The Securities and Exchange Board of India (“SEBI”) has released a consultation paper making minority-shareholder friendly proposals mainly relating to independent directors (“IDs”). The paper proposes a dual-approval process for appointment and removal of IDs, which includes a “majority of minority shareholders” approval. If this approval is not received, a...
Qualifying test requirements for Independent Directors – a hasty, slipshod & cumbersome requirement
I have written a piece for Moneylife on the new requirements of the Ministry of Corporate Affairs for independent directors that mandate existing as well as first-time independent directors to enrol in a databank as also pass certain qualifying test. The Rules, that are spread over several notifications and also an FAQ, come into force from 1st December 2019 and some transition period is also...
New issue/transfer of securities in unlisted public companies now to be only in demat form – step towards curbing benami holding/convenience of demat
MCA has inserted a new Rule 9A to Companies (Prospectus and Allotment of Securities) Rules, 2014, requiring unlisted public companies from 2nd October 2018 to issue/transfer shares only in demat form. They are also required to register with a depository and give facility to existing shareholders to convert their shares to demat form. In case of a fresh issue or buyback of securities, the...
SEBI’s new requirement for separation of post of Chairman/CEO – cosmetic and harmful
SEBI had recently amended Regulation 17 of the SEBI LODR Regulations 2015 by inserting a new clause (1B). The clause requires that top 500 listed companies in terms of market capitalisation should have a Chairperson who (i) is a non-executive director; and (ii) is not related to the Managing Director or CEO. This was SEBI’s version of the popular western corporate governance good practice of...
SEBI proposes wide powers for penal actions against auditors, company secretaries, valuers, etc.
SEBI has released a consultation paper on 13th July 2018 proposing amendments to 30+ of its Regulations. The amendments provide for duties and liabilities of Chartered Accountant/auditors, Company Secretaries, valuers, etc. This is in respect of the certification and reporting work they carry out for listed companies, various intermediaries and other persons associated with the capital market. In...
Will the new Section 90 unravel benami holdings in companies? Or will it misfire?
Section 90 and related provisions of the Companies Act, 2013, have been brought into force on 13th June 2018 alongwith related Rules. I had discussed earlier here some issues on Section 90, at a time when the new provisions were made part of the Act through the Companies Amendment Act 2017 but were not yet brought into force. Now that they have been duly brought into force and require action...
Front running – ill-conceived law and inequitable orders of SEBI
SEBI has passed an order on 8th May 2018 in a case of front running. On the face of it, there is nothing distinctive. The law relating to front running has seen ups and downs in the past, with even contradictory decisions of SAT, but the Supreme Court ([2017] 144 SCL 5 (SC)) largely settled the matter. Yet, this order raises and reminds of concerns that the law has not been thought through well...
Being Facebook ‘friends’/’likes’ on each other’s photos deemed sufficient by SEBI to allege ‘connection’ for insider trading
In an earlier post, I had written about how being connected as ‘friends’ on Facebook was deemed by SEBI to be significant enough to allege that the parties were ‘connected’ for purposes of insider trading. In that case, however, there was other alleged connection too. SEBI has yet again examined Facebook profiles for to pass a similar interim order. It found that a businessman and his...
Board meetings by video-conferencing – whether available only if company allows, or whether director can insist on it?
The NCLAT has held recently (in Achintya Kumar Barua vs. Ranjit Barthkur ([2018] 91 taxmann.com 123 (NCL-AT)) that if any director desires to attend board meetings by video conferencing, the company is bound to allow attendance in this manner. In other words, it is not up to the company or at the discretion of the Chairman/Company Secretary whether or not to allow attendance by video conferencing...
SEBI’s order against Price Waterhouse firms/partners
SEBI passed an order on 10th January 2018 against CA firms practicing under the brand/banner of Price Waterhouse and two of its partners. The Order debars them from issuing, for two years, audit certificates of listed companies, compliance certificates under specific securities laws of listed companies & SEBI registered intermediaries, etc. It has also required the auditor firm, jointly with...
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