This note, first published on the National Law School Business Law Review blog, discusses recent amendments to the [Indian] Insolvency and Bankruptcy Code, 2016 in light of the COVID-19 pandemic, which inter-alia temporarily prevent creditors from initiating insolvency proceedings against corporate debtors. While the proposed changes are a step in the right direction, the Government should also consider the impact of the pandemic on pending proceedings as well as alternative mechanisms to restructure debt and resolve defaults in a cost-effective manner to preserve value.
The current situation caused by the COVID-19 pandemic is unprecedented and several listed companies have seen a reduction in their value due to the sharp fall in stock prices compared to the beginning of 2020. The recent weeks have also seen delisting announcements by certain widely held companies including those on the NIFTY-50 and subsidiaries of global corporations.
Voluntary delisting is essentially a strategic move where a promoter (controlling shareholder) of a listed company and the listed company seek to delist the shares from the stock exchanges in India and is primarily governed by the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, as amended (the “Delisting Regulations”).
This note discusses the legal framework and process for voluntary delisting under the Delisting Regulations and certain key issues involved in delisting.
On June 5, 2020, the Insolvency and Bankruptcy Code, 2016 was amended to inter-alia prohibit creditors and corporate debtors from initiating corporate insolvency resolution proceedings in respect of defaults arising during the six (6) month period from and including March 25, 2020 (the date of commencement of the national lockdown) – this period may be extended up to one (1) year.
As a part of a series of relief measures in response to the current pandemic situation, the Finance Minister of India has announced on May 17, 2020 a proposed suspension of fresh initiation of insolvency proceedings up to one year. In addition, it has been announced that the Central Government will be empowered to exclude COVID-19 related debt from the definition of “default” under the Insolvency and Bankruptcy Code, 2016, as amended. It is envisaged that an ordinance will be issued to give effect to such measures. This note considers certain points in connection with the proposed ordinance.
The outbreak of COVID-19 and its development into a pandemic has led governments across the world to take extraordinary measures to protect their residents. The Central Government and various State Governments in India, along with public-health authorities, not-for-profit organizations and corporates, are collecting, tracking, and using information about individuals to slow down the spread of COVID-19; however, since a large proportion of such information could be categorized as ‘personal data’ or ‘sensitive personal data’ its use is subject to the data protection laws in India. It is, therefore, essential that a balance is struck between an individual’s right to privacy and public interest at large. Separately, as a result of the COVID-19 pandemic, corporates are also required to implement aberrant measures to safeguard their employees and extended workforce. In this regard, the collection of personal data by corporates will need to be undertaken in compliance with the requirements of data protection laws in India.
This note discusses the use of technology platforms by the Government of India to curtail the spread of COVID-19 and the obligations of corporates in India in relation to their employees or business, in each case, in the context of the legal framework for data protection in India.
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.
In the wake of the COVID-19 pandemic, several corporate borrowers will find themselves in challenging financial circumstances that may require negotiations with their lenders or even full-fledged restructuring. The Reserve Bank of India (RBI) and Indian courts have granted temporary relief measures to offset the strain on borrowers. If required by borrowers or lenders, India offers the following out-of-court and in-court restructuring and enforcement mechanisms: (i) the RBI Framework for Resolution of Stressed Assets (introduced in June 2019); (ii) the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act); and (iii) the Insolvency and Bankruptcy Code, 2016 (IBC). This note sets out such mechanisms and available relief measures. Given that the situation is constantly evolving, borrowers and lenders should remain vigilant about tracking legal and regulatory developments.
With a view to facilitate fund-raising from the capital markets in the wake of the current COVID-19 pandemic, the Securities and Exchange Board of India has decided to grant certain relaxations from the provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended, to public issues (both initial and further public offerings) and rights issues. The relaxations, which are contained in two separate SEBI circulars each dated April 21, 2020, essentially relate to (i) the validity of the SEBI observations, (ii) the requirement to file a fresh draft offer document in case of change in issue size and (iii) certain conditions applicable to rights issues.
On April 17, 2020, Press Note No. 3 (2020 Series) was issued by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India. The Press Note seeks to curb opportunistic takeovers and acquisitions of Indian companies by Chinese investors and companies due to the current COVID-19 pandemic. The Press Note has far-reaching implications on the overall FDI regime. This note analyzes some key considerations arising from the changes introduced by the Press Note, including (i) interpretation of ‘beneficial owner’; (ii) impact on indirect foreign investment; (iii) exercise of warrants and options and schemes of mergers; and (iv) bonus and rights issuances.
In a significant move, the Government of India implemented a nationwide lockdown in India in a bid to contain the COVID-19 pandemic with effect from March 25, 2020. The lockdown was initially expected to last until April 14, 2020 but has been extended until May 3, 2020. During the lockdown period, all private and commercial establishments are required to be closed down, with certain exceptions. While several employers have been providing work from home facilities to their employees during the lockdown period, due to the uncertainty over the scope of the COVID-19 public health emergency and the impact on the economy, employers are now considering options for saving labour costs for business viability reasons, including by reducing salaries of employees and/or terminating their employment. We discuss these options in the attached note.