Today’s Economic Times carries a newsreport about a company that has 2.6 million shareholders, but nevertheless continues to be unlisted. If true, this oddity of circumstances calls into question section 67 of the Companies Act. That section provides any offer of shares or debentures made to 50 persons or more will be considered a public offering, which will require listing of the securities on a...
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...
Allahabad High Court’s Order Vacating Stay in the Sahara Case
We have previously discussed SEBI’s order restraining two entities of the Sahara group as well as certain promoters and directors from accessing the capital markets. The order was subsequently stayed by the Allahabad High Court. On April 7, 2011, the Allahabad High Court vacated its stay, and this order is now accessible through eLegalix (Writ Petition No.11702 (MB) of 2010). While vacating the...
Regulating use of Internet can stifle
SEBI’s move to regulate the usage of e-mail, internet and electronic means of communication by employees of market intermediaries, and to make the compliance officer liable, was commented upon recently by Umakanth here. However, well-intentioned, SEBI’s move is not implementable, poses serious issues for the office of the compliance officer, and can have the unintended consequence of stifling...
SEBI’s Call to Promote Market Transparency
In a circular issued this week, SEBI has advised market intermediaries to put in place a code of conduct and internal controls to prevent circulation of rumours and unverified information in blogs, chats and messenger sites. SEBI seeks to impose a check on circulation of such information, as “market rumours do considerable damage to the normal functioning and behaviour of the market and distort...
Exclusion of Jurisdiction of Civil Courts under the SEBI Act
Legally India has made available certain expert witness statements filed before US Courts in the class action litigation concerning Satyam, which was recently settled. One of the witness statements, by Mr. Sandeep Parekh, makes an interesting point; but I am not entirely sure of the tenability in law of that point. Mr. Parekh’s declaration / statement as an expert witness is available here...
Supreme Court on Tainted Securities
In Varghese Joseph v The Custodian, the Supreme Court was called on to clarify the approach to be adopted in relation to tainted securities under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992. Although there is not much by way of company law principles of even statutory interpretation to be gleaned from the decision, it is of importance due to the investor...
A Case For Mandatory Dematerialisation of Securities
In yesterday’s Financial Express, Prof. Jayanth Varma makes a compelling case for abolition of physical share certificates and for mandatory dematerialisation of all shares. To supplement the arguments he makes, dematerialisation also impacts the manner in which transfers of shares are recognised in law. In the case of physical shares, a transfer obtains legal effect only if it is registered by...
SEBI’s Consent Order in the Reliance ADAG Case
On January 14, 2011, SEBI passed a consent order in the matter relating to shares of Reliance Communications Limited (RCL). SEBI had earlier initiated investigations into transactions entered into by two companies within the ADA group of companies, being Reliance Infrastructure Limited (RIL) and Reliance Natural Resources Limited (RNRL), and some of their officers on the ground that loans taken...
Dealing With the Anti-IPO Sentiment
We usually come across reports of companies preparing or filing for IPOs in order to take advantage of listings on stock exchanges. On the other hand, companies also often display resistance for undertaking IPOs as they are accompanied by costs such as full-blown regulatory oversight and public scrutiny. This is so even when the companies have grown to a significant size and there is a vibrant...
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