Foreign Investment in Nuclear Energy in India

Foreign Investment in Nuclear Energy in India

Nations across the globe have announced their net zero targets and other climate action commitments. Each country is pursuing its own pathway to achieve the net zero goal considering the resources available to it. In this background, in December 2023, the Government of India announced that it has initiated steps to substantially increase India’s nuclear power capacity.
This note provides an overview of the current legal framework for private/foreign investment in nuclear energy in India and the increased level of screening for foreign investment globally in the energy sector.


Legal considerations of investing in india

Investing in India: An Overview of Legal Considerations

Foreign investment is a key contributor to India’s growth story and India continues to consistently experience growth in inflow of foreign direct investment (“FDI”). The Government of India has announced that the provisional figure of FDI inflow into India for the financial year ended March 31, 2023 was USD 71 billion and according to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report, India remains a favored destination for global investors.
In this note we discuss certain key legal considerations for a foreign investor investing in India.
 


Compulsorily Convertible Debentures

Compulsorily Convertible Debentures:
Whether ‘Debt’ or ‘Equity’?

Compulsorily convertible debentures (“CCDs”), as the type suggests, are debentures that are compulsorily convertible into equity shares. CCDs first became prominent in the foreign direct investment (“FDI”) context in 2007 when Indian foreign exchange laws expressly recognized them as the only type of debentures that Indian companies could issue to raise FDI. The reason to disallow other types of debentures for FDI purposes was to curb debenture issuances to foreign investors in the guise of equity. Since the foreign exchange laws had established a FDI regime for equity instruments and a separate external commercial borrowing (“ECB”) regime for debt instruments, it was felt that Indian companies were bypassing the ECB route by issuing hybrid debt instruments under the FDI route. Thus, CCDs have been regarded as equity instruments for FDI purposes.
In November 2023, the Supreme Court of India (“Supreme Court”) delivered its judgment in IFCI Limited v. Sutanu Sinha that dealt with the question whether CCDs are to be treated as ‘debt’ or ‘equity’ in a different context. This note analyzes the Supreme Court judgment and the ‘repayment of principal’ test that courts have consistently applied to determine whether convertible debt instruments are regarded as ‘debt’ or ‘equity’.


Capital Reduction The Position of Minority Shareholders

Reliance Retail’s Capital Reduction: The Position of Minority Shareholders

In July 2023, Reliance Industries Limited announced that the board of directors of its indirect subsidiary, Reliance Retail Limited has approved a proposal to reduce its share capital. The proposed reduction involves canceling the shareholding of the minority shareholders of Reliance Retail, making Reliance Retail a wholly-owned subsidiary of its parent company, Reliance Retail Ventures Limited.
This capital reduction is of interest due to the trading of Reliance Retail’s equity shares on the unlisted market. While Reliance Retail’s valuation is based on reports from independent valuers, objections could arise if the minority shareholders perceive the offered consideration as lower than the price in the unlisted market.


SEBI Listing Regulations

Recent Amendments to the SEBI Listing Regulations: Additional Disclosure of Agreements and Special Rights to Shareholders

On June 14, 2023, the SEBI introduced certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including in relation to disclosure of agreements entered into by or in relation to listed companies and approval by shareholders for special rights granted to shareholders.
While the amendments aim to create a more robust compliance framework and increase transparency and accountability of listed entities, they are likely to lead to additional compliance burden for listed entities and reduce flexibility to shareholders to enter into inter-se arrangements.


overseas investment regime in india

New Overseas Investments Regime in India

On August 22, 2022, the Government of India notified the new regime for overseas investments by Indian entities and individuals. The new regime is a mixed bag of liberalizations, new restrictions and clarifications, and signals the revised thinking of the Reserve Bank of India in certain respects, particularly in relation to the scope of overseas investments and round tripping. This note discusses the changes introduced by the new regime and its impact on cross border transactions.


The Personal Data Protection Bill, 2019

The Personal Data Protection Bill, 2019 (“PDP Bill”), which was presented before the lower house of the Indian Parliament on December 11, 2019, seeks to provide for the protection of personal data of individuals and establish a Data Protection Authority. The PDP Bill has been referred to a joint select committee of both the houses of the Indian Parliament, which is expected to submit its report in early 2020. Accordingly, there may be changes to the PDP Bill based on the recommendations of the joint select committee. Once enacted, the PDP Bill will replace Section 43 of the Information Technology Act, 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 and prevail over any other inconsistent laws in this regard (e.g., any sector-specific laws). This note provides an overview of the PDP Bill


Information Sharing Under SEBI’s Insider Trading Rules

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (PITR), prohibits communication of unpublished price sensitive information (UPSI) to any person except where it is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.