ArchiveDecember 2011

The Court of Appeal on the illegality defence

The role of illegality as a defence to a claim for damages has always been the subject of much debate. There are two principal rationales that can be proposed for illegality being a defence: (a) that the claimant cannot be allowed to rely on his illegal conduct (reliance-based rationale); and (b) that allowing the claim will result in stultifying the law which rendered the claimant’s conduct...

Companies Bill, 2011: Layering of Subsidiaries

It is quite common for companies to be structured in the form of groups. Apart from various operational advantages of separating businesses into distinct entities, it also has the effect of enabling promoters to maintain control over separate aspects of the business. Group structures are prominent in countries where shareholding is concentrated, and the corporate structures in many Asian...

Companies Bill: Stalled in Parliament?

Newspaper reports (here, here and here) suggest that the Companies Bill has run into some rough weather, with indications that it might be referred to the Standing Committee for further review. This is surprising as well as disconcerting, as it comes within a week of the Government presenting the Bill in Parliament. It represents further delay in the corporate law reform process, which has been...

Guest Post: Arbitration Update

(In the following post, Ms Renu Gupta, Advocate, discusses recent developments in Indian arbitration law) This post provides brief updates about some decisions of the Supreme Court of India in the year 2011 (this excludes cases which have already been discussed on this blog such as Yograj case here, and P.R Shah case here), which have made significant contribution to the field of arbitration. 1...

Amendments to Preferential Allotment Rules

(I would like to thank my colleague, Mr. Saiyam Chaturvedi for his invaluable research.) The Sahara case has led to certain amendments being made to the Unlisted Public Companies (Preferential Allotment) Rules, 2003 (the “Rules”). While the Sahara case itself has seen itself being argued and debated across various judicial fora over the last couple of years, the Government of India...

Companies Bill, 2011: Amalgamation and Corporate Restructuring

The provisions of the Companies Act, 1956, specifically sections 391 to 394, contain an elaborate framework that enable companies to give effect to arrangements and compromises with their shareholders and creditors. The expression “arrangement” has interpreted to include a wide range of transactions, such as mergers, demergers and other forms of corporate restructuring (including debt...

Companies Bill, 2011: Class Actions

Background In developed markets, one of the key mechanisms used for enforcement of corporate law is shareholder actions against the company or its management for breach of duties and obligations owed under law. Such shareholder actions can be either direct actions for breaches of duties owed to the shareholders directly in which case the remedies will flow to the shareholders, or they can be...

Companies Bill, 2011: Duties of Directors

The Companies Act, 1956 does not contain any specific provision that generally governs the duties of directors. The duties are instead governed by common law, which judges are required to apply to a given set of facts and circumstances. Under common law, there are two broad sets of director duties: (i) duty to act with skill, care and diligence, and (ii) fiduciary duties (to act in the interests...

Companies Bill, 2011: Independent Directors

Corporate governance generally places a fair amount of emphasis on board independence, and it is no different in India. Having a minimum number of independent directors (IDs) on the board is said to enhance monitoring of the management and promoters, and thereby protect the interests of the public shareholders. The Companies Bill, 2011 takes the concept of board independence to another level...

SEBI’s FAQs on Takeover Regulations

SEBI recently put out a set of FAQs relating to the Takeover Regulations, 2011 that came into effect on October 22, 2011. While a substantial part of the FAQs relate to either explanation of matters or elaboration of certain aspects of process and mechanics, they also address substantive issues on a few counts. We had earlier discussed the issue as to whether hostile takeovers are permissible...

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