Sunday, July 29, 2012

Miscellaneous


1.         Online Shareholder Participation
In a previous post, we discussed the recent introduction of mandatory e-voting for large listed companies with effect from October 1, 2012. The Harvard Law School Corporate Governance Forum has a post that sets out some principles and best practices that companies are encouraged to adopt while conducting electronic shareholders meetings and voting. Although that is set in the context of laws applicable in the U.S., some of the general principles would be useful for Indian companies as well.
2.         Offer for Sale by Promoters Through the Stock Exchange Mechanism
Earlier this year, SEBI had issued detailed guidelines on offer for sale by promoters through the stock exchange mechanism (analysed here). This is in pursuance of the requirement for listed companies to achieve their minimum public shareholding by next year. Due to concerns raised in connection with the offer process, it has now been relaxed, and a new set of guidelines have been issued via SEBI’s circular dated July 18, 2012. Some press reports that track SEBI’s decision on this issue are contained here, here and here.
3.         Special Rights to Specific Shareholders
It is quite customary for companies (including listed ones) to offer special rights to financial investors such as private equity funds and venture capital investors. These rights include board representation, special quorum requirements and affirmative voting rights on specific matters both at the board and shareholder meetings. While such rights have been historically the subject matter of discussion on their legalities such as their enforceability under certain provisions of the Companies Act, whether they amount to “control” under the SEBI Takeover Regulations, and whether the stock exchanges would permit inclusion of these special rights in the articles of association, these rights have now been the focus of corporate governance concerns. In a recent instance involving one company, the merits of providing these rights to a shareholder holding as low as one share have been questioned by other minority shareholders.

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