The Karnataka High Court yesterday issued its 336-page ruling on the highly contested winding up of six schemes of the Franklin Templeton Mutual Fund (“FTMF”). FTMF’s decision was the subject matter of challenge before various High Courts, and the Supreme Court directed a transfer of all related petitions to the Karnataka High Court, which held a mammoth virtual hearing over several days before...
SEBI Rules on Misapplication of IPO Funds
In an order issued yesterday involving Birla Pacific Medspa Limited (“BPML”), the Securities and Exchange Board of India (“SEBI”) was faced with an alleged misapplication of IPO funds by the company way back in 2011. Through a prospectus issued on June 29, 2011, the company raised Rs. 65.17 crores to establish “Evolve” Medspa centres across India, which constituted the primary purpose of the...
SEBI Tightens Reins over the Proxy Advisory Industry
Proxy advisory firms have acquired the status of an important corporate governance intermediary. This is not just globally, but also in India. They play a crucial role of providing voting advice to shareholders (particularly of the institutional variety). In India, the advent of the proxy advisory industry over the last year has invigorated the active participation of institutional shareholders...
Paper on Shareholder Remedies: Oppression, Prejudice and Mismanagement
Under company law, shareholders (particularly the minority) can resort to various remedies prescribed thereunder, such as oppression, prejudice and mismanagement. While Indian company law has incorporated versions of shareholder remedies since the mid-20th century, the design of the remedies as they currently operate finds place in sections 241 and 242 of the Companies Act, 2013 (the “2013 Act”)...
Promoter-Friendly Amendments to the SEBI Takeover Regulations
Cash-starved companies are presently considering raising funds through various means during the economic downturn. When it comes to equity funding, the natural option would be to rely on their promoters to infuse more capital. Towards this end, the Securities and Exchange Board of India (SEBI) on 16 June 2020 issued amendments to the SEBI (Substantial Acquisition of Shares and Takeovers)...
RBI’s Discussion Paper on Bank Governance
Corporate governance in banks and financial institutions has captured a great deal of attention lately in India. One may attribute this to high profile episodes involving governance issues in banks such as ICICI Bank as well as Yes Bank, both involving the former chief executive officers (CEOs). There is generally a sense that universal corporate governance norms prescribed by the securities...
The Delisting Dilemma
When the financial markets are on a decline, company managements tend to utilize it as an opportunity to delist shares from stock exchanges. Not only is there a perception that the depressed market price is far from reflecting the true value of the company, but it also provides the promoters the ability to acquire the shares of the public shareholders at a relatively lesser cost. It is no wonder...
SEBI Circular on COVID-19 Disclosures
That the impact of the COVID-19 pandemic on a company’s business, operations and finances is “material” is undisputed. A question, however, arises whether listed companies ought to make clear and full disclosures of such impact and, if so, under what regime. One option would be to rely on existing securities regulation that requires listed companies to make episodic as well as periodic...
Corporate Governance in the Age of a Pandemic
Experience from past crises suggests that companies with robust corporate governance systems and practices are able to weather a storm better than others. Similarly, it is reasonable to hypothesize that, even amid the throes of a crisis such as the COVID-19 pandemic, referred to in corporate speak at an “unknown unknown” that has sparked a systemic risk, well governed companies can more optimally...
MCA Clarifies on Legal Actions against Outside Directors
Recognizing the specific roles that different directors of a company play, section 149(12) of the Companies Act, 2013 contains a safe harbour provision that protects certain types of directors against liability. It relates to three types of directors, who are, for the sake of convenience, referred to as “outside” directors: (i) an independent director; (ii) a non-executive director who is not a...
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