Corporate Governance issues in Compensation Arrangements: Analysis of SEBI’s Consultative Paper -
Taking cognizance of instances where promoters, directors and key managerial personnel (Senior Management) of certain listed entities received rewards from private equity investors, SEBI has issued a Consultative Paper on “Corporate Governance Issues in Compensation Agreements” for public comments. Article in this issue of Amicus discusses the Consultative Paper which inter alia proposes amendments providing that the management of a listed company is not to enter into any such compensation arrangements without the prior approval of the board of directors of the listed company as well as its shareholders (by way of an ordinary resolution). According to the author, in order to avoid considerable regulatory burden, SEBI should instead make mandatory board approval with interested parties being disallowed from attending and voting, along with disclosures to the stock exchange on the key terms of arrangements without requiring a shareholders’ approval.
Notifications & Circulars
- Foreign Direct Investment (FDI) in Non-banking Finance Companies - 100% FDI now allowed under the automatic route in any non-banking financial services which are governed by financial sector regulators.
- Equity shares to non-resident entity against pre-incorporation expenses - Wholly owned subsidiary set up in India by a non-resident entity allowed to issue equity shares to non-resident entity against pre-incorporation/preoperative expenses incurred by such non-resident entity, subject to conditions.
- Exclusively listed companies of De-recognized/Non-operational/exited Stock Exchanges placed in the Dissemination Board – SEBI clarifies process for raising further capital and exit.
- External Commercial Borrowings by Startups – RBI allows start-up enterprises in India to access loans under ECB framework.
- ‘Trust Deed’, which provides for resolving the disputes arising between beneficiaries of Trust through arbitration, does not constitutes an ‘agreement’ much less an “arbitration agreement” within the meaning of Section 2(b) and 2(h) read with Section 7 of the Arbitration and Conciliation Act, 1996 - Supreme Court.
- Conversion of shares and increase of authorized share capital, when illegal – Supreme Court strikes down share conversion, noting clear case of oppression.