Power Purchase Agreements

The Promise of ‘Virtual’ Power Purchase Agreements

In the US and elsewhere, ‘virtual’ power purchase agreements (VPPAs) have appealed to a wide variety of corporate buyers, including for the purpose of meeting renewable energy (RE) targets quickly. Further, compliance with ‘green’ mandates by procuring renewables through a VPPA has become an important element of business branding across the world. With regard to India, too, recent reports suggest that VPPAs are essential to meet corporate needs and wants, particularly in the country’s expanding commerce and industry (C&I) segment.
However, in response to investor demand with respect to environment, social, and governance (ESG) standards, if a company seeks to shift completely to RE, it may not be able to do so for various reasons, including on account of inherent risks in RE generation. Further, ‘physical’ PPAs are not viable for projects below a logistical minimum. Accordingly, C&I consumers with lower load requirements and/or fragmented demand may not yet have a cost-effective mechanism to procure RE, despite India’s newly democratized ‘open access’ regime. In this regard, VPPAs may still be the answer.
Nevertheless, given that your company needs/wants to acquire or generate RE – should, and can, you enter into a VPPA in India?


Power Purchase Agreements

The Continued Rise of Renewable Corporate PPAs in India

‘Corporate’ Power Purchase Agreements (PPAs) – as opposed to traditional models of energy procurement by state-owned electricity distribution companies – have proliferated over the past few years. With respect to renewable energy (RE) in particular, India appears to have witnessed one of the largest spikes in the world. Why are so many corporate PPAs getting signed here? Why now, and why specifically with respect to RE? Will this trend continue, and if so, what are the things to look out for? This note seeks to address such questions, including in light of recent (and anticipated) legislative and regulatory developments.


ESG rating providers

Regulation of ESG Rating Providers in India

ESG ratings and third-party data products have played an important role in the ESG ecosystem so far, especially in the absence of consistent and comparable issuer disclosures. Even though investors are increasingly relying on the ESG ratings to determine a company’s performance on ESG issues and to gauge the ESG related risks, the current rating systems have low reliability due to the lack of transparency and inconsistency in rating methodologies. To address these deficiencies, the International Organization of Securities Commissions (“IOSCO”) tabled a report on ESG Ratings and Data Products Providers (“IOSCO Report”), encouraging individual jurisdictions to adopt a global reporting baseline for investor oriented ESG rating system. The Securities and Exchange Board of India (“SEBI”) has released a consultation paper dated January 24, 2022, on ESG Rating Providers for Securities Markets (“Consultation Paper”) taking into account the recommendations made to the regulators in the IOSCO Report. This note aims at understanding the concept of ESG ratings and the need for their regulation. This note further explains (i) the issues in the current system of ESG ratings being provided by ERPs as identified by SEBI in its Consultation Paper; and (ii) the framework being proposed in the Consultation Paper to develop a legal regime for regulation of ERPs in India.


SEBI circular

Changes to Quarterly Shareholding Disclosures by Listed Entities in India

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.


independent directors

Monitoring Independent Directors: Who Will Guard the Guards?

Since the introduction of the concept of independent directors, it has been perceived as an easy remedy to poor corporate governance. Their efficacy in effectively monitoring company management is often taken at face value. Studying recent instances of corporate governance lapses provides an insight into the efficacy of independent directors. To plug gaps, regulators constantly strive to raise the bar on the relevant criteria for determining the independence, and the procedure for the appointment, of independent directors. However, the changes affected do not appear to address the problem at hand. In the United States, unlike in India, shareholders have often pursued derivative claims against independent directors. While these derivative actions are not always successful, they function as an additional check on independent directors’ actions. Derivative actions are also pursued by shareholders in India. However, they: (a) are rarely pursued against independent directors; and (b) typically arise out of situations where directors have committed a fraud on the shareholders rather than when they have simply failed to perform their duties. For independent directors in India to function as an effective check on management, the threat of shareholder action needs to be a real one.


ESG in India

Indian Legal Regime for ESG

The need for addressing Environmental, Social and Governance (“ESG”) related aspects, has never had more prominence than now. There is growing recognition of the financial and economic impacts of ESG risks across the globe and the investors are increasingly relying on ESG as an important metric to guide their investment decisions. Internationally, regulators and enforcement agencies are taking greater cognizance of ESG related issues and a more stringent view of non-compliances or greenwashing by any business regarding their ESG credentials. The impact of climate change, requirement of good governance and protection of interest of various stakeholders are increasingly forming part of various formal and informal dialogues, particularly in the post COVID era. At the 2021 United Nations Climate Change Conference (“COP-26”) held in Glasgow, United Kingdom, India, along with 196 other countries made enhanced commitments towards mitigating the risks associated with climate change. The recent legal developments have demonstrated that the regulatory landscape for ESG in India has developed at a measured but regular pace and the Indian regulatory authorities are now catching up on the ESG trends that have been ongoing at a global level. With so much being said and done in relation to ESG on a day-to-day basis, it is sometimes difficult to focus on the real issue. This note aims to explain the concept of ESG and provides a brief overview of the Indian regulatory landscape in relation to ESG.


shareholder activism in india

Shareholder Activism in India: The Zee-Invesco Decision

India has witnessed a significant increase in institutional shareholder activism over the past few years. As a consequence of the rapid rise in shareholder activism, there has been much greater focus on the rights of minority shareholders in relation to a company. In this context, the judgment of the division bench of the Bombay High Court on March 22, 2022 in Invesco Developing Markets Fund v. Zee Entertainment Enterprises Limited addresses two key issues: (i) the statutory right of shareholders to call a shareholders’ meeting and (ii) the appropriate judicial forum for such shareholder disputes.


insider trading regulations

Testing the Frontiers of the Insider Trading Regulations

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.


shareholders meeting

Requisitioning a Shareholders’ Meeting: The Unfolding Events Relating to Zee Entertainment and Dish TV

The recent controversies involving Zee Entertainment and Dish TV both involve investors holding significant stakes attempting to convene general meetings of shareholders. Through such meeting, the investors seek to replace certain directors on the existing boards. In both cases, the existing boards of directors have declined to convene such meetings. In this context, we first consider a purely legal question related to the circumstances under which can a company’s board decline a request from the company’s shareholders to convene a shareholders meeting. We then consider whether the grounds on which the boards of Zee Entertainment and Dish TV have rejected the investors’ requests are valid.


committee of creditors ibc process

An Alternative Approach to a Code of Conduct for the Committee of Creditors in an IBC Process

Recently the Standing Committee on Finance in a report placed before the Parliament on August 3, 2021 proposed a Code of Conduct for the Committee of Creditors in a corporate insolvency resolution process under the Insolvency and Bankruptcy Code. Following such report, the Insolvency and Bankruptcy Board of India has published a discussion paper on August 27, 2021 which includes, among other things, a draft Code of Conduct. This note considers an alternative approach for such a Code of Conduct.