tag:blogger.com,1999:blog-3202774368551476669.post9178502295754754447..comments2023-09-15T16:21:31.980+05:30Comments on INDIAN CORPORATE LAW: Directors are persons in control; failure to disclose their shareholding violates Takeover RegulationsUmakanth Varottilhttp://www.blogger.com/profile/12438677982004444359noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-3202774368551476669.post-87901895948158776602009-03-14T15:21:00.000+05:302009-03-14T15:21:00.000+05:30Because the expression "control" is defined inclus...Because the expression "control" is defined inclusively,The SEBI is (ARGUABLY) right in asking the Directors on Board the Companies to make the disclosures under the relevant regulations. <BR/><BR/>Although, it is clearly a jurisprudential fallacy to mistake "Right" and "Power".<BR/><BR/>The latter generally is a rough proxy for discretion that is conferred to carry out some responsibility. <BR/><BR/>The Directors have "Power" to influence the management and policy of the Company; that power is derived from being fiduciaries of the corporation. Further the origin of this "Power" is the Companies Act. One may by way of illustration point to Section 291 that speak of "Powers of the Board".<BR/><BR/>A "Right" is distinct and different from "Power".<BR/><BR/>If we analyse the definition of "control" in the Code, it refers to "Right" to appoint majority of directors; the "Right" to influence policy etc. <BR/><BR/>Further this "Right" can emanate from voting agreements, share holding agreement or in any other manner as the Code tells us.<BR/><BR/>The regulator seems oblivious to this distinction betweeen "Power" and "Right"; A Distinction that the CA, 56 itself recognises. (for e.g.S/291 as pointed out above) and therefore is wrong in construing the law of disclosure in the take over code so as to include Directors as well.<BR/><BR/>But as Economics of agency costs tells us, this is only natural; the delegate of the sovereign will look to appropriate as much power as it can.(and impose agency costs on its principal) And so, the fiat of dislosing Director's share holding (as well) will necesarily follow.<BR/><BR/>One hopes that sooner or later this issue is settled by the SAT clarifying this technical but nonetheless vital difference between "Power" and "Right" and set the course right. One has seen enough of SEBI's expansive interpretations.<BR/><BR/>Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-81143561540707876502009-03-12T18:40:00.000+05:302009-03-12T18:40:00.000+05:30As long as the judgment is read in the context of ...As long as the judgment is read in the context of disclosure requirements, it may make some sense. But, if one extends the logic further, does it mean that change in Board will also lead to change in control under the Takeover Code? If that be the case, then change in Board each time will have to be accompanied with a Public Announcement. That seems ridiculous.अभिषेक त्रिपाठीhttps://www.blogger.com/profile/12380008229878512092noreply@blogger.com