On June 14, 2023, the Securities and Exchange Board of India (“SEBI”) notified certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). The amendments are designed to strengthen corporate governance in listed entities by enhancing shareholder suffrage and disclosure of material events. Notably, the amendments introduced a new Regulation 30A that is to be read with a newly inserted Clause 5A of Paragraph A of Part A of Schedule III to the SEBI Listing Regulations (“Clause 5A”). Regulation 30A mandates shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, and employees of a listed entity or of its holding company, subsidiary, or associate company (“Specified Persons”) to notify the listed entity as and when any of them enters into agreements covered by Clause 5A (“5A Agreements”).
This note highlights the key features of Clause 5A and outlines certain practical considerations for Specified Persons and listed entities.
The Securities and Exchange Board of India issued a consultation paper proposing certain amendments to the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021. Amendments have been proposed to the counter-offer mechanism of the reverse book-building process, manner of calculation of floor price and the determination of the reference date. A fixed-price route for delisting and a framework for delisting of investment holding companies have also been proposed. This note summarizes the proposed changes to the voluntary delisting process.
On June 14, 2023, the SEBI introduced certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including in relation to disclosure of agreements entered into by or in relation to listed companies and approval by shareholders for special rights granted to shareholders.
While the amendments aim to create a more robust compliance framework and increase transparency and accountability of listed entities, they are likely to lead to additional compliance burden for listed entities and reduce flexibility to shareholders to enter into inter-se arrangements.
The Insolvency and Bankruptcy Code 2016 requires a successful resolution applicant to obtain regulatory approvals for the implementation of a resolution plan. The exact stage at which such regulatory approvals are required was not clear until a new Section 31(4) was introduced by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, which required the necessary regulatory approvals to be obtained within a period of one year from the date of approval of the resolution plan by the National Company Law Tribunal (“Tribunal”) or within such period as provided for in the applicable law, whichever is later.
However, a proviso to Section 31(4) lays down that where the resolution plan contains a provision for combination under the Competition Act, 2002, the resolution applicant is required to obtain the approval of the CCI prior to the approval of such resolution plan by the CoC (“CCI Proviso”). While the requirement under the CCI Proviso is mandatory, certain judgements of the Tribunal/National Company Law Appellate Tribunal have diluted the mandatory effect of the CCI Proviso by treating the CCI Proviso as ‘directory’. This note explores the question as to whether the CCI Proviso serves any useful purpose and is needed at all.
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.
The Insolvency and Bankruptcy Code, 2016 (“IBC”) ushered in a new era in the Indian insolvency regime by introducing a distribution waterfall mechanism under Section 53 of the IBC. The waterfall mechanism prioritizes dues owed to financial creditors over dues owed to operational creditors and government authorities.
The waterfall mechanism in the IBC is based on the recommendations of the Bankruptcy Law Reforms Committee. The preamble to the IBC also highlights its objective of balancing the interests of the stakeholders, including by alteration in the order of priority of payment of government dues.
There has recently been a rising trend of courts and tribunals seeking to deviate from the distribution waterfall under the IBC. Unfortunately, this tends to put the success of an insolvency resolution process at risk. In this note, we examine three recent examples and discuss why any such deviation could disturb the delicate balance sought to be achieved under the IBC.
Although the objectives of the erstwhile restriction on “round tripping” were laudable, such restriction had an unintended chilling effect on legitimate transactions. The new overseas investment regime introduced in August 2022 eases such restriction to a large extent. However, certain interpretational issues remain.
The enactment of the Insolvency and Bankruptcy Code, 2016 (“IBC”) marked a historic shift in India’s insolvency regime shifting the focus from recovery to resolution. The Bankruptcy Law Reform Committee (“BLRC”) reports highlighted the need for the legislative policy to initiate a resolution process at the instance of default to prevent erosion of value. Keeping this objective in mind, the IBC lays out a party driven process which places the creditors at the helm of the resolution procedure.
The Supreme Court of India (“Supreme Court”) has repeatedly held that keeping in mind the objectives of the IBC, the adjudicating authority at the stage of admission into the corporate insolvency resolution process needs to restrict its analysis to: (1) the existence of debt and (2) default in payment of debt. However, on July 12, 2022, the Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited (“Vidarbha”), relying on the use of the word “may” in the relevant statutory provision, applied the literal interpretation test and held that National Company Law Tribunal has the discretion to admit an application after it is satisfied regarding the existence of debt.
This judgment, which departs from precedent, could have serious consequences for the insolvency regime in India. This note discusses the implications of a literal interpretation test in context of Vidarbha and highlights the need for an intervention to avoid the mistakes of the past.
On August 22, 2022, the Government of India notified the new regime for overseas investments by Indian entities and individuals. The new regime is a mixed bag of liberalizations, new restrictions and clarifications, and signals the revised thinking of the Reserve Bank of India in certain respects, particularly in relation to the scope of overseas investments and round tripping. This note discusses the changes introduced by the new regime and its impact on cross border transactions.
Material Adverse Effect (“MAE”) clauses are once again in focus with the recent Musk-Twitter dispute arising from the termination of the transaction related to the acquisition of Twitter on MAE grounds. This note discusses certain issues relating to MAE clauses from a practical perspective in an M&A setting and how these clauses have been interpreted by courts in the past.