Information Filled Under 'Practicing Law in India' Category
Regulating Credit Rating Agencies Friday, March 12th, 2010
The RBI recently put out two documents, (i) the Report of the Committee on Comprehensive Regulation of Credit Rating Agencies prepared “in response to the direction given by the High Level Coordination Committee on Financial Markets to reflect on the inter regulatory issues emanating from the activities of Credit Rating Agencies”, and (ii) the Assessment of Long Term Performance of Credit Rating prepared by the National Institute of Securities Market. The NISM study complements the committee report. The committee report reviews the role of credit rating agencies (CRAs) in India, the regulations governing the industry and makes certain recommendations
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Regulating Credit Rating Agencies
Years ago when I was responsible for attorney development in my firm, I gave a business development presentation to a group of brand new partners at their orientation. As I surveyed the crowd, I realized that not one of the new partners had given any thought to business development. Not one had a prepared a business plan with written goals
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Young Lawyers: Getting Hours and Pleasing a Senior Lawyer Not Enough in the New Economy
For the last ten years, corporate governance norms in India have been a mandatory requirement for large listed companies, through Clause 49 of the listing agreement. However, in the recent round of reforms, the Ministry of Corporate Affairs has deviated from that path to set out voluntary guidelines for corporate governance (discussed earlier here )
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Voluntary Nature of Corporate Governance Norms
Many of you have friends working for companies that already have a lawyer You want to know how to get those potential clients to switch to your firm. Like many things, it is easier to tell you how NOT to do it than to tell you how to do it. Once again you can learn how not to do it from politics Here is a case in point
SEBI Decisions on Public Offers and Derivatives Tuesday, March 9th, 2010SEBI has made some regulatory pronouncements at its board meeting yesterday that concern public offerings of securities and the derivatives markets. As regards public offerings: (i) SEBI has decided that all investors in public offerings (including retail investors) “would be required to bring in 100% of the application money as margin along with the application for securities”. This creates a level playing-field and makes demands more realistic, by removing the disparity between retail investors and institutional investors as the latter are only required to bring in 10% of the application money under the current regulations.
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SEBI Decisions on Public Offers and Derivatives
On the occasion of the International Women’s Day, it is apt to consider the role of board diversity, particularly the participation of women directors, in corporate governance. A discussion in the Hindu Business Line finds that women in corporate boardrooms continue to be an exception rather than the norm. Some countries have addressed this concern by imposing specific requirements for women directors in their corporate governance norms.
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Board Diversity and Women Directors
The Bombay High Court has ruled that any pre-emptive rights over shares in public limited companies are patently illegal in view of the principle of “free transferability” enshrined in Section 111A of the Companies Act, 1956 (“ the Act ”). This revives the debate on enforceability of shareholder agreements and joint venture agreements governing public limited companies. In the case of Western Maharashtra Development Corporation Ltd
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Public Company shares cannot be fettered at all, says Bombay HC
From the perspective of taxation (particularly income tax and service tax), the budget proposes changes in several areas. Importantly, the Finance Minister has clarified that the Direct Taxes Code will be introduced from 1 st April, 2011 . The GST will also be sought to be implemented from that date.
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Taxation and the Budget: An Initial Assessment of the Finance Bill, 2010
The National Law School of India Review (NLSIR) , the flagship journal of the National Law School of India University, Bangalore, will be hosting the 3 rd Annual NLSIR Symposium, ‘Indian Corporate Law and Corporate Governance: At the Crossroads’, in Bangalore, on 10 th and 11 th April, 2010.
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Event Announcement: 3rd NLSIR Symposium on Corporate Governance
This week we have been focusing on career success and life fulfillment. As you know I have worked with hundreds of lawyers at my old firm and have coached hundreds of lawyers. Some of those lawyers are motivated and energized.
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4th Key to Success and Fulfillment: You Have to Motivate Yourself
In the context the proposed overseas acquisitions by Reliance Industries (of LyondellBasell Industries) and Bharti Airtel (of Zain), the M&A Law Prof Blawg has a interesting take on the impact of national pride generated through press attention on such deals. The Blog refers to a recent paper The Cost of Pride: Why Do Firms from Developing Countries Bid Higher? , which concludes that “firms from developing countries (versus those from developed countries) bid higher on average to acquire assets in developed countries”
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Overseas Acquisitions and the Impact of National Pride
Yogi Berra said it well: “If you don’t know where you are going, you might wind up someplace else.” I would say: “if you don’t know what you want out of your life, you might wind up unfulfilled.” A few years ago I spoke at a Texas Young Lawyers Association (TYLA) event. I began by asking the lawyers who attended: “How many of you are totally satisfied with your career and life?” Only a few raised their hand. I actually thought that was a good thing
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2nd Key to Success and Fulfillment: Answer What is Your "Major Definite Purpose"?
On November 27, 2008, the Ministry of Finance introduced changes to the pricing norms for FCCBs. As we had discussed then, two changes were proposed: (i) the minimum price will be the average weekly high and low prices for the 2 weeks prior to the relevant date, instead of the previous price determined as the higher of the average for 6 months and 2 weeks; (ii) the relevant date for price determination will the date on which the board decides to issue to securities, and not 30 days prior to the shareholders’ resolution as it earlier stood. These changes were introduced to overcome the difficulties faced by issuers in appropriately pricing FCCBs in declining market conditions
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Pricing Adjustments for FCCBs
We have discussed the issue of TDS u/s 195 of the Income Tax Act, 1961 a few times earlier ; and have also discussed a recent judgment of the Karnataka High Court in Samsung Electronics. The decision holds that deduction must be made u/s 195 on all sums paid to a non-resident, irrespective of the chargeability of the sum.s As was argued in the earlier posts, this view merits reconsideration.
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TDS u/s 195: Samsung Electronics appeal in the Supreme Court
Few issues have proved to be more controversial than the strength of the principle that the company is a separate legal entity. The exceptions to the principle – commonly referred to as “lifting” or “piercing” the corporate veil – are both statutory and judge-made. The statutory exceptions are, in the main, not controversial.
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The Court of Appeal Reaffirms the Sanctity of the Corporate Form
The Government has introduced a recent change to the approval process for FDI that may ease the process, at least for some large transactions. The threshold for obtaining the approval of the Cabinet Committee on Economic Affairs has been increased from Rs. 600 crore (Rs
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Easing the FDI Approval Process
The SEBI (Issue of Capital and Disclosure) Regulations, 2009 were recently amended to provide for “French” auction as one of the methods of price discovery in follow-on public offerings. This was supposedly brought about with a view to encourage the use of such auction mechanism in Government disinvestments. However, the results emanating from the first offering where the auction mechanism was deployed are not all that encouraging.
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Do Auctions in Public Offerings Work?
Although the Satyam episode invited close scrutiny of the corporate governance norms and practices that were prevalent in India, there is some evidence that it has acted as a wakeup call in enhancing board practices. As Arun Duggal observes in a recent Wall Street Journal column: The first reaction of corporate boards when Satyam blew in January 2009 was to have an independent verification that the cash, bank deposits and financial investments recorded in the company’s books were accurate. The board of directors, particularly independent directors, met with the external and internal auditors to assure themselves that the reported financial statements were true and accurate and that the auditors were independent and diligent.
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Enhanced Corporate Governance Practices
We had earlier noted the recent relaxations introduced by SEBI in order to provide a thrust to the securities lending and borrowing (SLB) mechanism and thereby short selling of securities. Some doubts were expressed regarding the sustainability of even the reformed process. In a column in today’s Mint, Jayant Thakur highlights several legal issues that are bound to arise when the SLB mechanism acquires widespread practice.
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Legal Issues in Stock Lending
In 1935, the House of Lords famously observed that “every man is entitled to order his affairs” in order to minimise his liability to tax ( IRC v. Duke of Westminster , [1936] AC 1). This is the dictum that is often cited as the source of the rule that while tax avoidance is legal, tax evasion is not
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Corporate Restructuring and the Business Purpose Rule
See my earlier post on a recent decision of SEBI on whether increase in percentage holding consequent to buyback of shares would amount to “acquisition” under the Takeover Regulations. If that and earlier posts are reviewed, one would note that SEBI has taken a fairly consistent stand that such increase does amount to acquisition.
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Buyback and Takeover Regulations – Yet another development
Several prior posts have discussed the decision of the Special Bench of the Mumbai Income Tax Appellate Tribunal in Daga Capital , on the appropriate interpretation of section 14A of the Income Tax Act. It was also observed that the problem was not so much with the provision per se , as with Rule 8D of the Income Tax Rules, which laid down the computation mechanism for the amount to be considered non-deductible under section 14A. It appears that a Writ Petition (No.
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New Development on Section 14A, Income Tax Act
Several months ago I wrote about client development training and programs. I shared with you that while I feel lawyers learn a great deal from workshops I do at firm retreats and other events, I believe very few lawyers actually retain very much, and even fewer actually make changes. My belief is consistent with neuroscience research, which has documented that most people have the mental capacity to focus on only one new idea at a time and that it is important to allow moments of “insights.” One article worth reading is ” Why Neuroscience Matters to Executives ” by David Rock and Jeffrey Schwartz.
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Client Development On-Line Coaching
SEBI has introduced changes to the securities lending and borrowing (SLB) framework which may help uplift the market for short sales. The contract tenure for SLB has now been increased to 12 months. The Economic Times notes the rationale: SLB was introduced in April 2008, starting with a contract tenure of seven days
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Relaxation in Short Selling Norms
The role of credit rating agencies has been the subject-matter of discussion ever since the sub-prime crisis erupted, and the industry has been subjected increased scrutiny and regulation. However, much of that has not affected India, and there has been no serious overhaul of the system regulating rating agencies in India
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Internal Audits for Credit Rating Agencies
Nearly two years ago, we had debated ( here and here ) the pros and cons of India’s establishment of a sovereign wealth fund (SWF), when that topic was the flavour of the day. Since then, the global financial crisis and receding stock markets at least partially eclipsed the increasing appeal of SWFs. Nevertheless they continue to capture the attention of regulators and commentators
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Rationalizing the Absence of an Indian SWF
In my last post, I used Tug McGraw’s quote: “You gotta believe” and shared with you the importance of having self-confidence. In this post I want to focus more on how your beliefs either limit your success or empower you to the take off for your success
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Are Your Beliefs Limiting Your Success or Empowering It?