The judgment of the English High Court in Madoff Securities v. Stephen Raven [2013] EWHC 3147 (Comm) was delivered last week, and is now available on BAILII. There is plenty of interesting dicta on the duties of directors. In England, the duties are codified in s. 172 of the UK Companies Act. 2006. (The new Indian Act also has a partial codification: see for example, s. 166 of the Companies Act...
Delaware Court on Going Private Transactions
Transactions such as mergers between a company and its controlling shareholders are subject to close scrutiny by courts. Such transactions give rise to conflict of interest as they are carried out between related parties and therefore require close supervision. Moreover, mergers with controlling shareholders may also be utilised to force out minority shareholders of a company if the non...
Shareholder Activism Enters the Boardroom
Over the last month or so, an interesting debate has surfaced that takes shareholder activism to the next level. As the Deal Professor column notes, two hedge funds have initiated proposals whereby they have promised to pay their nominees, if elected to the board of the investee company, director compensation linked to the profitability of the company as if they were executives. The promised...
Dismissal of Suit Against Satyam Directors
Last week, there was coverage in the financial press about the dismissal of a securities law suit by a New York court against the independent directors of Satyam. Now, a copy of the order dated January 2, 2013 issued by Judge Barbara Jones of the Southern District of New York is available through D&O Diary, which also carries a detailed analysis of the opinion. The shareholder suits failed on...
Indemnity clauses and criminal proceedings
Earlier this week, the Court of Appeal decided another interesting case involving contractual interpretation – this time interpreting and determining the scope of an indemnity clause. The case was one of the many fall-outs of the ongoing News of the World (“NOTW”) saga, and involved a claim brought by Mr Coulson, former editor of NOTW, against his former employers. On the termination of Mr...
Miscellaneous
The following developments and readings may be of interest: 1. Sahara: Public Offering vs. Private Placement We have been following the Sahara case as it involves the crucial question of what differentiates a public offering from a private placement of securities under Indian company law and securities regulation. Newspaper reports (here, here and here) indicate that the Supreme Court has now...
Nomination Committees of Corporate Boards
The recent episode relating to the nomination of directors for appointment on the board of Hewlett-Packard Co. brings to the fore the role of the nomination committee. Institutional Shareholder Services (ISS), a shareholder advisory group, recommended a vote against certain nominees on the ground that HP’s nomination committee was heavily influenced by the HP CEO, Leo Apotheker. While HP’s...
Actions Against Independent Directors
On March 11, 2011, SEBI passed an order in relation to Pyramid Saimara Theatre Limited (PSTL) restraining three of its independent directors (Mr. K.S. Kasiraman, Mr. K. Natarahjan and Mr. G. Ramakrishnan) from being independent directors or members of audit committees of any listed company for a period of two years from March 11, 2011. The order was passed on the ground that these independent...
“Professional” Independent Directors
In a recent Economic Times column, Prof. T.T. Ram Mohan discusses the concept of a professional board propagated by Lee Pozen in the Harvard Business Review (Dec. 2010, p. 50). The idea goes as follows: The author, Robert Pozen, lists reasons why boards are ineffective. They are too large (the average size of the top 500 companies in the US was 11 in 2009). Members lack domain expertise (only one...
More on Independent Directors
Can Independent Directors Appoint Alternates? Despite closely following developments in the law relating to independent directors (IDs) in the recent past, this question took me by surprise. Considering the special position of an ID, it seemed to me that an individual occupying that position is incapable of being substituted, even if that were temporary in nature. However, a debate generated...
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