Does a managing director have implied authority to suspend the Chairman of the board of directors? This is a question the Court of Appeal considered in its recent judgment in James Butler v John Smith. The leading judgment was given by Arden LJ. The case is significant because it dealt not with the ostensible authority of an MD in relation to a third party (on which there is a plethora of...
Revised FDI Policy
The Department of Industrial Policy and Promotion (DIPP) has issued the new Consolidated FDI Policy Circular 1 of 2012 that is effective from today. An accompanying press release lists the key changes. Some of the key changes relate to sectoral issues: – relaxation for foreign investment in commodity exchanges whereby FII investment may be brought in through the automatic route; and –...
Illegitimate pressure in economic duress
Traditionally, duress rendered a contract voidable only if it was physical duress (which involved a threat to the person or belongings of an individual), but following the decision of the Privy Council in Pao On v Lau Yiu Long, the concept of economic duress was also recognised. It is now fairly settled law that there are two essential ingredients for voiding a contract on grounds of economic...
Women on Boards Survey
The issue of diversity on corporate boards (particularly gender diversity) has garnered much importance lately, including in academic studies. The Harvard Corporate Governance Blog cites to a GMI Ratings’ survey that measures board representation by women in 45 countries across the globe. The survey reports heterogeneity in trends both among developed markets and emerging markets as distinct...
Regulating Alternative Investment Funds
At its board meeting on April 2, 2012, SEBI has approved a proposal to frame a separate set of regulations governing alternative investment funds. This is with a view to regulate the fund industry more comprehensively. Currently, there are not only various routes available for investment funds to be structured, but there is ambiguity regarding the regulation of certain types of investment funds...
Whether Bank Deposits are financial assets – RBI circular creates problems for NBFCs and non-NBFCs
The circular dated 15th March 2012 of the Reserve Bank of India stating that bank deposits will not be treated as financial assets for NBFCs was highlighted in an earlier post by Mr. Satyajit Gupta who has explained its background and rationale. The author has raised a valid concern that the RBI may have about the trading in shell-NBFCs which are dormant and which keep their assets in bank...
Institutional Placement Program
(The following post is contributed by Yogesh Chande, an advocate practising in Mumbai) The Institutional Placement Program (IPP) was approved by Securities and Exchange Board of India (SEBI) at its board meeting held on 3 January 2012. Subsequently, by a gazette notification dated 30 January 2012, the provision relating to IPP (Chapter VIII-A) was inserted in the SEBI (Issue...
SEBI Regulates Algorithmic Trading
In order to keep up with advances in technology involving securities trading, SEBI has issued to the stock exchanges broad guidelines on algorithmic trading in the securities markets. The concept of algorithmic trading is defined as any “order that is generated using automated execution logic”. Such trading is effected by automated electronic platforms that analyze split-second information and...
Dormant NBFCs under RBI scanner
There are numerous NBFCs who have obtained registration from the RBI, parked their funds in fixed deposits with commercial banks but have not commenced NBFC activities for several years thereafter. In view of the recent difficulty in getting NBFC registrations as well as to get the benefit of lower net owned funds (NOF) requirements (in case the NBFC was registered pre-1999), acquiring such...
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