Corporate Finance/M&A, India updates

New mining laws: mergers and acquisitions for captive user mines now possible
  • India
  • 08 June 2016

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.

Liberalisation of guidelines for FDI in e-commerce businesses
  • India
  • 13 April 2016

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.

Revamping foreign direct investment policy
  • India
  • 16 December 2015

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.

Liberalisation of foreign investment laws: composite caps introduced
  • India
  • 09 September 2015

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.

Buy-back of shares: impact of new Companies Bill
  • India
  • 08 May 2013

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.

Companies Bill 2011: key changes from an M&A perspective
  • India
  • 07 March 2012

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.

Regulatory conundrum over put and call options
  • India
  • 21 December 2011

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.

Resolving disputes in cross-border M&A transactions
  • India
  • 11 May 2011

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.

Offer price in indirect takeovers - a concept clarified
  • India
  • 13 October 2010

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.

Securities Exchange Board introduces amendments to the Takeover Code
  • India
  • 25 August 2010

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.

Bharti-MTN deal: two missed calls
  • India
  • 07 July 2010

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.

Non-compete clauses: soft asset, hard negotiations (buyer beware!)
  • India
  • 19 May 2010

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.

Court Ruling Makes Squeezing Out Minority Shareholders Easier
  • India
  • 09 December 2009

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.

Merger Review under the Competition Act: Regressive or Progressive Steps?
  • India
  • 23 September 2009

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.

Impact of Latest FDI Regime on M&A and the Bharti-MTN Deal
  • India
  • 15 July 2009

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.

Valuation in a Global Downturn
  • India
  • 24 June 2009

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?

Strict Compliance with Provisions of Chapter III of Takeover Code Relaxed
  • India
  • 25 March 2009

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.

Press Note 1 (2005 Series) to be Abolished?
  • India
  • 03 September 2008

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.

Changes to Indian FDI Policy
  • India
  • 20 February 2008

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.

Liberalization of Commercial Borrowing Guidelines
  • India
  • 24 January 2007

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.

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