In September 2022, the Supreme Court of India in SEBI v. Abhijit Rajan interpreted the insider trading regulation in India to include a ‘profit motive’ as an essential requirement for establishing a charge of insider trading. This note analyzes the Supreme Court judgement and highlights certain issues that arise for consideration following such judgement.
This note provides an overview of the amendments that were issued on February 14, 2023 by the Securities and Exchange Board of India to the SEBI (Infrastructure Investment Trusts) Regulations, 2014 and the SEBI (Real Estate Investment Trusts) Regulations, 2014. The amendments primarily introduce governance-related requirements for investment managers of InvITs and REITs and apply to all InvITs and REITs, including those proposing to register or list. The amendments also include certain requirements with respect to the appointment of auditors of InvITs and REITs, limited review of the accounts of assets of InvITs and REITs and the treatment of unclaimed distributions. Clarifications in relation to the calculation of leverage thresholds and the definition of change in control under the regulations are also part of the amendments. The governance norms and the clarifications to the definition of change in control are effective from April 1, 2023 and the other provisions are effective immediately.
India’s debut issuance of sovereign green bonds by auction provides a significant opportunity to ascertain the current market appetite for such sustainability-linked initiatives, including among institutional investors. Indeed, such bonds have been successful in the past in the context of an eclectic set of sovereign issuances. Among other things, standards established by such issuance may lead to welcome improvements in the Indian bond market in general terms. For instance, Indian companies may want to ride on enhanced credibility standards, as applicable, and seek to better address persistent concerns related to greenwashing. Such broad advantages notwithstanding, in this piece, we look at some of the finer details related to India’s debut sovereign green bond issuance.
On June 30, 2022, the Securities and Exchange Board of India (“SEBI”) issued a circular amending the quarterly shareholding pattern disclosed by listed entities in India (the “2022 Circular”). This amended an earlier SEBI circular dated November 30, 2015. The 2022 Circular comes into force with effect from the quarter ending September 30, 2022. Listed entities are required to submit their shareholding pattern to the stock exchanges within 21 days of the end of each quarter in formats prescribed under the circulars. This note discusses certain key changes implemented by the 2022 Circular.
By an order issued on January 14, 2022, the United States District Court, Northern District of California allowed the Securities Exchange Commission (“SEC”) to proceed on the misappropriation theory of insider trading in its “shadow trading” complaint against Matthew Panuwat. The SEC had alleged that Panuwat used confidential information about the acquisition of his employer, Medivation, to buy options in another publicly traded company and Medivation’s peer, Incyte. This note discusses the circumstances in which trading in securities of a company while in possession of information related to another company may be considered a violation of the Indian Insider Trading Regulations.
On June 15, we had written about a proposed preferential issue by PNB Housing Finance, in respect of which a proxy advisor issued a report asking public shareholders to vote against the proposed investment. As an alternative to a preferential issue, the report suggested that the company should have considered a “rights issue”. In our previous article, we considered a “rights issue” and a “preferential issue” from the perspective of certainty in funding, disclosure obligations, approvals and timelines and pricing.
The debate has since focused on whether the proposed preferential issue required a report of a registered valuer and whether such a report was in fact procured. In this article, we consider the legal framework around which the debate turns, comprising the SEBI ICDR Regulations, the Companies Act and PNB Housing Finance’s articles of association.
Recently PNB Housing Finance announced a “preferential issue” of shares, through which the Carlyle Group will acquire a controlling interest in the company. A proxy advisor has issued a report asking public shareholders to vote against the proposed investment. The report argues that the price at which Carlyle will be investing in the company belies the company’s true value. As an alternative to a preferential issue, the report suggests that the company should have considered a “rights issue” in which all shareholders will be entitled to participate. In this context, it is important to consider whether a preferential issue and a rights issue are, in fact, comparable options for fundraising and accordingly, if there is merit in the allegation of poor corporate governance that has been levelled against the target company’s board of directors.
In 2020, a set of orders were issued by the SEBI in which the SEBI imposed penalties on certain individuals for forwarding WhatsApp messages with details of companies’ earnings ahead of formal announcements. These individuals received such messages on WhatsApp groups that they were a part of, and forwarded such messages as they had received them. The SEBI refused to accept the defense that the information shared was simply market chatter that was “heard on the street” and was not unpublished price sensitive information (“UPSI”). The SEBI’s orders were recently overruled by the Securities Appellate Tribunal (“SAT”). The SAT ruled that information could be considered UPSI only when a person in receipt of such information had knowledge that it was UPSI.
In 2020, over $80 billion was raised in the US from more than 200 SPACs (special purpose acquisition companies), with SPAC IPOs comprising over 50% of US IPOs. While Indian laws have been amended to facilitate cross-border mergers, regulatory and taxation challenges restrict the ability of the parties to efficiently merge an Indian company with the SPAC. The parties’ objectives could therefore be met through externalisation and structuring within the scope of Indian regulations. Apart from the regulatory and taxation challenges involved in a US listing through the SPAC route, Indian companies should also be prepared for compliance with a stringent governance, internal controls, accounting and disclosure regime. Several Indian technology companies have plans to go public. It remains to be seen how many will opt for the SPAC route, which has increasingly emerged as an attractive option for companies around the world particularly in the technology and ESG sectors. In the meanwhile, the SPAC alternative could also well be explored by Indian regulators as a route for listing in India with appropriate safeguards.
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.