In India, under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “ Takeover Regulations”), there exists a mandatory tender offer regime for acquisition of listed companies. Under this regime, both, the acquisition of a substantial shareholding stake (25%) and the acquisition of “control” are treated equally, and require the acquirer to make an open offer to the public shareholders. Currently, under the Takeover Regulations, the test to determine what constitutes change of “control” is principle-based. Keeping in sync with global norms, in early 2016, the Securities and Exchange Board of India (the “SEBI”) released a discussion paper (the “ Paper”) to explore bright-line tests to determine what constitutes as change of “control.”
Recently, the Securities and Exchange Board of India (the “ SEBI”) has approved and notified several important changes to Indian securities regulations, including, extending relaxations from open offer and preferential issue requirements to new investors acquiring shares of distressed companies, extending relaxations from open offer requirements to acquisitions made pursuant to resolution plans approved by the National Company Law Tribunal (the “NCLT”) and exemptions from lock-in requirements at the time of initial public offer (“IPO”) to Category II Alternative Investment Funds (“ AIFs”) such as private equity funds and debt funds.
The Indian government enacted the Insolvency and Bankruptcy Code, 2016 (the “ Code”) to consolidate the law on insolvency in India, and provide an effective and timebound mechanism for recovering debts due to both, financial as well as operational creditors. The provisions of the Code are being tested in Indian courts, and an important ruling has been passed by India’s Supreme Court (the “Court”) on out-of-court settlements between parties following the commencement of insolvency proceedings.
With the aim of having a robust and efficient insolvency process and to remedy the appalling credit default situation in India, the Indian government enacted the Insolvency and Bankruptcy Code, 2016 (the “ Code”). The Code introduced sweeping reforms by consolidating the law on insolvency in India, and providing an effective and time bound mechanism for recovering debts due to both, financial as well as operational creditors.
In 2009, the Indian government implemented the provisions for prohibition of anti-competitive agreements and abuse of dominant position in India under the Competition Act, 2002 (the “Act”). More recently, antitrust litigation has picked up in India as the general public is becoming aware of various issues such as price fixing, cartel formation, tying arrangements and predatory pricing.
Under the existing provisions of section 10(38) of the Income-tax Act, 1961 (the “IT Act”), income arising from the transfer of a long term capital asset, being equity shares of a listed company or units of an equity oriented fund, is exempt from capital gains tax if the sale transaction is chargeable to Securities Transaction Tax (“ STT”) under Chapter VII of the Finance (No.2) Act, 2004 (the “Tax Exemption”)
The erstwhile Companies Act, 1956 (the “1956 Act”) contained provisions for the merger of a foreign company with an Indian company but not vice versa. The Companies Act, 2013 (the “ 2013 Act”) made a significant change and introduced enabling provisions for merging an Indian company into a foreign company. The provisions relating to both inbound and outbound mergers along with the corresponding amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, have been notified on April 13, 2017.
The Competition Act, 2002 read with the Competition Commission of India (Procedure in Regard to the Transaction of Business relating to Combinations) Regulations, 2011, deal with the merger control regime in India. On March 27, 2017, the Indian government issued a notification (the “ Notification”) changing the target test exemption.
Under the provisions of the Income-tax Act, 1961 (the “IT Act”), the income of a non-resident is deemed to accrue or arise in India, inter alia, if it arises, directly or indirectly, through the transfer of a capital asset situated in India. The Finance Act, 2012, introduced an explanation to section 9(1)(i) of the IT Act, under which an indirect transfer of shares or an interest in a company or entity registered or incorporated outside India substantially deriving its value from assets located in India was subjected to capital gains tax in India on the theory that the offshore capital asset would be regarded as situated in India if it substantially derived its value (directly or indirectly) from assets located in India.
On March 6, 2017, the Government of India (the “Government ”) notified the Trade Marks Rules, 2017 (the “2017 Rules ”), which replace the Trade Marks Rules, 2002 (the “ 2002 Rules”) and revamp the regime for trade mark filings in India. The Trade Marks Rules (both, 2002 and 2017) are formulated by the Government under the Trade Marks Act, 1999 (the “Act”), and specify the procedure to be followed for various matters, including applying, renewing or assigning trademarks and rectification of the trade marks register. In this update, we present a snapshot of the key features of the 2017 Rules and their impact on stakeholders.