Year-End Reforms from SEBI

We wish our
readers a very happy 2015!
The end of 2014
was marked by a flurry of announcements from SEBI, some of which are briefly
discussed in this post.
Re-Classification of Promoters as Public
The concept of
“promoters” is quite significant in the Indian context as it is relevant for
various purposes. While the existing SEBI regulations define a “promoter”, the
circumstances are not entirely clear as to when a person would cease to be a
promoter. This question has arisen in recent circumstances when promoters have
sought to be re-classified as public shareholders in order to meet the minimum
public float norms. Now, SEBI has come up with a discussion
, which details the circumstances and conditions upon which promoters
may re-classify themselves as public shareholders.
SEBI’s effort in
the paper is to make the circumstances for transition as clear and objective as
possible. While this is desirable, it is likely that cases would arise where
all of the requirements may not be satisfied in a given case in a technical
sense. Whether SEBI would be able to exercise any discretion to dispense with
these requirements in specific cases is an open question.
Municipal Bonds
While the issue of
debt securities by municipalities and other local authorities are quite common
in some jurisdictions, this mode of raising finance is less utilized in the
Indian context. Perhaps this can also be attributable to lack of a clear regime
thereon. SEBI has therefore issued another
discussion paper
proposing a regulatory framework for the issuance of debt
securities by municipal authorities. While this is a welcome move, there could
be other areas of the law that might have to be addressed before this regime
can be successful. For example, clarity eludes the question of a bankruptcy
regime for municipal authorities in India. This could be an important
consideration for debt investors.
Expansion of Investment Under FVCI
SEBI has issued
to the SEBI (Foreign Venture Capital Investors) Regulations,
2000, which will now allow foreign venture capital investors (FVCIs) to invest
in core investment companies (CICs) in the infrastructure sector. This
amendment became necessary (and was based on recommendations received through a
consultation process) because CICs generally came within the scope of
non-banking finance companies (NBFCs) in which FVCI investment is disallowed.
Depository Participants
SEBI has also eased
the process
for registration of depository participants by altering the
erstwhile two-stage registration process to a single registration.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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