01 January 0001

Corporate Amicus: September 2019


Preference Liquidation - Hit or Miss?
by Priyanshi Singhal

The article in this issue of Corporate Amicus discusses the merits of Liquidation Preference (LP) which is an active option with the investors who seek to secure their investments. Liquidation preference ensures returns on a predetermined price for an investment in the event of liquidation. According to the author, in the absence of sufficient legal precedent, or any clarification by the department, on whether returns featuring out of liquidation and/or winding up proceedings would qualify as ‘assured returns’, accommodating an LP clause under the extent foreign exchange laws, in light of the existing Pricing Guidelines, appears to be a tricky proposition. Raising the issue of enforceability of the LP clauses in Indian courts since no such matter has surfaced so far, the author emphasises that the way LP clauses in an agreement are drafted will be crucial to determine its implementation…

Notifications and Circulars

  • Mergers and Acquisitions - MCA clarifies on ‘Appointed date’ for Section 232(6) of Companies Act
  • Penalty for non-compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 clarified
  • Issue of shares with differential rights under Companies Act, 2013
  • Foreign Exchange Management (Deposit) Regulations, 2016 amended – Acceptance of deposits by issue of Commercial Papers
  • Alternative Investment Funds incorporated in IFSC to make investments as per provisions of SEBI (Alternative Investment Fund) Regulations, 2012
  • Master Direction on KYC – Certificate of proof of address if individual in jail

Ratio decidendi

  • Maintainability of Company Petition filed under Section 140(5) of Companies Act, 2013 against past auditor cannot be challenged citing literal interpretation - NCLT, Mumbai
  • Appointment of arbitrator – Section 11 of Arbitration Act when not applicable – Supreme Court Larger Bench

News Nuggets

  • Liquidation – Workers provident fund, pension fund and gratuity fund are not assets
  • Summary suit by factor against assignor/guarantor maintainable
  • No person other than Corporate Debtor can challenge admission under IBC Section 7
  • Mortgage when not a ‘preferential transaction’ under Section 43(2)(a) of IBC
  • Committee of creditors is not required to record reasons for replacing RP
  • Time limit prescribed in arbitration agreement is sacrosanct
  • No restoration of company if past directors could be brought to liability under Section 179 of Income Tax Act
  • Combinations (M&A) – CCI amends regulations to provide green channel approvals
  • DGFT’s Export Policy cannot be questioned under Section 4 of Competition Act
  • Arbitration – Deemed existence of arbitration agreement and doctrine of ‘Group of companies’
  • Arbitration – 1940 Act not valid for arbitration starting after 1996 Act
  • Draft e-commerce guidelines for consumer protection, issued

September, 2019/Issue-96 September, 2019/Issue-96

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