Parliament recently passed the Mines and Minerals (Development and Regulation) Amendment Act 2016. The act has not only addressed the concerns of stakeholders by introducing provisions to transfer captive user mines, but also addressed the concerns of banks and financial institutions with non-performing assets and bad debts by providing that the proceeds from the sale of assets may be used to discharge debts.
The government recently notified changes to the Foreign Direct Investment (FDI) Policy by issuing guidelines on FDI in Indian entities engaged in the e-commerce sector. The guidelines have specifically permitted 100% FDI under the automatic route in entities using the marketplace model and have also set out the conditions applicable to e-commerce entities with FDI using the marketplace model.
The government recently amended India's foreign direct investment (FDI) policy in order to further liberalise foreign investment caps and other conditions applicable to FDI in several industry sectors. Instead of approaching and amending the FDI policy in a piecemeal manner, the government has significantly amended the FDI policy, which – apart from several new restrictions – is likely to be positively received by foreign investors.
In order to simplify the complex regulatory regime and make it more attractive to foreign investors, the Department of Industrial Policy and Promotion recently issued a press note introducing composite caps for foreign investment. Foreign investment can now be made under any route up to the sectoral cap prescribed for the relevant sector without being constrained by a separate, lower sub-limit. The new framework is expected to increase foreign investment.
The new Companies Bill, which is pending approval by Parliament, introduces drastic changes that curtail the powers of a company to buy back its own shares. In light of the proposed introduction of a tax on buy-back and the increased restrictions imposed by the bill, companies may be discouraged from buying back shares as a method by which to disburse excess cash or increase the value of shares.
Mergers and acquisitions in India are governed by a large number of individual laws. The Indian government recently tabled its proposed Companies Bill 2011 before the Lower House of Parliament seeking to replace the outdated Companies Act 1956. A number of key changes have been proposed in the bill that are expected to impact on M&A transactions involving Indian companies.
M&A activity in India has witnessed a number of regulatory and legal changes in 2011. Policy changes in the past two months have generated uncertainty over the legality and enforceability of put and call options. These options are found in almost all modern investment agreements, despite the fact that they are not specifically codified under Indian law.
Every successfully negotiated multi-jurisdictional transaction should have a backbone of legally enforceable contracts. It is not sufficient only to spell out the rights, duties and obligations of the parties, but crucial also to lay down the process to be followed in case of a dispute. Therefore, a dispute resolution clause in any contract assumes tremendous significance, especially in cross-border M&A transactions.
The Supreme Court has provided clarity on the interpretation of the words 'persons acting in concert' as embodied in the Substantial Acquisition of Shares and Takeover Regulations 1997. The case involved a dispute surrounding the offer price quoted by Daiichi Sankyo in its public announcement for an indirect acquisition of shares in Zenotech Laboratories Ltd.
The Substantial Acquisition of Shares and Takeover Regulations 1997 (the Takeover Code) established the fundamental rules for mergers and acquisitions. With market conditions evolving, it was felt that the regulations needed to be amended to align them with those of other global markets. A panel has submitted new recommendations for takeovers. The changes are bold and could be sweeping when implemented.
In the last two years, Indian telecommunications giant Bharti Airtel has twice attempted to acquire South African telecommunications service provider MTN. However, Bharti failed on both accounts - each time for a different reason. Had the deal gone through, it would have resulted in the third-largest telecommunications company in the world, with combined annual revenues of over $20 billion and a subscriber base of over 200 million.
Disputes among joint venture partners are not unusual. Often they emanate from the issue of funding the joint venture, regardless of whether the joint venture company is co-managed or one party has majority control. This update examines the issues surrounding a critical point in the acquisition of an existing joint venture manufacturing business where the minority shareholder sells its shares to the majority shareholder.
Where minority shareholders are forced to exit the company, they can approach the Company Law Board to seek appropriate relief. The board may grant injunctive relief prohibiting the majority shareholders or a potential acquirer from taking any action that might adversely affect the minority's interest. The legal position on squeezing out minority shareholders recently came under scrutiny before the Bombay High Court.
The Competition Act 2002, which recently replaced the Monopolies and Restrictive Trade Practices Act 1969, establishes merger review and control procedures designed to prevent anti-competitive combinations. However, the Competition Commission must be sensitive to the concerns of interested parties and ensure that combinations are regulated in a way that is conducive to national growth.
Foreign direct investment (FDI) is essential for long-term economic development. It not only facilitates capital inflow, but also enhances the competitiveness of the domestic economy. It is considered an indispensable tool for the Indian economy and the government monitors all inflow through its specialized departments. Radical changes were recently made to the FDI norms in anticipation of increased foreign investment.
In this global downturn it might be asked whether it is timely and appropriate to plan mergers, takeovers, disinvestments and acquisitions. Some say it is a buyers' market, since the value of business assets is low - but does that mean it is also a good time to sell? How do companies determine the value of an asset and what is the legal impact of the valuation?
The Securities and Exchange Board of India (SEBI) has announced a second 2009 amendment to the Substantial Acquisition of Shares and Takeovers Regulations 1997 (the Takeover Code). Newly inserted Regulation 29A states that on a target company's application, SEBI may relax one or more of the provisions of Chapter III, subject to certain conditions.
Under Press Note 1, Indian promoters are protected from being short-changed by foreign partners. It mandates that if a foreign company wishes to invest in India in its own sector, it must obtain a no-objection certificate from its Indian partner. The Indian government now has plans to abolish this requirement.
The Indian government has announced significant changes to the Foreign Direct Investment Regulations. The changes will allow for more foreign investment in the commodity exchanges, bringing the commodity exchanges into line with the stock exchanges for attracting foreign investors.
The Reserve Bank of India has issued a notification liberalizing the external commercial borrowing guidelines. The revised guidelines enable corporations to raise up to an additional $250 million through external commercial borrowing. Previously, corporations were permitted to raise only a maximum of $500 million through external commercial borrowing during one financial year.