Public market transactions typically demand a high degree of certainty while navigating time-sensitive legal and regulatory hurdles. This demands robust structuring of the transaction preferably with in-built fail-safe mechanisms if overall commercial objectives are not met. One such commercial objective is consolidation, and its potential fail-safe – a conditional tender offer.
The Securities and Exchange Board of India (SEBI) by its informal guidance in January 2020 has settled the question of extraterritorial compliance of corporate governance required under Regulation 24(1) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). The informal guidance was sought by KCP Limited (Company), which has a material subsidiary, KCP Vietnam Industries Limited (KPC Vietnam), a limited liability company incorporated under the laws of Republic of Vietnam.
The Ministry of Corporate Affairs has, on 3 February 2020, issued the long pending notification of sub-sections 11 and 12 of Section 230 of the Companies Act, 2013 (Companies Act). These sub-sections provide for the takeover of minority shareholders by majority shareholders in unlisted companies through a scheme of arrangement placed before the National Company Law Tribunal (NCLT) in the same manner as other schemes of arrangement under Section 230, subject to the specific changes below.
The issuance of the Securities and Exchange Board of India (Prohibition of Insider Trading) Amendment Regulations, 2018 (PIT Regulations) in December 2018 by the market regulator brought with it several amendments to the regulations including additional compliance requirements for listed companies and persons with access to unpublished price sensitive information (UPSI).
he SEBI (Prohibition of Insider Trading) Regulations 2015 (PIT Regulations) have been equipped with its recent round of amendments to play an increasing role in public M&A transactions. Based on the recommendations of the Committee on Fair Market Conduct chaired by TK Viswanathan, the amended PIT Regulations (which came into effect on April 1, 2019) have lent much required clarity to various aspects of deal making.
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The budget promises to take steps to enable sourcing of external commercial borrowings and FDI for the sector. Whether this is an indication of certain relaxations in terms of use for other legal entities to set up educational institutions and ease of repatriation of funds remains to be seen.
The landscape of control transactions is evolving continuously and issues around minority protection rights, liabilities and exits associated with such transactions (highlighted above) are being dealt with through various approaches
With a view to streamline the process and timeline involved in issuance of observations on draft offer documents (DOD) filed with the Securities and Exchange Board of India (SEBI), SEBI has issued the “Securities and Exchange Board of India (Issuing Observations on Draft Offer Documents Pending Regulatory Actions) Order 2020” dated 5 February 2020 (General Order), which has come into force with immediate effect.
The biggest direct takeaway for startups from this budget was the deferment of the payment of income taxes payable upon exercise of stock options by their employees.
