On March 26, the Supreme Court delivered its verdict in a matter that has grabbed headlines for more than four years. Two prominent business groups, historically inter-connected with each other in multiple ways, have engaged in a no-holds-barred battle that by all accounts will be a significant marker in the history of corporate India. It started at a board meeting of Tata Sons on Oct. 24, 2016, when Cyrus Mistry was removed by the board of directors from his position as executive chairman. This led to a series of cascading events that ultimately ended up in the courts.
The SEBI’s Insider Trading Regulations prohibit trading in listed securities when in possession of unpublished price-sensitive information (“UPSI”). Therefore one question which invariably needs to be addressed in such matters is whether the information that was alleged to be UPSI was “unpublished”. In a recent order issued by the SEBI in February 2021, Future Corporate Resources Private Limited, Mr. Kishori Biyani and certain other persons (together, the “Noticees”) were held to be in violation of the Insider Trading Regulations. It was alleged that the Noticees traded in shares of Future Retail Limited when in the possession of UPSI. The Noticees argued, inter alia, that the information that was alleged to be UPSI was already in the public domain in the form of media reports. This argument was rejected by the SEBI. It was not the first time that such an argument was made. It will likely not be the last. However, the backdrop is that the original 1992 regulations, and then the amendments in 2002 and 2015, have taken divergent approaches on this point. It has also not helped that the orders of adjudicatory authorities on this point have been inconsistent.
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 Supreme Court of India in the Essar Steel case held that allowing claims apart from those covered in a resolution plan to survive after approval of a resolution plan militates against the rationale of Section 31 of the IBC. The Supreme Court recognized that a successful resolution applicant should be given an opportunity to take over and run the business of the corporate debtor on a clean slate. Subsequently, the legislature introduced Section 32A of the IBC to provide that a corporate debtor shall not be prosecuted for an offence committed prior to the corporate insolvency resolution process, subject to certain conditions. Recently, the Supreme Court dismissed a writ petition challenging the constitutional validity of Section 32A of the IBC. The Supreme Court issued an unequivocal declaration of the need to give the successful resolution applicant a fresh start.
The recent interpretation of “control” by the High Court of Delhi in a litigation between Future Retail and Amazon has once again focused attention on the perennial question of what constitutes control. As described in more detail in the note, this question cannot be considered in abstract; it must be considered in the context of a specific legislation or policy and the objective it seeks to achieve. The relevant provisions of the FDI policy, which provide the context in this case, may not have been correctly appreciated.
In light of the growing trend of private equity (“PE”) firms acquiring minority stakes in multiple firms in the same sector, the Competition Commission of India (the “CCI”) has recently announced a market study to analyse the incentives and rights associated with such minority investments, and their impact on competition in India. There is a lack of clarity around situations in which a PE investor is required to notify a proposed minority acquisition to the CCI, and it is hoped that the CCI’s proposed market study will inform improvements to this framework, in order to bolster certainty and investor confidence. In this context, this note provides an overview of the existing Indian merger control framework vis-à-vis ‘minority acquisitions’, including the uncertainty currently surrounding the notifiability of such transactions, and suggests a possible way forward.
Since April 2020, prior regulatory approval has been required for all investments from countries that share land borders with India, including where the beneficial owner of an investing entity is situated in or is a citizen of any such country. The threshold for beneficial ownership has remained unclear and can arguably be triggered even if a single share of an investing entity is beneficially held by an investor from one of the restricted bordering countries (which include China). This has created uncertainty not only regarding inflow of new investments in the start-up sector but also beneficial ownership in a private equity fund. While other Indian laws prescribe certain tests for beneficial ownership, these are not consistent. This note examines the concept of “beneficial ownership” under certain Indian laws as well as the definition in the United Kingdom and the United States, and suggests next steps in the context of Indian foreign investment regulations.
The Competition Commission of India (the “CCI”) recently commemorated the completion of the first year of the ‘Green Channel’ approval route for combination filings in India, by way of which, combinations which meet certain criteria are deemed to be approved upon filing a valid short form notification (Form-I) with the CCI. This unique approval route was introduced by the CCI with effect from 15 August 2019, for facilitating speedy clearance of transactions, and balancing the ease of doing business in India with appropriate regulatory oversight for such combinations. Since its introduction, almost one-fifth of the combinations notified to the CCI have availed of this route.
This note analyses certain issues relating to the implementation of this route, some of which have subsequently been addressed by the guidance issued by the CCI through its updated ‘Notes to Form-I’. While some issues remain to be clarified, it is hoped that going forward, these will be resolved through CCI’s further guidance and decisional practice, and facilitate a wider and more certain use of the deemed approval route.
This note, first published on the National Law School Business Law Review blog, discusses recent amendments to the [Indian] Insolvency and Bankruptcy Code, 2016 in light of the COVID-19 pandemic, which inter-alia temporarily prevent creditors from initiating insolvency proceedings against corporate debtors. While the proposed changes are a step in the right direction, the Government should also consider the impact of the pandemic on pending proceedings as well as alternative mechanisms to restructure debt and resolve defaults in a cost-effective manner to preserve value.