Deciphering Compulsory Convertible Debentures: Navigating between Debt and Equity
Authors: Sumit Bansal, Shivani Chhabra, Taranjeet Singh and Ankur Kishanpuria
Compulsory Convertible Debentures (CCDs) are a unique financial instrument that combines the features of both debt and equity. These instruments are issued with an underlying characteristic of mandatory conversion into equity after a certain tenure, or on happening of a specified event. CCDs are commonly used by companies to raise capital for business expansion, debt reduction, or other corporate purposes. CCDs are subject to specific regulatory and tax considerations that issuers and investors need to be mindful of.
In this article, the authors delved into the key regulatory aspects, tax implications and accounting framework associated with CCDs in the Indian context.
Proxy Advisory Firms- Are they the Influencers of Corporate Governance and Play a Balancing Act
Authors: Manendra Singh and Aditi Ladha
“Far too much power is concentrated in the hands of ‘shareholder services’ companies like ISS and Glass Lewis, because so much of the market is passive/index funds, which outsource shareholder voting decisions to them,” tweeted Elon Musk, adding to the endless discussion on proxy advisors and their hold over institutional investors in matters of corporate governance.
On June 25, 2023, ICICI Securities announced its plan to delist its securities from the stock exchanges by way of a scheme of arrangement, as per which shareholders of ICICI Securities will receive 67 shares of ICICI Bank for every 100 shares they hold. In line with legal requirements, the company approached its shareholders for their approval vide special resolution (i.e. approval of at least 75% of the shareholders of the company) on March 27, 2024.4 Ahead of the voting, coincidentally proxy advisory firms had recommended institutional investors to vote in favour of the delisting of ICICI Securities.5 Whether or not, it was a direct impact of such reports, however, more than 80% of the institutional shareholders voted in favour of the delisting.
TRC- A Conclusive Proof of Residence?
Authors: Lokesh Shah and Aarya Jha
The evolution of globalization has made economies as well as corporations across the world more integrated. Multi national enterprises (“MNE”) represent a significant proportion of global gross domestic product (“GDP”). Expansion of MNEs lead to interplay of numerous tax jurisdictions of nations.
A country has a sovereign right to tax their residents on global income. A country also has a sovereign right to tax any income where the source is within its territory. This results in the problem of double taxation. For instance, a person is a resident of India and earns his income in United States (“US”). India has a sovereign right to tax the US income of the person based on residence rule. At the same time, US also has a sovereign right to tax the income of the person based on source rule. Therefore, both India and US have a legitimate right to tax the income of the person. This leads to the problem of double taxation. To avoid this issue of double taxation and to divide / allocate the taxing power, countries enter into double taxation avoidance agreements (“tax treaty”).
CCI and Sectoral Regulators: A Conundrum of Overlapping Jurisdictions
Authors: GR Bhatia and Toshika Soni
The objective of the new economic order since 1990 is to empower the market’s ‘invisible hand.’ However, the assumption that liberalized markets are inherently competitive is flawed. Various distortions may arise from vested interest groups, large monopolistic firms, or collusion amongst firms or anti-competitive practices flowing from economic and other policies of the Government. Competition law and policy serve to guide and moderate the adverse influence of these visible hands, thereby reinforcing the market’s invisible hand. Thus, competition law forms an integral part of the broader framework for fostering a ‘free market economy’.
Case Comment- Debtor’s Right of Redemption- Supreme Court Fortifies Section 13(8) of the SARFAESI Act
Authors: Saloni Kapadia and Rima Jain
The Supreme Court in its judgment dated September 21, 2023 in Celir LLP v. Bafna Motors Pvt. Ltd. Ors.3 (“Celir Judgment”) has clarified that under amended Section 13(8) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (“Act”), the borrower’s failure to repay the entire debt due before the publication of the auction notice constituted extinguishment of right of redemption of mortgage exercisable by the debtor.
The Shifting Focus of Asian and European Markets Towards India is a Homage to its Potential
Author: Reshma Oak
Businesses all over the world intentionally or unintentionally participate in market development, market penetration and seek expansion and diversification by engaging in meaningful alliances with a primary motive of their business growth. But when a business decides to step outside its country for seeking this growth, what exactly does it entail? I think that first off, they would want to be sure about the political systems, markets, governance models, more importantly the legal environment and the overall business environment. One has to therefore acquire a reasonable level of knowledge and awareness about the legal and business atmosphere of the chosen jurisdiction. Depending upon how much confidence is generated about the jurisdiction and what rewards are predicted, the decision of entry is made and modes of establishment contemplated.