TagOptions in Securities

Pricing of Options To Foreign Investors

The last few weeks have witnessed some activity from the Reserve Bank of India (RBI), which is indicative of a more liberalized approach towards the pricing at which foreign investors are able to sell their shares upon exercise of options (such as put options) made available to them under contractual documentation. Most of the indications came from the RBI in relation to a specific case involving...

Vexed issue of allowability/quantification/timing of expenditure on ESOPs

A troublesome issue for companies is the deductibility of ESOPs expenditure under the Income-tax Act, 1961. ESOPs (employees stock options/shares) are often given at a discount at their fair value. A share having a fair value of Rs. 100 is given, say, at Rs. 80. This is one extreme of a simple example. In practice, ESOPs are even more complicated with different features such as of vesting...

Miscellaneous

1.         RBI Circular on Options We had carried two guest posts (here and here) on RBI’s notification dated 9 January 2014 relating to options and convertible instruments. This notification has generated a great deal of debate and its precise scope and contours are still being carefully ascertained. For a flavour of the further debate, the following...

Guest Post: Optionality Clauses Permissible in FDI Instruments – the Heydays for Exit Rights

[This post is contributed by Nidhi Bothra of Vinod Kothari & Co. She can be contacted at [email protected] This is a continuation of a previous post on this topic, and supplements the analysis in that post.] The optionality clause in equity shares/ compulsory convertible debentures/ preference shares has been a gray area from the regulatory perspective in India for years. These...

Guest Post: RBI Circular on ‘Options’

[The following post is contributed by Parag Bhide, who is a Principal Associate at Universal Legal, Mumbai] Finally, Foreign Investors investing into India are able to include ‘options’ in their investment agreements. The Reserve Bank of India (“RBI”), through its circular dated 9 January 2013 (“Circular”) has legitimized inclusion of options/right to exit in the Investment Agreements.[1]...

Analysis of SEBI Notification on Pre-emption Rights and Options – Part 1

[Last week, we had discussed SEBI’s recent notification granting conditional validity to pre-emption rights and options in securities of Indian companies. In the following two-part post, Ms. Sikha Bansal of Vinod Kothari & Company provides a detailed background to SEBI’s recent reforms and analyses their impact. She can be reached at [email protected]] In our elaborative article...

SEBI Notification on Pre-Emption Rights, Put and Call Options

The enforceability of pre-emption rights and put and call options in securities of Indian companies has been fraught with difficulties for a number of years. These have been discussed in detail in this paper, with arguments made for streamlining these provisions to recognise such rights and options in investment agreements. Although the Securities and Exchange Board of India (SEBI) had been...

‘Marketable Securities’ and ‘Spot Delivery Contracts’: The Supreme Court’s Analysis of the SCRA

In its recent judgment in Bhagwati Developers v Peerless General Finance, the Supreme Court has considered some important questions relating to the interpretation of the Securities Contract (Regulation) Act, 1956 [“SCRA”]. There were principally two questions before the Court: (i) the applicability of the SCRA to public unlisted companies and (ii) the construction of a settlement agreement to...

Enforceability of Put and Call Options: Reality Soon?

Although put and call options are quite common in investment agreements, its enforceability under Indian law has been in serious doubt due to age-old provisions in securities laws which have not been updated to meet with the requirement of the times. I have discussed the issue in detail in this paper and also called “for a reconsideration of the legal regime so that physically settled options...

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