The out-of-court approach for corporate debt restructuring (CDR) was instituted by the Reserve Bank of India (RBI) over a decade ago. While it has been successful in several cases, there have also been significant shortcomings with the CDR mechanism. In a recent speech, a Deputy Governor of the RBI undertakes a review of the CDR mechanism. A number of issues are examined in the speech, including...
High-Frequency Trading and Short Termism
The Economist has a piece that advocates a cautious approach towards high-frequency trading. It argues: This newspaper seldom finds itself on the side of restraining either technology or markets. But in this case there is a doubt whether the returns justify the risk. Society needs a stockmarket to allocate capital efficiently, rewarding the best companies with higher share prices. But high...
IPO Lock-in on ESOP Shares
SEBI recently issued an informal guidance to clarify that in the case of an IPO only shares held by employees of the company or other qualifying group entities (such as a holding company) are entitled to exemption from the one-year lock-in period on pre-existing share capital. Specifically, employees who are no longer in employment of the company at the time of the IPO would be subject to the one...
Synchronised Trades Per Se Not Illegal
There is no prohibition on synchronised trading in securities, so long as the securities are delivered and that the transaction has not been effected with manipulative intent to artificially move the price of the stock. This position has been reiterated in a recent order of the Securities Appellate Tribunal (SAT) involving Subhkam Securities Private Limited. The relevant portions of the order are...
Miscellaneous
1. Online Shareholder Participation In a previous post, we discussed the recent introduction of mandatory e-voting for large listed companies with effect from October 1, 2012. The Harvard Law School Corporate Governance Forum has a post that sets out some principles and best practices that companies are encouraged to adopt while conducting...
E-voting in Top Listed Companies
As we have previously discussed, the participation of retail (or even institutional) shareholders in Indian companies’ decision-making is still far from desirable. The Government has, however, been taking steps to enhance participation. About a decade ago, the concept of postal ballot was introduced. However, that has not made significant inroads, due to which the next round of reforms have been...
Interpreting the Takeover Regulations
With the current Takeover Regulations (that came into effect in October 2011) being fairly recent, they are being subjected to interpretation during the course of their functioning. SEBI this week issued two sets of informal guidance in the context of one takeover. The first pertains to whether an acquirer holding less than 25% can make a voluntary offer and then acquire shares in the market...
The LIBOR Crisis and Corporate Governance
Whenever a corporate crisis erupts (a phenomenon all so common these days), questions quickly emerge regarding the role of governance (or failure thereof) at the companies involved. On a similar note, questions are being raised regarding the failure of board oversight, risk management systems and internal controls at banks such as Barclays that failed to curb manipulation in “fixing” the LIBOR...
Registrar of Companies and the Right to Information Act
In the past, there has been some discussion on whether the concept of right to information should be extended to the corporate sector or not, but presently it applies only to a “public authority”. At most, it might include government companies as the definition of a “public authority” includes “any … body owned, controlled or substantially financed … directly or indirectly by...
Standing Committee Report on the Companies Bill, 2011
After the Companies Bill, 2011 was presented in Parliament late last year, it was referred to the Standing Committee on Finance chaired by Mr. Yashwant Sinha. The Standing Committee had previously submitted a detailed report on the Companies Bill, 2009, and most of its recommendations had found their way into the 2011 version of the Bill. The Standing Committee has now issued its report on this...
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