While the SEBI Takeover Regulations in India are a subject-matter of detailed review, elsewhere in the U.K. there are proposals for amending certain aspects of the City Code on Takeovers and Mergers. These changes have been necessitated on account of the widespread debate that followed the takeover of Cadbury plc by Kraft Foods Inc. early this year. Towards that end, the Code Committee of the...
25% Free Float Requirement Becomes Law
More than two years following the issue of a discussion paper on the topic, the Ministry of Finance (MOF) has on June 4, 2010 amended the Securities Contracts (Regulation) Rules, 1957 to set a limit of 25% minimum public shareholding for initial listing by companies on Indian stock exchanges as well as continued listing. MOF’s press release accompanying the notification summarizes the new...
Encapsulating the Investor-State Dispute Settlement (ISDS) Regime of 2009
(The following post is contributed by Rohan Bagai, who is a corporate lawyer at one of the leading law firms in India. He holds a Master of Laws (LL.M.) degree from New York University School of Law (NYU), New York with a specialization in corporate laws) The American Society of International Law (ASIL) recently posted “The United Nations Conference on Trade and Development (UNCTAD) report on the...
Easy Exit for Defunct Companies
The inability to expeditiously close down businesses or companies in India often forms the subject matter of critical comment about doing business in India. In order to address this drawback, the Ministry of Corporate Affairs (MCA) has issued the Easy Exit Scheme, 2010 under which inoperative companies (“defunct companies” to use the technical expression) are given an opportunity to get their...
Depository Receipts and Voting Rights
SEBI has written to the Ministry of Finance and the Reserve Bank of India to curb the practice whereby holders of ADRs/GDRs pass on their voting rights to boards or managements of the companies in which they hold these instruments. As the Economic Times reports: The Securities & Exchange Board of India (Sebi) has recommended a change in current rules to allow holders of American Depository...
Enforcement of Corporate Governance Norms: Anecdotal Evidence
A constant quibble with corporate governance in India is that while the body of substantive norms has been ballooning over time, the enforcement of those norms has not kept pace. In a somewhat unusual measure, the National Stock Exchange (NSE) has threatened to suspend trading of a listed company for failure to file governance reports as required under the listing agreement. As the Business...
Interpretive Guidance: Differential Rights on Shares
Section 86(a)(ii) of the Companies Act, 1956 as well as the Companies (Issue of Share Capital and Differential Voting Rights) Rules, 2001 permit the issue of shares with differential rights as to voting and dividend (DVRs) by companies, subject to certain conditions. Such issue of shares with DVRs has also been implicitly blessed by the Company Law Tribunal in Anand Pershad Jaiswal v. Jagatjit...
The Impact of Tightening Financial Regulation
The last week has witnessed tighter financial regulations emerging out of the U.S. and European markets. While some of the reforms are expected to result in migration of investments into more liberal markets in Asia (including India), others represent introduction of stringent measures that are already in place in India. Possible Regulatory Arbitrage First, the European Union finance ministers...
Framework for SME Exchange
After making a proposal nearly two years ago for the establishment of a separate stock exchange for small and medium enterprises (SMEs) to enable them to access the capital markets, SEBI has recently established the legal framework for achieving the same either through promotion of dedicated exchanges and/or dedicated platforms of the exchanges for listing and trading of securities issued by SME...
Proposal for Streamlining Stamp Duty on Mergers, etc.
The issue of applicability of stamp duty to a scheme of arrangement (merger/ amalgamation, demerger, reconstruction or otherwise) effected with the sanction of the High Court under sections 391 to 394 of the Companies Act, 1956 has always been a vexed one. As regards stamp duty legislation more generally, several states have enacted their own stamp duty laws while the remaining states are...
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