[Aayushi Choudhary is a 5th year student of Gujarat National Law University, Gandhinagar] In recent years, companies have increasingly sought innovative ways to incentivize and retain not only their employees but also non-employee stakeholders such as consultants, contractors, and business partners. This trend has given rise to complex financial instruments that blur the lines between traditional...
Bombay High Court Differentiates Options from Forward Contracts
[Debayan Gangopadhyay is a 3rd year B.A., LL.B. student at ILS Law College, Pune] An option in securities popularly known in forms such as “call” or “put” option is typically a clause in an agreement for transfer of shares through which the option holder gets the option to sell its shares to or buy additional ones from the transferor on a future date. An “option” is the right or entitlement, but...
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...
Regulatory Updates: SEBI and CCI
SEBI: Stock Exchanges and Clearing Corporations SEBI has issued the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 that deal with the recognition, ownership and governance of stock exchanges and clearing corporations. Certain minimum ownership and net worth requirements have been specified. Maximum shareholding by a single shareholder has been...
Bombay HC Ruling on the MCX-SEBI Case
The Bombay High Court has pronounced its judgment today in the matter relating to the denial of a stock exchange licence to the MCX Exchange. The Court has set aside SEBI’s order of 23 September 2010 (which was discussed here) and directed SEBI to reconsider MCX’s application afresh in the light of the Court’s observations. The judgment has significant implications on various...
SEBI’s Further Order in the Sahara Case
SEBI yesterday issued a detailed and well-reasoned order in the case involving the offering of optionally fully convertible debentures (OFCDs) by two Sahara companies. It found that the Sahara companies had offered OFCDs to millions of investors in the garb of a ‘private offering” without complying with the requirements applicable to a public offering of securities. Although the order itself...
SEBI Reasserts Views on Put and Call Options
In view of the provisions of the Securities Contracts (Regulation) Act, 1956 (SCRA) and notifications issued thereunder, the validity of put and call options on securities of public limited companies entered into outside the stock exchange has been in doubt. In the last year, however, SEBI has been making its stand clearer: such options are invalid. On two previous occasions involving the MCX...
SEBI on Put and Call Options
The Vedanta/Cairn Energy deal brings the issue of put and call options back into the spotlight as SEBI has sought removal of those clauses from the agreement regarding sale of shares in Cairn India. Curiously enough, SEBI has adopted a strict stance on an issue that is far from being clear under Indian law. As we have discussed earlier, the enforceability of put and call options hinges upon a...
Balco Arbitration Award: Section 111A of the Companies Act
A CNBC-TV 18 report and interview indicate that an arbitration panel has rejected Sterlite’s right to acquire the balance 49% in Balco by way of exercise of a call option. The report states: The arbitration panel comprised of two former chief justices of India and a third senior judge. When Sterlite acquired Balco’s 51% stake for Rs 550 crore in 2001 it was all fine, it had a call option to buy...
Enforceability of Options in Securities
The Mint carries an article by Archana Rajaram and Amrita Singh that discusses the current position on the enforceability of put and call options on securities of an Indian company. The Securities Contracts (Regulation) Act, 1956 (SCRA) and the notifications issued under that permit only ‘spot delivery’ contracts in securities transactions outside the exchange. A spot delivery contract is one...
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