[The following post is part of the series contributed by Vinod Kothari and Soma Bagaria. The authors can be reached at [email protected] and [email protected] respectively. The first post of the series can be found here.] As the AIF Regulations are unclear on the extent of its applicability in case of companies, guidance can be sought from other jurisdictions. 1...
AIF Regulations: Meaning of Ownership Interests and Investor Interests in a Company – Part I
[The following is the first in a series of posts contributed by Vinod Kothari and Soma Bagaria. The authors can be reached at [email protected] and [email protected] respectively] 1. BACKGROUND There has been a speculation and confusion regarding the extent of applicability of the SEBI (Alternative Investment Fund) Regulations, 2012...
Another Effort at Harmonizing Foreign Portfolio Investment
In 2010, the Working Group on Foreign Investment in India made an important set of recommendations in relation to the consolidation of various types of investment routes for foreign investors making portfolio investments into the Indian markets. The idea was to do away with the various routes presently existing, such as for non-resident Indians (NRIs), foreign institutional investors (FIIs) and...
Supreme Court Judgment in the Sahara Case
The Supreme Court’s judgment in the Sahara case that was rendered yesterday is available here. The court found that the two companies in the Sahara group raised monies in violation of the corporate and securities laws applicable in India, and ordered refund of subscription monies along with interest. While the two judges have delivered separate judgments, the findings of non-compliance seem...
Relaxations on IDR Redemption
Last year, SEBI issued a circular that imposed some curbs on redemption by holders of Indian depository receipts (IDRs). Under that circular, redemption was permitted only if the IDRs are infrequently traded on the stock exchanges in India. This was a method of limiting exit options to investor exclusively to the Indian markets, except where they are illiquid (in which case conversion into...
Prohibition on Acquisition of Shares by Employee Trusts
One of the decisions taken at SEBI’s board meeting escaped attention until some recent discussion in the financial press (here and here). The relevant paragraph in SEBI’s press release is as follows: Listed entities shall frame employee benefit schemes only in accordance with SEBI (ESOS and ESPS) Guidelines, 1999. Entities whose schemes are not in conformity with the same would be given...
Business Responsibility Reporting
The debate continues over the nature of the corporate social responsibility (CSR) requirements that should be imposed on Indian companies through the Companies Bill, 2011, i.e. whether voluntary or mandatory. Although the Government had proposed a hybrid approach, the Parliamentary Standing Committee on Finance appears to be keen on retaining the mandatory approach, as we had previously discussed...
SEBI’s Capital Market Reforms
In what is clearly the most extensive set of capital market reforms in recent years, SEBI announced a series of measures following its board meeting last week. These are intended to boost the capital markets in India (both primary and secondary), and also to streamline various process. The principal recommendations have been divided into the following categories (in the words used in SEBI’s board...
High-Frequency Trading and Short Termism
The Economist has a piece that advocates a cautious approach towards high-frequency trading. It argues: This newspaper seldom finds itself on the side of restraining either technology or markets. But in this case there is a doubt whether the returns justify the risk. Society needs a stockmarket to allocate capital efficiently, rewarding the best companies with higher share prices. But high...
IPO Lock-in on ESOP Shares
SEBI recently issued an informal guidance to clarify that in the case of an IPO only shares held by employees of the company or other qualifying group entities (such as a holding company) are entitled to exemption from the one-year lock-in period on pre-existing share capital. Specifically, employees who are no longer in employment of the company at the time of the IPO would be subject to the one...
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