Monthly Archives

May 2021

May 29
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due diligence report

Due Diligence Report : The Ball of The Game

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Due Diligence Report

The Business Standards, on its 27th of May 2021 issue, reads a headline about how million-dollar M & A deals are being sealed in the pandemic situation where countries over the world are facing the wrath of lockdowns.

What is M&A?

M&A, the abbreviated term for Mergers and Acquisitions, is a generalized term describing the coming together of companies or the assets through transactions like mergers, acquisitions, purchase of assets, tender offers, partnerships, and consolidations. The term Merger and Acquisition is often understood as synonymous, whereas they are not.

A merger is the bringing together of two or more separate businesses to form a single new firm. An acquisition is the takeover of a submissive firm by a dominant one, with the dominant firm becoming the owner of the submissive firm.

I concluded that before a merger or acquisition, a corporation must study and examine important benefits and drawbacks in order to transform the financial transaction into a lucrative one. And this research must be done meticulously. Here comes the role of ‘Due Diligent Report’.

What is the Due Diligent Report?

The importance of mergers and acquisitions in the development of firms may be demonstrated by using Yahoo as an example. Once a pioneer in the world of the Internet, this company has squandered its value whereas its competitor, Google, has made it to the apex, which is all due to the calculated steps taken during Mergers & Acquisitions.

Prior to paying a large sum of money in a commercial deal, investors conduct extensive research, which is referred to as Due Diligence. It is clear from the term that the act of research is being carried out with the utmost care. This conscious analysis, when presented as summarized in a report, it is known as a ‘Due Diligence Report’.

A due diligence report includes a statement describing the research, the documents based on which the research is performed, information on assets and liabilities, debts, market analysis, and SWOT Analysis. SWOT stands for Strength, Weakness, Opportunities, and Threats, linked with the company being acquired. 

What are the types of Due Diligent Reports?

The due diligence report forecasting the estimates of commercial potentialities are primarily of 3 (three) types. They are:-

  1. Financial Due Diligence
  2. Business Due Diligence
  3. Legal Due Diligence

The accounting practices, audits, tax-related compliances, and other financial and commercial prospects of the acquired business are highlighted in the financial due diligence report. The business due diligence report demonstrates the parties engaged in the transaction’s business viability. Legal due diligence, also known as Documents Only due diligence, is the estimation of the legal risks that are evaluated before a merger or acquisition.

Importance of Due Diligent Report

The main objective of the Due Diligent Report is to give the company acquiring a complete overview of the possible risks in the future. These risks, when recognized, can be negotiated likewise for the smooth running of the business.

Sections of the Due Diligence Report

The sections of a due diligence report are as follows:-

  1. Corporate Records like the certificate of incorporations, certificates of shares, articles of
  2. Association, memorandums, and the existence of any warrants.
  3. Financial information for the past five years. The statements of audits, taxes filed, the tax returns, internally generated financial models, etc.
  4. The records of indebtedness of the company to be acquired like the loan agreements, mortgages, etc.
  5. The list of employers and the code and policies related to employment. Documents if there is any pending litigation related to labor law.
  6. Documents relating to the real property of the company.
  7. All the agreements the target company has entered into.
  8. Copies of legal proceedings, environmental policy compliances, and licenses obtained.

 Conclusion

As a result, a Due Diligent Report is an essential component of any financial transaction involving two or more organizations. The importance of the report emphasizes how meticulously it should be created, as the prospects of both the firm acquiring and the firm acquired are dependent on it, despite the fact that such studies have some limitations.

The competency of the workforce remains behind the curtain. The report entirely relies on the information available and this may pose a hurdle for a reliable due diligence report. 

 

Tags: due diligence, due diligence report, m & a deals, purchase of assets, financial due diligence, commercial due diligence, tender offers, legal due diligence

May 29
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tax on reit

The Imposition of Tax on REIT / INVIT Under The Finance Act 2020: A Critical Evaluation

By Corporate Law, Banking, Media Coverage One Comment

The Imposition of Tax on REIT/INVIT Under Finance Act 2020

Real Estate Investment Trusts and Infrastructure Investment Trusts are rapidly growing investment vehicles that allow developers to monetize revenue-generating real estate and infrastructure assets while also allowing unitholders to participate without owning the assets.

The Indian real estate sector has long campaigned for the creation of “Real Estate Investment Trusts (hereinafter REITs)” and “Infrastructure Investment Trusts (IITs)” (hence InvITs). Although these industry launches were originally permitted a few years ago, their popularity has waned because of the ambiguity surrounding the tax legality of all pass-through transfers. REIT may be defined as a sort of mutual fund that enables investors to invest in real estate.

A real estate investment trust (REIT) is a firm that receives money from interested investors and invests it in real estate projects. InvITs, on the other hand, vary from REITs in that the majority of willing investors often participate in capital investments with a long gestation period.

They are collectively known as “Business Trusts,” and they have enormous potential to aid the government in accomplishing one of the country’s large infrastructure expansion goals while also encouraging the country’s commercial real estate market to improve.

Dividends (received by unitholders of REITs and InvITs) were not subject to tax prior to the approval of the Finance Bill tabled in Lok Sabha. The Finance Minister, Ms. Nirmala Sitharaman, released the Union Budget for the years 2020-2021 and requested several changes. For the fiscal year 2021, the Bill tabled in the Lok Sabha comprised many budgetary and taxation-related suggestions to change the Income-tax Act, 1961 (“Income-tax Act”).

Following the passage of the bill, the government decided to tax profits received by unitholders in REITs and InvITs, jeopardizing the developers’ and road-to-port the builders’ intentions to collect all money from such instruments. It may as well had been a tax policy enforced, but the dividend distribution tax was eliminated in Budget 2020-21, putting the burden of proof on the holders.

Although tax-free SPVs and trusts will remain, unitholders of InvITs and REITs will no longer be exempt. They will also be subjected to be taxed at the applicable income tax rate for the dividend income under the finance act 2020.

Upon the bill’s ratification, there was some unanimity on the fairness of the taxation policy imposed on dividend unitholders, and some remained unaffected by the adjustment in the taxation policy since it was not a major problem and was not unreasonable given that the government had already decreased the corporate tax rate. The aim behind such imposition seems to be convincing as it was to apply one advantage – either exempt the dividends or offer a lower corporate tax rate to the SPVs.

The imposition of tax responsibility on REITs and InvITs, like two sides of a coin, has its own set of benefits and downsides. The idea in the Union Budget to tax the profits obtained in the hands of unitholders/investors was developed after studying the chances of imposing the tax and taking into account the views addressed by real estate industry authorities.

 It would have a detrimental effect on the potential of InvITs and REITs, as a budget choice would go against the government’s immediate efforts. This was done to entice InvITs and REITs to give some tax certainty to long-term infrastructure developers. The introduction of the tax, on the other hand, contributes to the uncertainty among international/foreign investors who are skeptical of India’s tax regime’s stability and will be irreversibly hurt by the tax regime’s unpredictability.

The government’s proposed/passed reforms, as well as the application of a tax on dividends earned by REIT and InvIT unitholders, seem to have a significant influence on the business trust’s future potential in one way or another. Nevertheless, the appeal of these structures remains unresolved following a comparative review of the revisions.

 

Tags: finance bill 2020, reit taxation, the finance act 2020, tax on reit, 2020 finance act, reit tax benefits, finance act 2020, reit dividend tax, finance act 2020 summary

May 27
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intellectual property rights

Intellectual Property Rights VS Open Access Initiatives

By Corporate Law, Media Coverage No Comments

Intellectual Property Rights and Open Access Initiatives

In the wake of the global epidemic, the conflict between open access and traditional IP rights is becoming a significant problem. The essence of IPR and open access is that they are opposed to one another, to the point that approving one is destructive to the other. Let’s break down and find a balance between them.

IPR registration primarily consists of safeguarding one’s intellectual work for innovations and creative works, indicating its origin, and providing the owner unlimited control over that particular product for a certain length of time.

Whereas the fundamental goal of most open-access efforts is to help people and organizations overcome barriers. And to aid individuals and organizations in overcoming legal barriers, sharing and developing knowledge, and addressing global concerns.

 The effort encourages open access sharing and gives information on how to distribute information while avoiding prejudice against any individual or group of individuals. It would also stimulate fresher ideas and solutions to society’s broader issues, as well as provide a fair playing field for all entrepreneurs and people to compete on an equal footing with giant corporations with more resources.

As a result, these ideas are intended to both promote and enable access to individuals who may not otherwise be able to afford it.

The basics of open access, as can be shown, contravene one of the most fundamental concepts of intellectual property rights, which is to safeguard intellectual property. The rationale for the parties wanting legal protection for their IP is mostly commercial profit. The patent helps provide a framework to share protected work without letting go of any commercial benefits like product sales and licensing royalties. For instance, a person can patent his scientific tool and then sell the same to a huge corporation.

As an outcome, the firm may create it in big quantities at a lesser cost, lowering the cost to the customer. For all parties concerned, this is a triple-win situation. The patent owner makes money from the invention, the business sells the item to the consumer, and the customer gets a cheaper product. Copyrights are also for anyone who wants to safeguard their work, such as literary works or movies, while simultaneously benefiting from IP protection.

A large portion of this labor is shown in front of the public to get advantages. Without copyright protection, the author’s work might be duplicated or exploited without the originator receiving any recompense.

Furthermore, a trademark serves as a means of distinguishing one company’s goods or services from those of another. It also allows an owner to restrict other parties from using his or her trademark. A trademark’s main purpose is to provide information about a product’s origin and excellence to help consumers make better purchasing decisions.

It also gives a single owner monopolistic power because a large number of registered marks means fewer marks are accessible for others to use in the public domain.

As a result, in addition to symbolism, a trademark may be extremely valuable to a firm, causing some to incorporate it into their value. Trademarks are perpetually protected as long as they are in use and the owner can defend them. It protects companies from impersonators who want to profit by creating uncertainty in the marketplace by attempting to imitate an already recognized brand.

Striking a balance between traditional intellectual property rights and open access projects may be difficult, because artists may contemplate the consequences of doing something for the greater good, but they are also likely to consider how profitable their invention may be. However, recently this convergence has been seen in the Open COVID Pledge where the world is coming together to fight the pandemic. 

The goal of the committee is to urge organizations all around the globe to share their intellectual property so that we can all combat COVID together. This vow will eventually assist in the defeat of COVID-19 and will benefit humanity as a whole. Participating in this promise may also benefit businesses by generating goodwill and resulting in future commercial benefits.

 

Tags: open access initiatives, intellectual rights, ipr law, intellectual property rights law, ip rights, intellectual property rights, intellectual property protection, ipr act

May 26
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personal guarantor insolvency

The New Legislation of Personal Guarantor’s Insolvency Under IBC

By Corporate Law, Banking, Media Coverage No Comments

Personal Guarantor Insolvency

IBC 2016 was created to replace the old framework for insolvency and bankruptcy with single legislation. With the adoption of the IBC, the winding-up procedure was brought under the supervision of the National Company Law Tribunal, guaranteeing prompt and speedy action during the early phases of a firm’s financial default. The IBC’s primary goal is to help distressed corporate debtors.

History of Personal Guarantor Insolvency

As defined by Section 5(22) of the Code, a personal guarantor is an individual who is the surety under a contract of guarantee to the corporate debtor. While the provisions of the IBC pertaining to the insolvency resolution process of corporate debtors were implemented by the Central Government in 2016, the provisions of the IBC pertaining to the insolvency resolution process of corporate debtors were not.

The provisions pertaining to Personal Guarantors to Corporate Debtors’ bankruptcy resolution procedure were not. Prior to the Code’s creation, the Presidency Towns Insolvency Act of 1909 and the Provincial Insolvency Act of 1920 covered insolvency and bankruptcy for all persons, including personal guarantors.

NEW LAW

The IBC shall apply to the personal guarantor of the corporate debtor as of 1.12.2019, according to a notice dated 15.11.2019. Section III of the IBC will only apply to personal guarantors, according to this notice.

The Supreme Court in landmark judgment held that lenders can now initiate insolvency proceedings against promoters, managing directors, and chairpersons who issued personal guarantees on corporate loans if the borrower defaults.

Prior to the Notification concerning Section 60 of the Code, the Debt Recovery Tribunal had jurisdiction over insolvency and bankruptcy procedures against personal guarantors, whereas procedures against corporate debtors for the same default were either underway or became pending before an NCLT. 

This had the opposite effect, delaying the legal procedure and producing inaccuracies in estimating the amount to be recovered from the guarantors. To resolve this issue, Sections 60(2) and 60(3) of the Code were inserted, mandating that bankruptcy procedures against personal guarantors and corporate debtors be conducted by the same court, namely the NCLT.

ADVANTAGES AND DISADVANTAGES OF THE NEW LAW

  1. Consolidation of proceedings safeguards the debtors’ and guarantors’ interests by ensuring that the claim amounts issued to creditors do not overlap.
  2. For creditors, it allows for simultaneous actions before the same court, removing the burden of having to go to two separate forums to recover the same amount.
  3. The new legislation is likely to significantly reduce delays in the collection of creditors’ dues, as the Code mandates a time-bound approach.
  4. In addition to the SARFAESI Act, debt recovery suits, and other civil remedies, creditors now have another option for recovering their loans, resulting in a concentration of power in their hands.
  5. There appears to be no clear provision in Part III of the IBC, 2016 that allows an aggrieved personal guarantor to challenge the adjudicating authority’s decision.
  6. A pro-creditor insolvency framework presently applies to personal guarantors. Liabilities do not exclude guarantors. As a result, organizations must exercise prudence and prudence before issuing assurances in order to protect themselves from unanticipated events.

IMPACT ON THE INDUSTRY

In Lalit Kumar Jain vs. Union of India, the Hon’ble Supreme Court confirmed the legality of the 2019 notice expanding the IBC rules to personal guarantors. The Court also concluded that approving a Corporate Debtor’s resolution plan did not free a Personal Guarantor of their responsibility to repay the Corporate Debtor’s debt owed to an independent contractor.

A distinctive aspect of loans supplied to MSMEs is that it is frequently backed by personal guarantees supplied by promoters (which account for around 29 percent of GDP). Promoters will be encouraged to employ the pre-packaged insolvency resolution procedure for MSMEs to get creditor-friendly outcomes and strengthen credit discipline across the loan market as a result of the decision.

CONCLUSION

Despite being a good legislative attempt at efficiency, asset valuation maximization, and resolution process optimization, the new legislation fails to address the realities of the bankruptcy process.

For instance, an ordinance dated 05.06.2020 halted the implementation of Sections 7, 9, and 10 of the IBC, 2016, which were intended to safeguard corporations against new insolvency actions, citing the COVID-19 epidemic as the rationale. 

However, relevant provisions of Part III of the IBC, 2016 dealing with individual/personal insolvency, including personal guarantors to corporate debtors, are not suspended in the same way, even though it is reasonable to assume that the economic slowdown caused by COVID-19 will affect both corporates and individual guarantors equally.

This has led to the creditors having the option, even during a COVID-19 pandemic, to take action against personal guarantors but not against corporate debtors.

 

Tags: individual insolvency under ibc, personal guarantor ibc, personal guarantee ibc, voluntary liquidation under ibc, personal guarantor under ibc, personal guarantor insolvency, ibc personal guarantor, personal insolvency under ibc, personal guarantor insolvency under ibc, insolvency proceedings against personal guarantor

May 25
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limited due diligence

Limited VS. Exhaustive Due Diligence

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Exhaustive Due Diligence

The term “due diligence” is not defined in Indian law, but it suggests that a buyer should exercise caution. It is an inquiry or verification of the affairs of a business organization conducted by any individual or other business entity interested in taking over, combining, or investing in that former entity.

This is done to prevent foreseeable risks. Every business must conduct legal due diligence and be ready for unwelcome surprises before doing any deal the mergers & acquisitions. There are many processes involved in due diligence including business due diligence, special due diligence, accounting due diligence, and legal due diligence.  Due diligence looks at the past and current performances of the businesses.

LIMITED VS. EXHAUSTIVE DUE DILIGENCE   

As we talk about limited due diligence, we imply it’s confined to a certain level and focused on certain legal concerns, whereas exhaustive due diligence takes into account, encompasses, and evaluates everything about a corporate organization. While considering a merger or an acquisition transaction, the buyer, acquirer, or investor, as the case may be, will have limited knowledge pertaining to the target company other than what is available in the public domain.

 Due to this, the buyer will appoint legal and financial experts preferably lawyers, chartered accountants, or merchant bankers to conduct an exhaustive due diligence process on its behalf. In an exhaustive due diligence process, a vast amount of information is to be reviewed.

The legal due diligence team typically analyses the charter documents, material contracts, employment agreements, and real estate documents. Including corporate compliances, tax compliances, financial documents, insurance contracts, labor law compliances, intellectual property rights, and any litigation proceedings by & against the target company. 

Prospective buyers should gather documentation that reveals the company’s organization the parties need to refrain from the structure. They must also gather information on taxes, strategic fit, intellectual property, material assets, contracts, members, and lawsuits. 

PROS AND CONS

PROS 

  • It aids in the identification and mitigation of the target entity’s risks and responsibilities.
  • It evaluates the value of the target entity.
  • The information acquired following due diligence aids in deciding whether or not the agreement with the target firm is worthwhile.
  • Exhaustive due diligence helps in getting complete or overall information about the target entity.

CONS 

  •  Limited information or inquiry is the main reason for mergers & acquisitions failure.
  • Exhaustive due diligence is a very time-consuming process.
  • Any mistake, omission, or oversight committed at the time of the due diligence process can have adverse effects.

IMPACTS ON INDUSTRY

  • When a business entity confirms deals without doing due diligence or deals with insufficient due diligence, the damages can be dangerous. 
  •  After a merger or acquisition, all financial risks of the target company are transferred to the acquirer company.
  • Once governmental authorities or third parties take action against a targeted firm following a merger or purchase, the acquirer will face substantial legal fights and proceedings even if the acquirer had no involvement in the targeted firm’s non-compliance, fraud, or irregularity. Therefore, strict due diligence and deep investigation into the background of the cases of the targeted company are of paramount importance.

CONCLUSION

A well-executed due diligence process with proper effort is an essential part of a successful M&A deal. Negligence or other improper conduct in this regard will have harmful effects on the deal M&A. A failed M&A deal will create serious financial and legal difficulties and damage the reputation of the parties to the deal.

In order to remove any inadequacies in a due diligence process, it is essential that the process is done by people with the necessary skills and competencies. A well-qualified team with a systematic approach will make sure that the risks associated with the deal are identified and are not transmitted to the consumer.

 Therefore, it is essential for the parties to refrain from being overly enthusiastic or emotionally vested in a transaction that can cause the parties to ignore any negative information and cloud their judgment. The next time you engage in an M&A transaction, you’ll know what to do and how to go with your legal due diligence process, which will provide you with a clear picture of your future with the subject firm.

 

Tags: commercial due diligence, due diligence, due diligence real estate, legal due diligence, limited due diligence, financial due diligence

May 24
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concrete paver path

The Need for Paving a Concrete Path for SPACs

By Corporate Law, Banking No Comments

The Need for Concrete Paver Path for SPACs

Due to the financial shortages that businesses are experiencing as a result of the epidemic, Special Purpose Acquisition Firms, or more accurately, blank cheque companies, might be a haven during these unusual circumstances, highlighting the need for regulation.

SPACs provide firms with a unique manner of public inclination and distinctive advantages over the traditional IPO measure. They provide greater market certainty in valuing equities, lower exchange charges, adaptable arrangements, greater access to the display, more solid brand worth, and market confidence in a substantially shorter period of time.

The limited market instability produced by the general shutdown is partly to blame for the surprise surge in energy prices. Despite the fact that several firms all around the world had postponed their IPOs due to the pandemic, SPACs have been approved to provide them with an exit strategy by supporting them in obtaining financing even during times of extreme volatility.

Indian corporations have been requesting approval for direct posting on foreign stock exchanges for quite some time, but India lacks a defined mechanism on the subject. In the meanwhile, many organizations have sought alternatives, and SPACs have emerged as a viable option. SEBI has recently formed a specialized advisory committee to look at the viability of SPACs in India.

It has prompted the board to produce a report on enabling SPACs alongside controlling norms to reduce the chances under existing legislation. Its recommendations for administrative income assortments through capital additions charges are also being looked upon.

SPACs frequently choose the newest, most distinctive, and futuristic enterprises in the technological and market arena as acquisition targets, allowing the major investor to be addressed directly, ensuring pricing certainty rather than market value volatility. Another advantage of starting a new firm in the early stages is that the costs associated with records and exposure are low, if not eliminated.

Abroad posting permits Indian new companies to get to bigger and more enhanced pools of capital and raise assets at lower costs, diminishing their expense of capital and making them more cutthroat. Abroad business sectors may help new companies accomplish more rewarding valuations as these business sectors have a more profound financial backer biological system that comprehends the dangers implied in a beginning up.

In particular, new firms seek high values based on expectations rather than beneficial history, making them unsuitable or unattractive candidates for an IPO on Indian stock exchanges. In any event, Nasdaq provides access to a larger and more current financial supporter base, as well as the ability to search for values.

Given how this interaction is performed, i.e., the SPAC support discovers the financial donors rather than target undertaking a wide book-building activity, it is reliant on forecasts. As a result, company entrepreneurs should reconsider a Nasdaq listing via SPAC.

The new USD 8 billion arrangement between India’s ReNew Power and Nasdaq listed SPAC RMG Acquisition Corporation II, for which Khaitan and Co went about as the Indian legitimate guidance to RMG II, is among the biggest ever postings including an Indian organization in the US through this course. Also, if the developing buzz around SPACs is any sign, this arrangement might just be trailed by a lot more sooner rather than later.

Investing in SPAC is not without risk, both for the backers and for the retail financial supporters. If the SPAC posts continue at their current rate, the required number of target companies by the end of 2021 might number in the thousands. In any case, there will surely be a limited number of worthwhile targets.

If the supporters are unable to identify a goal or if the investors refuse to approve the agreement, the supporters are left with no options. Furthermore, in the United States, retail financial supporters are allowed to cancel their offers and guarantee reductions even before they are purchased. In any event, such an option is unlikely to be available to Indian investors for a variety of reasons.

In the United States, posting through SPACs has become the norm. India, too, may join this current trend if it has a strong SPAC system. In the Indian economy, new enterprises have a huge duty to complete.

A robust SPAC system will aid India in creating a stable startup environment. It will help the market conclusions and give new channels to capital development. That would lead to increased foreign inflows to help India in its journey towards expanding its economy.

 

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May 23
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indian startup

SEBI Gives Indian Startup Wings

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Indian Startup Wings

The Securities Exchange Board of India has issued a long-awaited circular on a revision in the criteria of listing. This approach allows Indian primary startups to grow their market and gives small investors an investment opportunity. A large number of Indian companies are now in the early stages of development.

At which point the essential market list is in the logical stage to offer initial financial backers the chance to invest cash, yet additionally to take their story to a more extensive crowd.

It is not, however, a smooth journey, since a list of these businesses’ accomplishments might serve as a test based on specific standards that are more extensive and demanding than they have ever been exposed to. Private bankers, private equity funds, and investors treat their children with extraordinary generosity. Since, in the initial phases, the financial backers of the startups, look for development instead of return.

Additionally, the numbers are a result of outstanding advancement. That is the reason we’ve seen terms like gross worth added (GVA) utilized as a measuring stick for computerized business development. Tragically, the benefit of the same in the environment of most new companies has not yet been perceived.

SEBI has also introduced provisions for startups that are similar to mainboard businesses. “Issuer businesses that have given promoters/founders Superior Voting Rights (SR) equity shares will be able to list under the Investors Growth Platform (IGP) framework.” The regulator has increased the set-off mark for open offers for IGP organizations from 25% to 49%.

In any case, independent of procurement or holding of offers or casting ballot rights in an objective organization, any adjustment of control straightforwardly or by implication over the target organization will trigger an open offer. The controller has devised cautious starting instructions.

Currently, a company must have 75 percent of its capital owned by QIBs as of the date of use for moving from IGP to Main Board if it does not meet the conditions of productivity, net resources, total assets, and so on. This need has now been reduced to half of its original size.

The amendments have been made according to the partner’s suggestions for the Innovators Growth Platform. It made changes in the wake of dissecting remarks on the discussion paper given in last November. SEBI has cut the personal period for backers to having 25% of pre-issue capital held by qualified financial backers from 2 years to 1 year for qualification prerequisites which were of significant interest for new businesses.

Other actions done by the controller include rebranding Accredited Investor to ‘Innovators Growth Platform Investors’ with the final purpose of IGP. Currently, such financial supporters’ pre-issue ownership for fulfilling qualification criteria is considered for just 10%, but this is being increased and will be considered for the entire 25% needed to achieve qualification conditions.

Profit is important to experienced investors, and they want it now. Given the current state of main startups, the market is still uncertain about the immediate consequence of earnings. SEBI, on the other hand, has attempted to speed up the process by establishing the Innovators Growth Platform on the National Stock Exchange. Some other discounts such as simplifying open offer trigger requirements and adjusting delisting rules are also intended to make life easier for startups.

Apart from the above-mentioned rules, the market regulator also mandated the public disclosure of analyst calls, and quick reporting of earnings, and expanded the requirement of setting up a Risk Management Committee. Thereby, the startups will eventually have to follow the rules.

According to Renaissance Capital, half of the IPO enrollments in the United States will be withdrawn at long last. Financial backers are disillusioned in the store, even with those documented. For example, McAfee, an internet security corporation, meets all of the criteria to be included on the list for 2020.

It declined on the first day of the season, to $ 20 per offer, and then climbed a half year later. On the other side, Infosys may serve as an inspiration and a good example of how to profitably build a firm. These criteria have made it simpler for startups in India to go public, preventing a possible outflow of Indian firms to international capital markets.

 

Tags: india startups, startups in india 2021, indian startup, startup companies in india, start up india, start up business in india

May 22
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the renewable energy sector

Challenges in Cross Border M&A Deals in The Renewable Energy Sector

By Media Coverage No Comments

Cross Border M&A Deals in The Renewable Energy Sector

Cross Border M&A Deals: India’s government has emphasized the potential of renewable energy to address the country’s rising energy needs. Due to the increasing relevance of renewable energy as an economically viable source of electricity, M&A activity in this sector has increased in India in recent years.

This industry has demonstrated tremendous potential for investment from both domestic and foreign firms, resulting in a surge in cross-border M&A deals.

Although both the acquirer and the acquired firm face obstacles, cross-border M&A may help organizations extend their operations throughout the world without having to start from scratch.

Cross Border M&A Deals – Pros and Cons

PROS

  • Capital builds up:

Long-term capital accumulation is aided by cross-border mergers and acquisitions. It invests not only in plants, buildings, and equipment to develop its enterprises but also in intangible assets like technical know-how and talents, rather than simply the physical element of the capital.

  • Employment creation:

It can sometimes be observed that mergers and acquisitions (M&As) done to drive restructuring may result in downsizing but, in the long run, increase employment. It is sometimes necessary to downsize businesses in order to keep them running. In the long run, as firms grow and become more successful, additional job possibilities will arise.

  • Technology handover:

Once enterprises from other nations join forces, beneficial impacts such as technology transfer, sharing of best management skills and practices, and investment in the host country’s intangible assets are sustained. This, in turn, leads to innovations and has an impact on the company’s operations.

CONS

a. Political concern:

The political environment might have a big impact on cross-border mergers and acquisitions, especially in politically sensitive areas like defense and security. 

b. Legal considerations:

Companies wanting to merge cannot overlook the challenge of meeting the various legal and regulatory issues that they are likely to face. Various laws concerning security, corporate, and competition law are bound to diverge from each other.

Hence before considering the deal, it is important to review the employment regulations, antitrust statutes, and other contractual requirements to be dealt with. These laws are active while the deal is under process and also after it has been closed. 

c. Due diligence:

Due diligence is a crucial aspect of the mergers and acquisitions process. Due diligence can influence the terms and conditions under which the M&A transaction takes place, the deal structure, and the deal price. It assists in identifying the potential for hazards and provides a complete perspective of the proposed transactions.

There is a slew of additional aspects to consider since each transaction has its own set of advantages and disadvantages.

Industry Impact

Frequent improvements, such as energy sources, indicate that market changes reflect the desire for eco-sustainable growth. The availability of renewable energy sources varies. This complicates the complete integration of renewable energy sources into the distribution system, as well as the reduction of system-wide electric imbalances.

Several solutions on the market, on the other hand, allow for the technological exploitation of synergies across diverse energy networks, therefore relieving the issues associated with the integration of renewable energy sources. Political, economic, social, technical, legal, and environmental issues all have a role in M&A decision-making, as well as the number and value of acquisitions that follow.

The most important factors are commodity price fluctuations, increased oil supply, increased penetration and active development of renewable energy sources, use of smart grid technology, which allows for lower transaction costs and optimal operation of electrical grids, and liberalization of energy markets.

 In February 2021, a total of $3.53 billion in cross-border power industry M&A agreements were announced throughout the world, headlined by IFM Investors, and the $2.19 billion asset purchase between Ontario Teachers’ Pension Plan and Brookfield Infrastructure Partners.

Conclusion

Despite the issue, we have discussed above the number of cross-border transactions has increased quite radically over the past few decades. Though there have been a few economic crises and the situation has not been so conducive, it had not disturbed the upward trend in cross-border M&A deals and activity.

More and more firms desire to go global since it provides excellent chances and is a less expensive choice for them to expand themselves inside. Looking into M&A attitudes throughout the world reveals that the business’s acquisition focus is shifting from domestic to cross-border transactions due to the numerous advantages it provides.

 

Tags: global renewable energy, renewable energy industry, renewable energy investment, cross border m&a deals, renewable energy market, renewable energy finance, the renewable energy sector, renewable energy sector

May 22
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ombudsman concept

Will The Ombudsman Concept by The SEBI Adversely Affect The Entities?

By Labour & Employment No Comments

ombudsman Concept by The SEBI

One of the most perplexing issues that SEBI faces is investor complaints. Verifying facts, solving legal issues, and finally reaching a conclusion may be extremely costly for SEBI if the conventional method is followed.

In terms of recognizing the virtue of time, the delay might be far worse. Sebi has also been criticized for effectively performing the function of a postman by just delivering the complaint to the Company without taking any further action. Of course, there are certain criticisms that are baseless. There may be several complaints filed against the company in which SEBI has no part.

Nonetheless, the current circumstances necessitated a new strategy, and Sebi has advised a whole new strategy in the form of the proposed “Ombudsman Regulations.” The notion of an ombudsman is not a novel one; it already exists in the banking industry. Based on all of the recommendations, SEBI suggested this regulation apply to the operation of the capital market sector.

It is, in essence, and even legally, a time-limited arbitration procedure. Many of the procedures, which are usually time-consuming, are and have been eliminated entirely. There will be just one and the last level of appeal, and it will be addressed to SEBI. No legal representation is permitted, and the major importance of this issue is emphasized, with severe consequences.

Given the core of the Act, the Ombudsman does not require any fancy credentials, and anybody with specific knowledge and competence in subjects such as “legal, finance, economics,” and so on would be considered competent for the post.

Apart from the usual disqualifications, one that bears special mention is that he should not have served as a full-time director of an intermediary or a publicly listed company. Surprisingly, his job is entirely at the discretion of the SEBI, and he may be dismissed and dismissed with just a day’s notice.

The proposed regulation included benefits as well as drawbacks for investors, some of which are outlined below. A residuary category of complaints includes any complaint made against an intermediary or a publicly listed firm. As a consequence of this chance, anybody with a compelling claim against a publicly listed company, whether an investor or not, or an intermediary, can apply to the Ombudsman for assistance.

Of course, no arbitrary limits should be placed, since this may lead to the rejection of real concerns for technical reasons. However, such wide breadth may not be required, resulting in some unusual and trivial complaints being brought and addressed before the Ombudsman.

However, when looking at the other half of the page, the broad definition supplied offers some advantages. Certain technological roadblocks are also removed by not requiring the complainant to be an investor (or even qualified in any other way). Additionally, avoiding the development of particular categories aids in preventing some attempts by corporations to dodge certain regulations. Such as the complaints claiming that they do not fit into any of the categories.

Therefore, the “Securities and Exchange Board of India (Sebi)” has now dropped its plan and scrapped the proposal to create an ombudsman to handle the investor complaints more quickly and feasibly. According to the regulator, the present mechanism for stock exchanges handling investor complaints looks to be pretty solid and to be operational, and functioning efficiently.

Investors are increasingly taking their complaints about all publicly listed businesses to specialized stock exchanges, which are also regarded as first-line regulators. After that, the bourses are allowed to take up the cases with the concerning corporations. Sebi is only notified of the complaints that have not been efficiently handled.

“In the most perfect system, every stock market participant would have its own ombudsman.”

Thus, the decision to reject the idea was taken in the best interests of the whole investment community. Since SEBI was also having problems finding a qualified candidate for the position of ombudsman. However, the idea was met with opposition from the start, and hence SEBI decided to withdraw it.

 

Tags: the ombudsman concept, affect of ombudsman on entities, ombudsman concept, affect of ombudsman, ombudsman concept by the sebi

May 20
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delhi rent control act 1958

A Critical Analysis of The Delhi Rent Control Act 1958

By Real Estate No Comments

Analysis of The Delhi Rent Control Act 1958

The motivation for the design of a rent control statute in the post-independence era was to protect economically disadvantaged parts of the community who couldn’t buy a property or qualify for loans due to bad credit scores. When demand for rental property exceeds supply and renters are abused by landlords, rent control measures are required.

As a corollary, the Rent Control Act of 1958 was enacted with the goal of protecting tenants’ rights, ensuring their safety, and limiting landlords’ ability to evict renters. The Act was written uniquely for each Indian state. The purpose of this essay is to examine and comprehend key parts of the Delhi Rent Control Act.

After years of trying to come up with the right law, Delhi finally established a comprehensive rent control law in 1958. The government imposed a rent restriction and established policies that favored renters, resulting in a general lack of interest among investors in purchasing real estate as a result of the DRC Act.

The Delhi Rent Control Act is intended to serve two main purposes: protect the tenant from paying more than the standard rent and protect the tenant from unilateral eviction.

The Act has changed again in 1988, exempting properties with monthly rents above Rs. 3,500 from the Rent Control Law and allowing landlords to increase rent by 10% every three years.

But, because the actual monthly rent at the time varied from the low double digits to barely Rs. 1000, and the legislation stipulated that assets would be subject to the DRC Act until the rent reached Rs. 3500, the realization of this rate failed to provide a significant profit for the landlords.

This amendment was guided by proposals to achieve a better mix between landlords and tenants and to reduce the inhibition of the Delhi Rent Control. However, the Act seeks to apply several other outdated regulations that do not allow landlords to revisit their rent. The relevance of the Act’s outdated requirements, as well as the law’s procedural legality, have been questioned on various occasions.

The DRC Act focuses on the mistreatment of tenants as well as the owners’ exorbitant rental charges, and the regulation of these activities, as well as rental management improvements, is a primary motive for the law.

Rental management also gives property owners more financial stability since, because loans are limited, inhabitants want to stay in an estate for a long time. This ensures that property owners will not face vacancies next year, as the existing renters are expected to extend and renew their lease.

The main effect of the DRC Act is a reduction in housing standards since assets are not maintained regularly and landlords do not increase the quality of the facilities until the returns begin to dwindle.

This law not only restricts the availability of legal rental homes but also eliminates applicants who force residents to establish informal or unrecorded agreements. The eviction of tenants is also a major issue that a landlord face which is very strictly monitored. 

The mismatch between the rent payable and the available lodging is another flaw; also, renters are unable to make modifications, renovations, or withdrawals in the building without the approval of the owner. In addition, the rent control methods entail high administrative expenses and a complicated enforcement mechanism.

Due to the poor returns imposed by the DRC Act and the Pagdi scheme, landlords have no motivation to make any modifications to the house, and to combat this scenario under this non-upgraded regulatory system, rentals have remained low while maintenance and operational costs have grown dramatically.

As a result, the Delhi government allowed landlords of buildings to raise the rent, paid, by 25% in 2020 to fund restoration work, as long as the majority of them remained secure and met safety regulations.

There have been petitions filed in the High Courts of Maharashtra, Tamil Nadu, and Karnataka, requesting that such antiquated rent control legislation be repealed. If any of these appeals are successful, Delhi may be on the verge of passing a tenancy law that benefits both renters and landlords.

To conclude, the Act’s major flaw is its stagnating property income, and implementing a new policy in lieu of the existing one would aid in raising investment and boosting the rental housing industry in the National Capital.

 

Tags: evict renters, tenant eviction, delhi rent control act 1958, tenant eviction notice, delhi rent control act, rent control measures