Over the last decade, there has been a continuous tightening of securities regulation and corporate governance norms in the US following the various corporate governance scandals (Enron, WorldCom, etc.) and the global financial crisis. This has appeared in the form of legislation such as the Sarbanes-Oxley Act and the Dodd-Frank Act. More recently, however, there has been a relaxation on some...
Takeover Regulations: Pledge of Shares to Trustee Company
The SEBI Takeover Regulations (both the erstwhile regulations of 1997 and the present ones of 2011) carve out specific exemptions from disclosure and open offer requirements in case of pledge of shares in favour of banks or (public) financial institutions even if such pledge were to exceed the prescribed threshold shareholding percentages. Given the limited nature of these exceptions, one of the...
OECD Report on Related-Party Transactions
One area that is yet to receive significant attention in terms of regulatory reforms pertains to related-party transactions (RPTs). This is despite the enormous potential for RPTs in India given the concentrated ownership structures of public listed companies. All of these provide less protection to minority shareholders. In the past, although several suggestions for reform have been made (see...
Revised FDI Policy
The Department of Industrial Policy and Promotion (DIPP) has issued the new Consolidated FDI Policy Circular 1 of 2012 that is effective from today. An accompanying press release lists the key changes. Some of the key changes relate to sectoral issues: – relaxation for foreign investment in commodity exchanges whereby FII investment may be brought in through the automatic route; and –...
Women on Boards Survey
The issue of diversity on corporate boards (particularly gender diversity) has garnered much importance lately, including in academic studies. The Harvard Corporate Governance Blog cites to a GMI Ratings’ survey that measures board representation by women in 45 countries across the globe. The survey reports heterogeneity in trends both among developed markets and emerging markets as distinct...
Regulating Alternative Investment Funds
At its board meeting on April 2, 2012, SEBI has approved a proposal to frame a separate set of regulations governing alternative investment funds. This is with a view to regulate the fund industry more comprehensively. Currently, there are not only various routes available for investment funds to be structured, but there is ambiguity regarding the regulation of certain types of investment funds...
Institutional Placement Program
(The following post is contributed by Yogesh Chande, an advocate practising in Mumbai) The Institutional Placement Program (IPP) was approved by Securities and Exchange Board of India (SEBI) at its board meeting held on 3 January 2012. Subsequently, by a gazette notification dated 30 January 2012, the provision relating to IPP (Chapter VIII-A) was inserted in the SEBI (Issue...
SEBI Regulates Algorithmic Trading
In order to keep up with advances in technology involving securities trading, SEBI has issued to the stock exchanges broad guidelines on algorithmic trading in the securities markets. The concept of algorithmic trading is defined as any “order that is generated using automated execution logic”. Such trading is effected by automated electronic platforms that analyze split-second information and...
Further Order by SEBI on Shareholding Disclosures
(The following post is contributed by Yogesh Chande, an advocate practising in Mumbai) SEBI’s whole time member in an order dated 26 March 2012 (Order), has revoked the directions which were issued by an interim order dated 8 March 2010 (which has been discussed earlier) against the entities mentioned in paragraph 4 of the Order. One of the issues which required to be examined...
The Debate over Staggered Boards
Staggered boards are found to be a form of anti-takeover defence. This concept, which is prevalent in several U.S. companies, ensures that only a third of the board can change each year. Hence, it would not be possible for shareholders to replace the board, except through a gradual process of changing a third of the board each year. There is an interesting battle brewing in the U.S...
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