It is clear that directors ought to act in good faith for the benefit of the company. Since the company is a separate legal personality, there is often the question as to who represents the interests of the company. Generally, the interests of the company are said to equate with the interests of the shareholders, while in the case of an insolvent company (or one that is in the zone of insolvency)...
Guest Post: Reduction of Provident Fund Contributions to Statutory Limits
[The following post is contributed by Madhusudan Bose, who is a lawyer and company secretary by profession, at PRA Law Offices, New Delhi] Introduction Recently, the Employees Provident Fund Organization (“EPFO”) issued a communication dated May 27, 2014, directing all Regional PF Commissioners not to force employers to contribute over and above the statutory wage ceiling in respect of their...
Financing Domestic M&A
A Times of India report indicates that the Finance Ministry is considering a proposal to allow banks to finance domestic M&A, i.e. acquisitions of local targets by local acquirers. If this proposal goes through (although significant doubts have been raised regarding that), it will mark a sea-change in the funding of domestic M&A that is currently deprived of bank funding. At present...
Codification of Directors’ Duties: Is Common Law Excluded?
Background Hitherto, directors had negligible guidance under company law as regards their duties and liabilities. The preexisting Companies Act, 1956 (the 1956 Act) did not explicitly stipulate directors’ duties, which made it necessary to fall back on common law principles (to be articulated by courts while delivering specific decisions). The statutory uncertainty was compounded by the absence...
Proposal to Overhaul Delisting Regime
Delisting of companies from the stock exchange (also known as privatization) has become a common phenomenon around the world, as it has in India. The rationale for delisting a company is detailed below: A number of reasons are proffered as motivations for delisting. Where there is a perception that the market price of the company is not reflective of the true value of its businesses, share price...
Report on Governance of Banks
Historically, the governance of banks has received greater (and somewhat different) attention when compared to governance of companies carrying on other forms of business. This is because banks deal with depositors’ funds and their actions or misdeeds can cause a more severe strain on the economy as a whole. Hence, while banks that are established as companies (and listed on the stock exchanges)...
Guest Post: COMPAT upholds CCI order in DLF Belaire Owners Association Case
[The following post is contributed by Vaibhav Choukse, Senior Associate – Competition Law and Policy, Vaish Associates Advocates. Views are personal.] Introduction On May 19, 2014, in a landmark order, the Competition Appellate Tribunal (“COMPAT”) upheld the order of the Competition Commission of India (“CCI”) imposing a record penalty of INR 630 crores (USD 140 million) on DLF Limited...
Regulatory Domain over M&A for NBFCs
The Reserve Bank of India (RBI) has issued a notification relating to mergers and acquisitions (M&A) involving non-banking finance companies (NBFCs). This now brings most M&As relating to NBFCs within the regulatory domain of the RBI thereby requiring its prior approval. The following types of transactions fall within the RBI approval requirement: 1...
Power of SEBI to Seek Call Data Records
In the past, we have discussed issues with the onerous evidentiary burden carried by the Securities Exchange Board of India (SEBI) in relation to various securities offences such as insider trading. Following from past experience, SEBI has been conferred additional powers to seek further information in the course of investigation of such offences. Much of these additional powers came by way of...
Announcement: Workshop on Comparative Business And Financial Law
[This announcement is posted on behalf of the Younger Comparatavists Committee of the American Society of Comparative Law] The Younger Comparativists Committee (YCC) of the American Society of Comparative Law (ASCL) is pleased to invite submissions for a workshop on comparative business and financial law to be held on November 7-8, 2014 at UC Davis School of Law in Davis, California. The purpose...
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