1. Regulation of Credit Rating Agencies Drawing lessons from the role of credit rating agencies (CRAs) in the recent financial crisis, SEBI has imposed additional transparency and disclosure norms for the Indian CRAs. SEBI’s circular issued on May 3, 2010 covers issues such as maintenance of records of the rating process, dealing with conflicts of...
End to Accounting Jugglery in Mergers?! – SEBI amends listing agreement to end deviation through disclosure
SEBI has directed, vide circular dated 5th April 2010, the modification of the listing agreement focusing on certain deviations from Accounting Standards commonly carried out as part of Schemes of mergers, demergers, etc. SEBI has done this cleverly and indirectly but with apparently with more effect than it would have done it directly. It has also attempted to kill several birds with one stone...
Stamp Duty on Amalgamations
The Mint has a column by Heena Singhvi that discusses the often contentious issue of whether stamp duty is payable on an order the High Court sanctioning a scheme of amalgamation between two or more companies. Of greater relevance is the discussion of the Delhi High Court decision in Delhi Towers Ltd. v. G.N.C.T. of Delhi (MANU/DE/3152/2009), delivered on 4 December 2009, where the court held...
Overseas Acquisitions and the Impact of National Pride
In the context the proposed overseas acquisitions by Reliance Industries (of LyondellBasell Industries) and Bharti Airtel (of Zain), the M&A Law Prof Blawg has a interesting take on the impact of national pride generated through press attention on such deals. The Blog refers to a recent paper The Cost of Pride: Why Do Firms from Developing Countries Bid Higher?, which concludes that “firms...
Corporate Restructuring and the Business Purpose Rule
In 1935, the House of Lords famously observed that “every man is entitled to order his affairs” in order to minimise his liability to tax (IRC v. Duke of Westminster, [1936] AC 1). This is the dictum that is often cited as the source of the rule that while tax avoidance is legal, tax evasion is not. The distinction between the two, while not always clear, is regarded by some as especially thin...
Relief for Investor Community on “Control” Debate
Background Under the SEBI Takeover Regulations, there are two methods by which an acquirer could be obligated to make an open offer to the public shareholders of a listed target company. The first is when the acquirer acquires shares or voting rights beyond certain defined thresholds (as contained in Regulations 10 and 11, with the initial threshold being 15%). The second is when the acquirer...
Restructuring Companies: Capital Gains and Transfer Pricing
In a very interesting decision that could have significant implications for restructuring companies, the Authority for Advance Rulings [“AAR”] has discussed several controversies in connection with restructuring schemes. The decision, Re Dana Corporation (decided November 30, 2009), is available here. The applicant, Dana Corporation, was incorporated in the USA. As part of its extensive worldwide...
Inputs and Suggestions to TRAC
The Takeover Regulations Advisory Committee (discussed earlier) has invited inputs and suggestions regarding suitable amendments to the SEBI Takeover Regulations. This is part of the committee’s consultative process. Suggestions are due in the prescribed format by October 31, 2009. The background for the proposed amendments is as follows: There have … been various prominent judgments by Hon’ble...
The Legal Aspects of Dual Listings
There has recently been a fair amount of discussion regarding the ability of companies to carry out dual listings in India. This arises in the context of dual listing as a possible structure being considered in the Bharti-MTN transaction. Generally, dual listings occur when two or more companies (that otherwise intend to merge) continue as separate entities with separate sets of shareholders, but...
Revamping the Takeover Code
After consolidating the regulations relating to primary markets (as discussed in the previous post), SEBI has embarked upon the next exercise of revamping the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (popularly known as the Takeover Code). It has appointed a Takeover Regulations Advisory Committee (TRAC) to advise on changes to the made to the Takeover Code. I am...
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