Foreign Buyers’ Risks in Indian M&A Transactions

Managing Foreign Buyers’ Risks in Indian M&A Transactions

Foreign buyers looking to acquire or invest in Indian companies are challenged with known and unknown risks similar to other jurisdictions. However, certain aspects of India’s exchange control rules, occasions of retrospective changes in law, cultural unfamiliarity and market practices unique or common to India often surprise foreign buyers and impose additional risks that have to be navigated by foreign buyers in Indian M&A transactions.  Dealing with such risks appropriately requires not just an assessment and classification of risks but also development of required strategies for risk management within the Indian legal framework. This note discusses certain common risks for foreign buyers in Indian M&A transactions and strategies to mitigate such risks.


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.


Private Sector Participation in India’s Space Sector

Reaching for the Stars: Private Sector Participation in India’s Space Sector

India’s recent achievements in space exploration have garnered significant global attention (e.g., Chandrayaan-3’s soft-landing on the lunar south pole; Aditya-L1’s solar study mission; and hitting key milestones in terms of achieving manned spaceflight capabilities as part of the Gaganyaan project). However, private sector participation in space activities continues to be hamstrung through a combination of: (i) financial constraints (e.g., a lack of access to capital, including continued challenges with respect to securing asset-based financing, such as on account of the mobility of such underlying assets); along with (ii) regulatory ambiguity (e.g., in terms of attributing and quantifying liability, including in respect of third-party liability insurance, as well as with regard to corresponding caps).
Nevertheless, several new initiatives in India hold promise, such as: (i) the Indian Space Policy, 2023; (ii) a stated commitment to increase the country’s global market share, including by moving away from a demand-based model to a supply-centric approach; (iii) the ongoing and time-bound processing of private sector applications (related to space activities) by the Indian National Space Promotion and Authorization Center (IN-SPACe) – a single-window nodal agency – including for the purpose of assisting erstwhile vendors and suppliers to move up the value chain; (iv) the aggregation of user requirements by NewSpace India Limited – a Central Government-owned enterprise – including for the purpose of utilizing new space assets optimally based on determinations of stakeholder accountability, as well as creating new ones based on demand confirmations; along with (v) the launch of the SpaceTech Innovation Network (SpIN) in order to foster entrepreneurial innovation – especially in respect of startups and SMEs.
This note outlines India’s efforts to enhance and improve upon space regulation – including through reforms and liberalization – while also highlighting obstacles in both policy and practice.


India’s Digital Public Infrastructure DPDP Act

India’s Digital Public Infrastructure Could Have All the Answers to Questions Under the DPDP Act

Confusion abounds among key stakeholders of India Inc. with respect to consent management and allied concerns under India’s newly published Digital Persona Data Protection Act, 2023. This is especially true in the context of age verification requirements, along with the means of obtaining verifiable parental consent for children’s data. However, India’s digital public infrastructure could provide all the right answers – eventually. This note explores and examines how.


Modifications to Schemes of Arrangement

Modifications to Schemes of Arrangement

Once a scheme of arrangement has been approved by its shareholders or the relevant National Company Law Tribunal, what, if any, modifications are permissible to the scheme of arrangement without seeking fresh shareholder approval?

This note considers the legal framework for modifications to approved schemes of arrangement. It also examines the proposed merger of Zee Entertainment with Sony Pictures India where this question potentially arises for consideration.


Contractual Arrangements Under India’s New Data Protection Law

Contractual Arrangements Under India’s New Data Protection Law: A Data Fiduciary’s Guide to the Data Processing Universe

In light of India’s new Digital Personal Data Protection Act, 2023 (the “DPDP Act”), organizations need to check whether and to what extent such new compliance regime applies to them and their operations. In this regard, they may need to improve their existing IT and cybersecurity systems. Relatedly, organizations should monitor entities in their supply chains with respect to data processing obligations. In particular, existing contractual arrangements may need to be reviewed, and future data processing agreements (“DPAs”) must be negotiated in light of the new law.

Unlike the GDPR which places certain direct regulatory obligations on data processors, the DPDP Act appears to attribute sole responsibility upon the main custodians of data even when the actual processing is undertaken by data processors pursuant to a contract or other arrangement. Therefore, organizations have to ensure that their own statutory obligations remain mirrored in their supply chain, as well as in delegated/outsourced data processing tasks.

Accordingly, this note discusses due diligence and risk assessment/mitigation strategies; key lessons from the GDPR; necessary clauses in a DPA; the possibility of transferring liability through, and the inclusion of appropriate indemnity provisions in, such DPAs; as well as ensuring confidentiality and security, along with business continuity and disaster recovery, in such contexts.


Carbon credits in India

Carbon Credits: An Overview

The idea of carbon credits, including the establishment of a market for such credits, has generated significant global attention in recent years. While this idea is not new, it has become especially important today to understand what such credits entail and how these can benefit businesses – given the worldwide momentum towards ESG-related goals.
Carbon market transactions involve the purchase of emission rights from entities which have the technical and/or economic ability to reduce emissions. India’s Carbon Credit Trading Scheme, 2023 defines a ‘carbon credit’ to mean a value assigned to a reduction, removal or avoidance of emitted greenhouse gases amounting to one metric ton of CO2 or its equivalent. Accordingly, certificates may be issued by the government under the newly amended Energy Conservation Act, 2001.
In regulated carbon markets, each registered/obligated entity may be allotted a certain number of credits. Those that produce fewer emissions than the number of credits issued by the government (or an authorized agency) may enjoy a surplus. Conversely, companies with older and/or less efficient operations may generate more emissions than their credit allocation. The latter category may then look to buy credits to balance their emissions, including on account of a regulatory mandate.
This exchange between buyers and sellers will establish the market price. If it is cheaper for an emitter to trade in, rather than control, emissions, they can buy credits. Those that find it feasible to reduce emissions at a cost less than the market price can sell. Emissions trading can thus transform the right to emit a pollutant into a tradable good and create economic incentives for reduction.


Capital Reduction

Capital Reduction: Tax Conundrums!

Capital Reduction, simply put, refers to the technique of reducing a company’s share capital in any form. It is a usually adopted mechanism by the companies for re-modelling their capital structure, amongst other means (viz., buy-back of shares and redemption of the preference share capital). Depending upon the objectives and attendant circumstances, a company can undertake capital reduction either with or without making any payment to its shareholders. This note discusses the tax implications that may arise in the hands of the company undertaking such capital reduction and its shareholders under different situations.


Managing Consent

Yes Means Yes: Managing Consent Under India’s New Data Protection Law

Unlike the EU’s GDPR (which allows non-consensual data processing under various circumstances), India’s new Digital Personal Data Protection Act, 2023 (the “DPDP Act”) relies heavily on consent as a ground for processing personal data. Other than a few ‘legitimate uses’ specified in the DPDP Act, consent will be the only legal basis for processing digital personal data in India once the law enters into force. This note discusses the role of consent managers and the potential of notice-and-consent management platforms (both inhouse and outsourced) to help entities comply with their obligations under the DPDP Act.