Continuing with its practice of engaging in public consultation before announcing changes to the FDI policy, the Department of Industrial Policy and Promotion (DIPP) has issued a discussion paper on “FDI Policy-Rationale and Relevance of Caps”. The discussion paper introduces the possibility of abolishing all sectoral caps for foreign equity shareholding below 49%. Before dealing with the...
SEBI’s Further Order in the Sahara Case
SEBI yesterday issued a detailed and well-reasoned order in the case involving the offering of optionally fully convertible debentures (OFCDs) by two Sahara companies. It found that the Sahara companies had offered OFCDs to millions of investors in the garb of a ‘private offering” without complying with the requirements applicable to a public offering of securities. Although the order itself...
Preferential Allotment of Securities in Unlisted Companies
The Ministry of Corporate Affairs (MCA) has announced draft rules that will, when promulgated, substitute the Unlisted Public Companies (Preferential Allotment) Rules, 2003. This will make the process of issue of securities more stringent for unlisted public companies. The Indian Legal Space blog has a nice comparison of the existing rules and the proposed changes. Some of the key features of the...
SEBI Reasserts Views on Put and Call Options
In view of the provisions of the Securities Contracts (Regulation) Act, 1956 (SCRA) and notifications issued thereunder, the validity of put and call options on securities of public limited companies entered into outside the stock exchange has been in doubt. In the last year, however, SEBI has been making its stand clearer: such options are invalid. On two previous occasions involving the MCX...
Restrictions on Redemption of IDRs
On the basis of prevalent regulations, Standard Chartered Bank issued Indian Depository Receipts (IDRs) last year with the offer document stating that IDRs would be convertible into equity shares by way of redemption one year after the issue subject to the approval of the Reserve Bank of India (RBI) on a case-by-case basis. However, one year after the IDR offering, SEBI has issued a new circular...
Public Financial Institutions under Section 4A of the Companies Act, 1956: MCA Circular
(This post is contributed by Vaibhav Modi) Section 4A of the Companies Act, 1956 (the “Act”) lays down what institutions shall be regarded as public financial institutions for the purposes of the Act. Section 4A(2) empowers the central government to specify other institutions as a public financial institution by a gazetted notification. This sub-section is 4A(2) has a proviso which lays down the...
Academic Analysis of CSR in India
Although there has been a signficiant amount of discussion about corporate social responsibility (CSR) in India, there has been little academic analysis of the concept. A new paper titled Directors as Trustees of the Nation? India’s Corporate Governance and Corporate Social Responsibility Reform Efforts by Professor Afra Afsharipour fills this gap. Interestingly, it also considers the crucial...
CA firms with LLPs can now act as statutory auditors
(The following post is contributed by Rohan Bagai) A limited liability partnership (LLP) of chartered accountants (CAs) can now act as a statutory auditor of a company notwithstanding Section 226 (3) (a) of the Companies Act, 1956, which stipulates that a ‘body corporate’ is disqualified from such an appointment. In this regard, the Ministry of Corporate Affairs (MCA) has recently issued a...
An Instance of Accounting Fraud
The New York Times analyzes an instance of possible accounting fraud at a Chinese company, Longtop Financial Technologies that has close similarities with India’s own Satyam scandal (i.e. improper confirmation of bank balances). While the Satyam scandal came into the public domain through a confession letter of the Chairman, in this case the auditor blew the whistle. Here is an extract: Deloitte...
Further Views on Merger Regulations
Our guest contributor Rahul Singh had earlier discussed the key features of the Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulations, 2011 that will come into effect on June 1, 2011. In addition, the following columns carry an interesting discussion about the impact of these regulations on business: Merging Business with...
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