In a previous note published earlier this month, certain common risks for foreign buyers in Indian M&A transactions were discussed in addition to the strategies to mitigate such risks. In this note, the most common concerns of foreign sellers in an M&A transaction have been discussed i.e., to mitigate risk of deal certainty, risk of any payment default by buyer and limitation of foreign sellers’ liability post completion of an M&A transaction. This note also discusses certain trends and market practices relevant for foreign sellers to manage such risks within the Indian legal framework.
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.
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.
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.
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.
Despite frequent usage of the phrase “ordinary course of business” in numerous legislations and acquisition agreements, its interpretation remains a matter of debate. This note analyzes the meaning of such phrase in the context of Indian and UK case law and highlights certain relevant factors.
Secondment of employees, as an approach, has become a common practice followed by multinationals to utilize their skilled resources with an ambition of geographical expansion. The tax implications at the time of re-imbursement of salary costs to secondees under a secondment arrangement has been a controversial issue which has led to protracted litigation between the tax authorities and the assessees. The courts have delivered plethora of judgements over the past many years depending upon the facts and circumstances of each case. This note discusses the principles emerged from various judicial precedents.
In her Budget speech earlier this year, India’s Finance Minister had stated that the government would facilitate the establishment of ‘data embassies’ for the benefit of countries looking for digital continuity solutions. Such data embassies may be set up under the auspices of GIFT City in India’s first IFSC, located in Gujarat.
Accordingly, in order to allow countries and international companies to set up such embassies, the government may formulate a bespoke policy soon. To that end, it may notify specific norms, such as with respect to: (i) what a data embassy constitutes, (ii) the size and specifications of the data center necessary for such purpose, and (iii) whether data embassies can be virtual.
Further, such a policy will be expected to offer diplomatic immunity with respect to Indian regulations as far as the sovereign and commercial digital data of establishing entities is concerned. While it is likely that the lure of regulatory immunity will promote significant investment in India’s data industry – especially from technology infrastructure providers and cloud storage companies – India’s data embassy policy may allow for the storage of non-personal data only.
On the whole, this initiative appears to be part of a larger plan to build a trusted data storage ecosystem in India. As a novel device under public international law, data embassies have only recently become a viable option, especially among vulnerable states that face multifaceted uncertainties and threats. The idea of storing backups of critical state information in data embassies abroad – especially for the purpose of operating such databases from a secure, off-site center outside a state’s own borders – implies that such information remains available for retrieval in the event of a disaster or other emergency.
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.