Cash-starved companies are presently considering raising funds through various means during the economic downturn. When it comes to equity funding, the natural option would be to rely on their promoters to infuse more capital. Towards this end, the Securities and Exchange Board of India (SEBI) on 16 June 2020 issued amendments to the SEBI (Substantial Acquisition of Shares and Takeovers)...
Competition Regulatory Framework Governing Hostile Takeovers in India
[Rajat Maloo is a III year B.A., LL.B. (Hons.) student at the National Law School of India University, Bangalore] In 2019, the L&T-Mindtree hostile takeover battle revitalised the dialogue on the market for corporate control in India, which has until date witnessed only a few hostile takeovers. Apart from the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (‘Takeover...
SEBI’s Consultation Paper on Pricing of Preferential Issues and Open Offer Exemption
[Rongeet Poddar is a 5th Year student at West Bengal National University of Juridical Sciences] The Securities and Exchange Board of India (“SEBI”) on 22 April 2020 issued a consultation paper for easing pricing norms for preferential issues in companies having stressed assets. It aims to provide objective criteria for classifying a company as ‘stressed’. The document issued by the securities...
Yes Bank Case: Scope of ‘Encumbrance’ over Shares
[Arushi Gupta is a IV year student at National Law University Odisha] With the recent order of the Securities and Exchange Board of India (SEBI) imposing a fine on the promoter entities of YES Bank, the much contentious issue of the definition of encumbrance has again taken the centre stage. This post aims to analyse the recent order of SEBI in light of the SEBI (Substantial Acquisition of...
Takeover of Unlisted Companies: A New Route
Squeeze out of minority shareholders of companies has been a controversial area. As a co-author and I had discussed, there are a number of methods by which squeeze outs can be effected in Indian companies. By way of a recent set of notification and rule-making efforts, the Ministry of Corporate Affairs (MCA) has just added another method that would be applicable to unlisted companies. Among the...
Takeover Offer Price and the Valuation Conundrum
Generally, in a takeover or other form of transaction involving mergers and acquisitions (M&A), there could be broadly two types of disputes. The first type arises if the companies involved have failed to comply with the requisite procedures for undertaking the transaction, which ultimately adversely affects the interests of the shareholders. This would give rise to a cause for the...
Recommendation of Independent Directors in a Takeover: Need for a Relook
[Shreya Goyal is a 4th student at the West Bengal National University of Juridical Sciences, Kolkata] The SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 govern the acquisition of shares in listed companies in India. These Regulations (and their predecessors) have been tested during many corporate takeover battles in India. In the recent takeover episode between L&T...
Lessons from L&T’s Takeover of Mindtree: Can Differential Voting Rights Aid Promoters in Peril?
[Rongeet Poddar is a final year B.A. LLB (Hons.) student at West Bengal National University of Juridical Sciences] A hostile takeover is a rare occurrence in the Indian market because of the stringent control of promoter-families over companies and concentrated shareholding patterns in India. L&T’s hostile takeoever of IT services firm Mindtree however is an exception to this general trend...
Dissecting the L&T-Mindtree Takeover Battle
Hostile takeovers are rare in India; there have been only a handful of occurrences over the last few decades. Hence, the announcement by Larsen & Toubro (L&T) yesterday that it intends to launch a takeover of Mindtree set the Indian corporate scene abuzz because the promoters and management of Mindtree have sought to aggressively resist L&T’s attempts. It is billed as the first...
Negating Negative Covenants: A Deterrence to Private Equity Investment in India?
[Shuchita Goel is a V year B.A., LL.B. (Hons.) student at National Law University Delhi] The Indian corporate landscape is dominated by firms with concentrated ownership, where the controlling shareholders (also known as promoters) play an all-pervasive role in corporate governance.[1] Parties in control of a corporation are in a position to extract private benefits of control that do not accrue...
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