Newspaper reports (here, here and here) suggest that the Companies Bill has run into some rough weather, with indications that it might be referred to the Standing Committee for further review. This is surprising as well as disconcerting, as it comes within a week of the Government presenting the Bill in Parliament. It represents further delay in the corporate law reform process, which has been...
Companies Bill, 2011: Amalgamation and Corporate Restructuring
The provisions of the Companies Act, 1956, specifically sections 391 to 394, contain an elaborate framework that enable companies to give effect to arrangements and compromises with their shareholders and creditors. The expression “arrangement” has interpreted to include a wide range of transactions, such as mergers, demergers and other forms of corporate restructuring (including debt...
Companies Bill, 2011: Class Actions
Background In developed markets, one of the key mechanisms used for enforcement of corporate law is shareholder actions against the company or its management for breach of duties and obligations owed under law. Such shareholder actions can be either direct actions for breaches of duties owed to the shareholders directly in which case the remedies will flow to the shareholders, or they can be...
Companies Bill, 2011: Duties of Directors
The Companies Act, 1956 does not contain any specific provision that generally governs the duties of directors. The duties are instead governed by common law, which judges are required to apply to a given set of facts and circumstances. Under common law, there are two broad sets of director duties: (i) duty to act with skill, care and diligence, and (ii) fiduciary duties (to act in the interests...
Companies Bill, 2011: Independent Directors
Corporate governance generally places a fair amount of emphasis on board independence, and it is no different in India. Having a minimum number of independent directors (IDs) on the board is said to enhance monitoring of the management and promoters, and thereby protect the interests of the public shareholders. The Companies Bill, 2011 takes the concept of board independence to another level...
SEBI’s FAQs on Takeover Regulations
SEBI recently put out a set of FAQs relating to the Takeover Regulations, 2011 that came into effect on October 22, 2011. While a substantial part of the FAQs relate to either explanation of matters or elaboration of certain aspects of process and mechanics, they also address substantive issues on a few counts. We had earlier discussed the issue as to whether hostile takeovers are permissible...
Companies Bill, 2011: CSR
It is believed that the treatment of corporate social responsibility (CSR) was one of the key sticking points that delayed the Companies Bill, 2011. Now that there is some clarity, it would be useful to examine the relevant provisions. Clause 135 read with Schedule VII of the Bill deal with the concept of CSR. A number of requirements emerge: 1.The Bill requires large companies (determined with...
Companies Bill, 2011
The Companies Bill, 2011 was introduced in the Lok Sabha today. A copy is available through the PRS Legislative Research website. A cursory review of the Bill suggests that there are a number of changes from the Companies Bill, 2009, which was expected considering the level of detailed examination undertaken by the Parliamentary Standing Committee last year. We will have the opportunity to...
IRDA Regulations on Insurance IPOs
Earlier this month, the Insurance Regulatory and Development Authority (IRDA) issued norms for IPOs by life insurance companies. Referred to as the IRDA (Issuance of Capital by Life Insurance Companies) Regulations, 2011, they set out certain preconditions for life insurance IPOs and also specify additional disclosure requirements. The following are some key points: 1. The regulations impose...
Bank Investments in Non-Financial Services Companies
The Reserve Bank of India (RBI) has tightened the control over investment by banks in other companies that do not operate in the financial services sector. The rationale has been set forth in a new set of guidelines issued yesterday: Banks’ investments in companies which are not subsidiaries are governed by Section 19(2) of the Banking Regulation Act, 1949 (B.R. Act). There is no requirement, at...
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