Price adjustments in M&A transaction documentation enable parties to align the consideration originally negotiated at signing to the facts and circumstances existing at closing. Such adjustments become particularly important when there is a protracted time gap between signing and closing, usually due to statutory and regulatory approvals, and in case of listed entities, volatility in the financial markets. Certain transactions are implemented through tribunal-approved schemes of merger, de-merger, etc. (“Schemes”). While Schemes offer certain advantages such as an exemption from takeover regulations in case of listed entities, price adjustments in such transactions are subject to greater scrutiny and constraints, given requirements for tribunal approval and in the case of listed entities, pricing requirements and review by stock exchanges and the securities regulator. This note sets out certain price adjustment mechanisms that could be considered by parties to Schemes involving listed entities.
For nearly a decade and half, India has been the China-in-waiting. The world’s back-up or the next manufacturing center. There have been many discussions and writings through this period that have urged India to get its act together and provide that alternative to China. Not for the lack of will but its implementation, this move just did not happen and China continued to flourish and gain global supremacy in manufacturing. However, recent events including the disruption caused by the Covid-19 pandemic have once again opened an opportunity for India.
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.
For the success of any insolvency regime, it is critical that distressed companies are prevented from takings measures which could hamper recovery to creditors in the event insolvency proceedings were to commence. Such protective provisions assume particular importance in the Indian context, where companies are often closely held by promoter groups who may seek to transfer value from assets through opaque structures to other group companies for their own benefit. Accordingly, the National Company Law Tribunal (the “NCLT”) is empowered to undo any such transaction to protect the interests of creditors and other stakeholders under the Insolvency and Bankruptcy Code, 2016 (the “IBC”).
Recently, in the matter of Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited and others (“Jaypee Infratech”), the Supreme Court of India clarified certain key aspects in respect of preferential transactions under Section 43 of the IBC. Such preferential transactions are one of the four categories of “avoidable” transactions (i.e., those which may be annulled or disregarded) under the IBC, the others being undervalued, extortionate and/or fraudulent transactions.
This note briefly discusses the different types of avoidable transactions under the IBC, the guidance issued by the Supreme Court on certain aspects of such transactions in Jaypee Infratech and a few key considerations for parties to mitigate the risk of their transactions falling within the ambit of such avoidable transactions.
Governmental authorities in India have, from time to time, implemented various measures to facilitate ease of doing business for companies operating in India including, inter alia, by way of amendments to the Companies Act, 2013 (the “Act”). In the past 1 (one) year, these reforms have focused on introducing new mechanisms for swift adjudication of offences, and decriminalization and rationalization of criminal penalties, particularly in relation to minor, technical or procedural non-compliances under the Act.
The objective of decriminalization and recategorization of offences that was introduced by the Companies (Amendment) Act, 2019 is now sought to be augmented by the Companies (Amendment) Bill, 2020 (the “CAB 2020”) which was recently presented in the Lok Sabha on March 17, 2020. CAB 2020 has, amongst other matters, proposed amendments in respect of decriminalization of various compoundable offences and rationalization of penalties prescribed under the Act. CAB 2020 is currently awaiting legislative consideration.
In this note, we discuss the continuing efforts of the Indian governmental authorities towards streamlining the processes for dealing with certain non-compliances under the Act, and analyze if the critical changes proposed by CAB 2020 for further decriminalization of offences and alteration of penalties under the Act is a step in the right direction.
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.
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.