The Mint has a report today stating that “only 5-6% of publicly traded companies in India have taken D&O insurance policies, compared with nearly 95% of Fortune 500 companies”. This seems striking considering the fear that various corporate governance episodes in India have generated among directors and managements. One of the key reasons for lack of D&O insurance policies is generally...
Priority of Dues in Winding Up of Companies
An interesting question was recently resolved by the Supreme Court in Employees Provident Fund Commissioner v. Official Liquidator of Esskay Pharmaceuticals. This sprang up a rather unusual situation where the Court was required to decide between non obstante clauses contained in two different legislations that ran somewhat contrary to each other. Section 529-A of the Companies Act provides that...
The Court of Appeal on the ‘Entire Contract Doctrine’
In any synallagmatic arrangement (such as a contract), it is often necessary to determine at what stage one party is entitled to call on the other to perform. Consider two common cases: (i) A enters into a contract with B which he breaches, B wishes to treat this as a repudiatory breach and avoid the contract; and (ii) A makes an advance payment to B under a contract, which is subsequently...
Supreme Court on arbitration agreements and third parties
A post earlier this year discussed the decision of the Supreme Court in Deutsche Post Bank Home Finance Ltd v Taduri Sridhar, where Raveendran J took a strictly contractual view of arbitration agreements, and held that only parties to an agreement could be made party to arbitral proceedings under it. As a result, in an arbitration between the prospective purchaser of property and the developer...
Insider Trading Laws in the U.S.: The Case Against Rajat Gupta
(The following post has been contributed by Karan Tyagi, who is an associate with Gide Loyrette Nouel in Paris. After obtaining his law degree from GLC (Mumbai), Karan went on to do his LL.M. from Harvard Law School last year. He can be contacted at [email protected]) Yesterday’s Financial Express has a piece authored by me on Rajat Gupta’s insider trading trial in the...
Corporate Governance: Transactions with Controlling Shareholders
Two recent events around the world bear eerie resemblances with India’s own corporate governance scandal that came to light in Satyam Computers nearly three years ago. Readers may recall that the Satyam episode was triggered by the company’s proposed acquisition of two related entities, Maytas Properties and Maytas Infra, which was approved by the board of Satyam, but vehemently rejected by its...
Court of Appeal: Clarification of ‘Meridian’ attribution
The theory of attribution in common law turns significantly on the application of the two main cases: Tesco Supermarkets v. Nattrass [1972] AC 153 (which provides for a strict reading of who the ‘directing mind and will’ of a company is), and Meridian Global Funds v. Securities Commission [1995] 2 AC 500 (which, in certain instances, allows for a more flexible understanding). In the...
FDI – Transfer of Shares
The Reserve Bank of India (RBI), through a circular issued last week, curtailed its own approval powers involving transfers of shares of Indian companies between residents and non-residents. Previously, certain specific transactions required the prior approval of the RBI, and these included (i) transfers not compliant with RBI’s pricing norms, (ii) those that required prior approval of the...
Lifting the Veil: Is ‘Fraud’ Necessary?
The sanctity of the corporate veil is among the most important pillars of certainty in commercial law today. English Courts, we have seen earlier, have given great respect to independent personality, refusing to lift the veil on grounds of economic ‘reality’ such as “single economic entity”, or subjective notions such as “public interest”. This tendency has been in existence since Adams v. Cape;...
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