Related Party Transactions

Recent Changes to Framework Governing Related Party Transactions involving Listed Entities

On September 28, 2021, the Securities and Exchange Board of India (the “SEBI”) approved certain changes to regulations governing related party transactions involving listed entities under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”). The changes were announced in a press release dated September 28, 2021. Subsequently, the SEBI amended the Listing Regulations on November 9, 2021 (the “Amendment Regulations”). This note sets out an overview of the amendments introduced by the Amendment Regulations, most of which will take effect from April 1, 2022, with certain provisions taking effect from April 1, 2023. While these amendments will require increased monitoring and compliance by listed entities, clarifications have also been provided to ease compliance. Overall, these amendments are expected to strengthen oversight of related party transactions involving listed entities in India.


Beneficial Ownership: A Comparative Analysis

Since April 2020, prior regulatory approval has been required for all investments from countries that share land borders with India, including where the beneficial owner of an investing entity is situated in or is a citizen of any such country. The threshold for beneficial ownership has remained unclear and can arguably be triggered even if a single share of an investing entity is beneficially held by an investor from one of the restricted bordering countries (which include China). This has created uncertainty not only regarding inflow of new investments in the start-up sector but also beneficial ownership in a private equity fund. While other Indian laws prescribe certain tests for beneficial ownership, these are not consistent. This note examines the concept of “beneficial ownership” under certain Indian laws as well as the definition in the United Kingdom and the United States, and suggests next steps in the context of Indian foreign investment regulations.


SEBI Order: AstraZeneca Pharma and the Elliott Group

In connection with a proposed delisting of shares of AstraZeneca Pharma India Limited (AZPIL) in 2014, the SEBI recently issued an order dated June 5, 2020 under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, holding that:
(i) AstraZeneca Pharmaceuticals AB Sweden (AZPAB), the promoter of AZPIL, and the Elliott Group (a group of related foreign institutional investors that collectively held a significant shareholding in AZPIL) colluded with each other to get the shares of AZPIL delisted and influence the delisting price of such shares without considering the interests of the retail shareholders of AZPIL; and
(ii) The conduct of AZPAB and the Elliott Group amounted to a manipulative and fraudulent trade practice under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Practice Relating to Securities Market) Regulations, 2003.
The SEBI questioned the conduct of AZPAB and the Elliott Group and concluded that there existed a ‘meeting of minds’ between AZPAB and the Elliott Group prior to the delisting announcement. This note analyses the SEBI’s order.


COVID-19: Certain Issues to Consider for Listed Indian Companies

While corporations across the globe brace for the full impact of the COVID-19 pandemic on their business, operations and financial results, listed companies need to be mindful of additional compliance requirements and responsibilities. This note discusses certain considerations which are relevant for listed Indian companies in the current COVID-19 scenario in relation to (i) periodic disclosures and reporting; (ii) board and shareholder meetings; (iii) impact on financial results and annual report; (iv) trading when in possession of UPSI and during trading window closure; (v) fund-raising; and (vi) duties of directors. As a practical matter, these considerations will continue to be relevant even in the future while tackling the aftermath of the COVID-19 pandemic or other crisis situations.


Empowering Shareholders on Executive Compensation

Recent shareholder activism and regulatory action have focused attention on the issue of executive compensation in India. The Companies Act, 2013 (act), restricts the total managerial remuneration payable by a public company to its directors and managers in a financial year to no more than 11% of its net profits for that financial year.