Indirect foreign investment into Indian companies had been a subject matter of ambiguity in the FDI policy. For instance, if an Indian company (that has foreign investors) makes investments into another Indian company, would that downstream investment be treated as domestic investment or foreign investment? While rules govern such investment? In order to streamline the policy, the Government had...
Changes to FDI Policy – Part III: Previous Venture
A significant condition in the FDI policy, first included in Press Note 18 of 1998 operated to restrict foreign investments. It required foreign investors to obtain prior Government approval to invest where they had a previous joint venture in India. In such cases, the automatic route was not available. This became an obstacle because FIPB, in considering applications, required a no-objection...
Changes to FDI Policy – Part II: Shares Against Non-Cash Consideration
The FDI policy allows issue of shares by Indian companies to foreign investors only against cash remittances received through normal banking channels. However, the only exceptions to this are conversion of external commercial borrowings outstanding as well as payment obligations towards lump sum fee or royalty for technical collaborations. Any other type of transaction involving an issue of...
Changes to FDI Policy – Part I: Convertible Securities
The Department of Industrial Policy and Promotion (DIPP), Government of India today released its new edition of the Consolidated FDI Policy, Circular 1 of 2011 that comes into effect April 1, 2011. This is part of the bi-annual review process that the DIPP commenced last year so as to ensure that the policy is in tune with dynamics in the economy and industry. The recent round of review has...
SEBI’s Call to Promote Market Transparency
In a circular issued this week, SEBI has advised market intermediaries to put in place a code of conduct and internal controls to prevent circulation of rumours and unverified information in blogs, chats and messenger sites. SEBI seeks to impose a check on circulation of such information, as “market rumours do considerable damage to the normal functioning and behaviour of the market and distort...
Cairo Regional Centre for International Commercial Arbitration Rules, 2011:
(The following post is contributed by Rohan Bagai) Notwithstanding the levitating political imbroglio in the Arab Republic of Egypt in the recent times, the Indian corporates (especially the fast moving consumer goods (FMCG) and the automakers) have enjoyed tempting tax breaks, favored trade treaties, and prompt approvals for operating businesses in the transcontinental nation of Africa. In this...
Nomination Committees of Corporate Boards
The recent episode relating to the nomination of directors for appointment on the board of Hewlett-Packard Co. brings to the fore the role of the nomination committee. Institutional Shareholder Services (ISS), a shareholder advisory group, recommended a vote against certain nominees on the ground that HP’s nomination committee was heavily influenced by the HP CEO, Leo Apotheker. While HP’s...
Pledge of Demat Shares: Implications Under Takeover Regulations
A somewhat peculiar situation came up for consideration of the Securities Appellate Tribunal (SAT) in Liquid Holdings Private Limited v. SEBI, on which SAT passed its order on March 11, 2011. Background Liquid Holdings Private Limited (Liquid) was one of the promoters of Blue Coast Hotels Limited (the Target). Morepen Laboratories Limited, a group company of Liquid, obtained loans from two banks...
Streamlined Procedure for Incorporation of Companies, etc.
(The following post has been contributed by Rohan Bagai) The Ministry of Corporate Affairs, Government of India (“MCA”) has recently notified a General Circular No. 6/2011 dated March 8, 2011 (the “Circular”) simplifying the procedure for incorporation of companies and establishment of principal place of business in India by foreign companies. In this regard, MCA has come up with certain key...
Actions Against Independent Directors
On March 11, 2011, SEBI passed an order in relation to Pyramid Saimara Theatre Limited (PSTL) restraining three of its independent directors (Mr. K.S. Kasiraman, Mr. K. Natarahjan and Mr. G. Ramakrishnan) from being independent directors or members of audit committees of any listed company for a period of two years from March 11, 2011. The order was passed on the ground that these independent...
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