[Nitu Poddar is a Partner at Vinod Kothari and Company, and can be reached at [email protected]] Disposal of an undertaking (whole or substantially the whole) can be carried out either as part of a scheme of arrangement or otherwise by way of slump sale or business transfer agreement (‘BTA’). Disposal, other than by way of scheme of arrangement, has so far been regulated according to...
Constitutionality of Section 327(7) of the Companies Act 2013: Sanctity of the Waterfall Mechanism
[Simran Malhotra is an Associate at Shardul Amarchand Mangaldas, New Delhi] In Moser Baer Karamchari Union v. Union of India (2 May 2023), workmen unions challenged the constitutionality of section 327(7) of the Companies Act (“Act”) for excluding preferential payment for workmen’s dues over other dues as provided under sections 326 and 327 of the Act in the event of liquidation of a company...
Cross-Border Merger Framework in India: Limited Efficacy?
[Rajat Sethi (Partner), Sumit Bansal (Partner) and Oshika Nayak (Associate) are at S&R Associates] The Ministry of Corporate Affairs (“MCA”) notified section 234 of the Companies Act, 2013, as amended (the “Companies Act”), and rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, as amended (the “Companies Merger Rules”), on April 13, 2017, to permit merger and...
Analyzing Directors’ Duty of Care under the Companies Act, 2013
[Rishabh Mohnot is a lawyer working in Mumbai and Hrithik Merchant a law student at the National Law School of India University, Bangalore] With the increasing proliferation of companies and their influence, there is a growing need to understand the responsibilities vested on their decision-makers. The Companies Act, 2013 (“2013 Act”) places a duty of care on the key decision-makers in a company...
Breaking the Rules: When Crowdfunding Platforms Cross the Line in Raising Capital
[Mohammad Kaif is a penultimate year student at Campus Law Centre, Faculty of Law, University of Delhi] Crowdfunding has become increasingly popular as a way to raise funds, where numerous individuals invest in a project or a company, usually via an internet-based platform. Some companies have used crowdfunding platforms to issue securities in violation of the provisions of Private Placement...
SEBI’s Proposals to Enhance Corporate Governance by Empowering Shareholders
Over the last decade and, in particular, following the enactment of the Companies Act, 2013, the Securities and Exchange Board of India (SEBI) has been gradually and consistently strengthening the governance norms pertaining to listed companies. Among other measures, SEBI has sought to focus on two specific matters, viz., (i) enhancing transparency in corporate matters; and (ii) empowering...
Liability of Company Secretary for Misstatements: SC Remits Case to SAT
In November 2022, we had discussed a somewhat curious ruling of the Securities Appellate Tribunal (SAT) in V. Shankar v. Securities and Exchange Board of India which exonerated the Company Secretary of Deccan Chronicle Holdings Limited (DHCL) from liability for certain misstatements and incorrect disclosures made by the company. We had noted that the SAT largely arrived at the ruling on first...
Derivative Action – Where Does the Jurisdiction Lie?
[Pratyush Singh is a third-year student at the National Law School of India University, Bangalore] Does the National Company Law Tribunal (NCLT) have exclusive jurisdiction over matters pertaining to derivative action? In November 2022, the Madras High Court in Valluvar Kuzhumam Pvt. Ltd. v. APC Drilling & Construction Pvt. Ltd. ruled in the affirmative. The argument to bar a civil court’s...
Supreme Court Reiterates Rectificatory Jurisdiction Under Companies Act: A Conundrum Involving NCLT and SEBI
[Anshita Dave and Abhyudaya Yadav are 5th year B.A., LL.B. (Hons.) students at Dharmashastra National Law University, Jabalpur] Recently, the Supreme Court in IFB Agro Industries Limited v. SICGIL India Limited held that the National Company Law Tribunal (“NCLT”) cannot exercise its rectificatory jurisdiction under section 59 of the Companies Act, 2013 (“the Act”) to...
The Regulatory Progression of ESG in India
The concept of corporate social responsibility (CSR) has had a pivotal status in the debates surrounding corporate law and governance at the turn of the century. Although CSR was ensconced in the idea of voluntarism by which companies and their boards are invited to pay attention to the interests of various constituencies affected by a company’s activities, in some jurisdictions such as India it...
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