ArchiveOctober 2014

Unenforceable Agreements and Credit Rating Agencies

A striking feature of the credit market over the past decade or more is the growing importance of credit rating: its significance for an applicant in urgent need of credit for his business cannot be overstated. This has given rise to some difficult legal problems: an obvious one is the liability of a credit rating agency (‘CRA’) for negligent entries. Another is whether a CRA is entitled to take...

Disclosure of “Encumbrances” on Shares

Recently, the Securities Appellate Tribunal (SAT) had to deal with two separate situations pertaining to the disclosure of pledge or other encumbrance over shares. In an order discussed earlier today, the SAT found that the acquisition of shares by a public financial institution through the invocation of a pledge was required to be disclosed in accordance with SEBI’s Takeover Regulations...

Invocation of pledge by PFI requires disclosure under SEBI regulations

[The following post is contributed by Supreme Waskar, partner at Sterling Associates, Mumbai] The Securities Appellate Tribunal (SAT) has upheld the order of SEBI against SICOM Ltd. (“SICOM”) imposing penalty of Rs. 5 lakhs for non-disclosure of acquisition pursuant to the invocation of a pledge under regulations 29(1) and 29(2) of the Securities and Exchange Board of India (Substantial...

Doing Business Report 2015: A Mixed Bag for India

The World Bank has released its report titled “Doing Business 2015: Going Beyond Efficiency”. It has also published a country report on India for the same year. At the overall level, India does not emerge in positive light, given that its ranking has fallen to 142 (out of a total of 189 countries) from 140 in last year’s rankings. India does not rank favourably among comparator economies either –...

CSR in Government Companies

The concept of corporate social responsibility (CSR) has acquired tremendous prominence in India since the enactment of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014 (the CSR Rules). They are applicable to large companies, whether or not they are listed on the stock exchange. Now, the Ministry of Heavy Industries & Public Enterprises of the...

Revisiting penalty clauses in contract

Last year, the English Court of Appeal in Talal El Makdessi v Cavendish Square Holdings [2013] EWCA Civ 1539 considered the enforceability of penalty clauses under English contract law, and was one of the few decisions in recent times to have concluded that the clauses in question were penal and therefore unenforceable. The decision was notable for affirming that the English law rule against the...

SEBI’s Order in the DLF Case: A Summary

[The following post is contributed by Supreme Waskar, partner at Sterling Associates, Mumbai] In its order dated October 10, 2014, the Securities and Exchange Board of India (“SEBI”) has restrained DLF Limited (“DLF”), its 5 directors and CFO (“Noticees”) from accessing the securities market and prohibited them from dealing in securities for the period of 3 years on the ground of active and...

A Case Study for Spinoffs

Mergers and acquisitions (M&A) transactions tend to be analyzed mostly from the acquirer’s perspective, whether they involve mergers or takeovers. At the same time, they have enormous implications for the target or the seller. Businesses may have to be downsized, contracted or split due to which companies may have to engage in sale transactions or restructuring of their business undertakings...

Foreign Direct Investment: Trusts as Investment Vehicles

[Vishal Achanta has contributed the following guest post. Vishal is a 5th year student at the National University of Advanced Legal Studies, Kochi] Recently, two investment vehicles have been introduced that as per the relevant SEBI regulations are to be set up as trusts: Real Estate Investment Trusts (‘REITs’) and Infrastructure Investment Trusts (‘IITs’). Both are intended to be pooling...

Amendments to the Provident Fund and Pension Fund Schemes Under the EPF Act

[The following guest post is contributed by Madhusudan Bose, who is a lawyer and company secretary by profession, at PRA Law Offices, New Delhi. Author’s views are personal] Pursuant to the proposals made by the Finance Minister in his Budget speech, the Ministry of Labour and Employment introduced a number of amendments to the Employees’ Provident Funds Scheme (“EPF Scheme”) and the Employees’...

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