We had earlier discussed the half-way house approach adopted by the Companies Bill, 2011 regarding corporate social responsibility (CSR), whereby CSR spending was not intended to be mandatory, but disclosure thereof was. It appears that there is continued resistance to this approach, and that the Parliamentary Standing Committee reviewing the Bill proposes to look at this issue afresh with a view...
Venture Capital Funds: Minimum Investment Norms
(The following post is contributed by Ravi Shankar Jha, a final year student at the Dr. RML National Law University, Lucknow. It points to a lacuna in SEBI’s Venture Capital Funds Regulations) Venture capital funds (VCFs) have been envisaged to provide easy capital to start-up firms. In India, VCFs are regulated by SEBI (Venture Capital Funds) Regulations, 1996. Through these regulations, SEBI...
Preferential Allotments Liberalized for Certain Institutional Investors
Over the years, SEBI has gradually tightened the regime relating to preferential allotment of shares in order to prevent possible abuse of the process and to thereby protect the interests of minority shareholders in listed companies. One of the requirements pertains to lock-in on shares of allottees. There are currently three types of lock-in applicable to persons who are allotted shares on a...
Regulating the Pay of Bankers in the Private Sector
Last week, the Reserve Bank of India (RBI) issued compensation guidelines for implementation by private sector and foreign banks that become operational from the financial year 2012-2013. This approach is consistent with the trend that corporate governance norms in the banking sector tend to be more controlled than in other industry sectors. Apart from the fact that the pay of CEOs and wholetime...
QFI Route Operational
Following the decision of the Government of India to permit qualified foreign investors (QFIs) to invest in the Indian stock markets, SEBI and RBI yesterday issued detailed guidelines (here and here) to operationalise the investment mechanism. SEBI has introduced a number of checks and balances to prevent misuse of this route. For example, significant KYC obligations have been imposed on the...
Liberalisation of Foreign Investment in Single-Brand Retail
Although the proposed policy changes on foreign investment in multi-brand retail had to be put on hold due to stiff resistance, the Government has issued Press Note No. 1 (2012 Series) to increase the limit of foreign investment in single-brand retail from 51% to 100%. Such foreign investment would continue to require the approval of the Government of India (acting through the Foreign Investment...
The Options Saga Continues
A few months ago, we had discussed a change of policy stance by the Government of India in allowing options (such as puts and calls) on shares of Indian companies to foreign investors. While the Government initially specified that the existence of such options would turn the foreign investment into an external commercial borrowing, it was quick to withdraw this stipulation due to the immediate...
SEBI Prescribes Additional Methods to Meet Free Float Requirement
In addition to the existing methods available for listed companies to meet the public shareholding (free float) requirements of 10% for public sector undertakings (PSUs) and 25% for other companies, SEBI has recently prescribed two other methods. These are (i) the institutional placement programme (IPP) under which a company can increase its public shareholding up to 10% through an offer to...
QFI Investments in Indian Stock Markets
With a view to creating further depth in the Indian capital markets and attracting greater foreign investment, the Government has provided another avenue for foreign investors to participate in the stock markets. Until now, the portfolio investment route (i.e. buying and selling on the stock exchange) was available only to two types of foreign investors, i.e. foreign institutional investors...
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...
Recent Comments