governance in India is that while the body of substantive norms has been ballooning over time, the enforcement of those norms has not kept pace. In a somewhat unusual measure, the National Stock Exchange (NSE) has threatened to suspend trading of a listed company for failure to file governance reports as required under the listing agreement. As the Business...

Interpretive Guidance: Differential Rights on Shares

Section 86(a)(ii) of the Companies Act, 1956 as well as the Companies (Issue of Share Capital and Differential Voting Rights) Rules, 2001 permit the issue of shares with differential rights as to voting and dividend (DVRs) by companies, subject to certain conditions. Such issue of shares with DVRs has also been implicitly blessed by the Company Law Tribunal in Anand Pershad Jaiswal v. Jagatjit...

The Impact of Tightening Financial Regulation

The last week has witnessed tighter financial regulations emerging out of the U.S. and European markets. While some of the reforms are expected to result in migration of investments into more liberal markets in Asia (including India), others represent introduction of stringent measures that are already in place in India. Possible Regulatory Arbitrage First, the European Union finance ministers...

Framework for SME Exchange

After making a proposal nearly two years ago for the establishment of a separate stock exchange for small and medium enterprises (SMEs) to enable them to access the capital markets, SEBI has recently established the legal framework for achieving the same either through promotion of dedicated exchanges and/or dedicated platforms of the exchanges for listing and trading of securities issued by SME...

The Corporate Veil and Arbitration Clauses

With the rapid growth of group companies in India over the past decade, it has become commonplace for a commercial transaction to be routed through several entities in one group. In cases where some of those entities have entered into agreements containing an arbitration clause, and others have not, the question arises as to whether the non-signatories are bound by the arbitration clause. In...

Proposal for Streamlining Stamp Duty on Mergers, etc.

The issue of applicability of stamp duty to a scheme of arrangement (merger/ amalgamation, demerger, reconstruction or otherwise) effected with the sanction of the High Court under sections 391 to 394 of the Companies Act, 1956 has always been a vexed one. As regards stamp duty legislation more generally, several states have enacted their own stamp duty laws while the remaining states are...

‘Sweat Equity’ vs. ‘Sweet Equity’ – a Legal Perspective

(In the following post, Rohan Bagai analyzes the regulations relating to ‘sweat equity’ under Indian company law in the light of recent events surrounding the Indian Premier League. Rohan is a corporate lawyer at one of the leading law firms in India. He holds a Master of Laws (LL.M.) degree from New York University School of Law (NYU), New York with a specialization in corporate laws) The recent...

Bombay HC on the Binding Nature of AAR Ruling

(The following post has been contributed by Ravichandra S. Hegde of J. Sagar Associates) The Bombay High Court on April 29, 2010, while allowing a Writ Petition against the Income Tax Department has ruled on the binding nature of the decision rendered by the Authority for Advance Rulings (“AAR”). The Court has clarified that the decision given by the AAR would be binding on the applicant, the...

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