An interesting question was recently resolved by the Supreme Court in Employees Provident Fund Commissioner v. Official Liquidator of Esskay Pharmaceuticals. This sprang up a rather unusual situation where the Court was required to decide between non obstante clauses contained in two different legislations that ran somewhat contrary to each other. Section 529-A of the Companies Act provides that...
Insider Trading Laws in the U.S.: The Case Against Rajat Gupta
(The following post has been contributed by Karan Tyagi, who is an associate with Gide Loyrette Nouel in Paris. After obtaining his law degree from GLC (Mumbai), Karan went on to do his LL.M. from Harvard Law School last year. He can be contacted at [email protected]) Yesterday’s Financial Express has a piece authored by me on Rajat Gupta’s insider trading trial in the...
Corporate Governance: Transactions with Controlling Shareholders
Two recent events around the world bear eerie resemblances with India’s own corporate governance scandal that came to light in Satyam Computers nearly three years ago. Readers may recall that the Satyam episode was triggered by the company’s proposed acquisition of two related entities, Maytas Properties and Maytas Infra, which was approved by the board of Satyam, but vehemently rejected by its...
FDI – Transfer of Shares
The Reserve Bank of India (RBI), through a circular issued last week, curtailed its own approval powers involving transfers of shares of Indian companies between residents and non-residents. Previously, certain specific transactions required the prior approval of the RBI, and these included (i) transfers not compliant with RBI’s pricing norms, (ii) those that required prior approval of the...
Reversal of FDI Policy on Options
Exactly a month ago, the Government announced its updated FDI policy which treated foreign investments in Indian securities as external commercial borrowings (ECB) in case such investments conferred options on the foreign investors. The wide amplitude of the restriction on options gave rise to significant concern among the corporate and investment community, and it has been the subject matter of...
SAT Order in the Sahara Case
(This post has been contributed by Amit Agrawal, a legal practitioner practicing before Rajasthan High Court, Jaipur and an alumnus of the National Law School of India University, Bangalore) The Securities Appellate Tribunal (SAT) delivered its judgment yesterday in the case involving issue of securities by certain companies within the Sahara group. The judgment has come after many rounds of...
Hostile Takeovers under the New Code
The new SEBI Takeover Code is set to come into force on October 22, 2011. One of the issues that has received great attention is the ability (or otherwise) of acquirers to carry out a hostile acquisition of an Indian listed company under the new Code. A recent press report has the background. As far as the Takeover Code of 1997 is concerned, we have previously seen (here and here) that the...
Revised FDI Policy: Options Outlawed
In the comments section to my previous post on the new FDI policy, reader Menaka highlights another important clarificatory change regarding the policy stance of the Government that now clearly outlaws options in securities held by foreign investors in Indian companies. The relevant clause in Circular No 2 of 2011 is as follows: 3.3.2.1 Only equity shares, fully, compulsorily and mandatorily...
Papers on Corporate Governance in India
The following recent papers contribute to the empirical literature on corporate governance in India, and deal with issues that have hitherto received less attention. 1. Executive Compensation in India by Rajesh Chakrabarti, Krishnamurthy Subramanian, Pradeep K. Yadav & Yesha Yadav. The abstract is as follows: We present an introductory regulatory and empirical analysis of executive...
Revised FDI Policy
It is that time of the year when the Government conducts its bi-annual review of the policy on foreign direct investment (FDI). Consistent with the previous trend over the last couple of years, it yesterday announced the Consolidated FDI Policy in the form of Circular No. 2 of 2011, which comes into effect from October 1, 2011. The key changes announced are as follows: 1. Construction development...
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