CA Gaurav Dhingra’s Post

Brief details: Appeal at Apex court The appellant-Jyoti Limited applied for listing of certain equity shares to the Bombay Stock Exchange whihc was declined stating "appellant had not taken in principle approval from the Stock Exchange and that the appellant had not even taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited" The above order of the BSE rejecting the application of the appellant for the listing of shares was upheld and confirmed by the Securities Appellate Tribunal Grounds; Section 9(1) of SARFEASI Act 2002, permits RARE to take measures such as conversion of any portion of debt into shares of the borrower company. The appellant company had not proposed to increase the subscribed capital rather it is RARE that has done it, no approval of shareholders is necessary. Facts: Here it is evident that the appellant company had entered into discussion with RARE and it was agreed upon between the parties to convert part of its outstanding debts of Rs.32.80 Crore into equity shares.Resolution passed by BOD was not endorsed by shareholders of the company.application to lsit the shares was by Appellant Company and not by RARE. Accordingly, as contemplated by Section 62(1)(c) of the Companies Act, 2013, the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE. Finding of SAT that the approval of the BSE is necessary in view of Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is clear and we do not have a different opinion. Special resolution of the shareholders is necessary which is lacking in the instant case. This statutory appeal under Section 22 F of Securities Contracts (Regulation) Act, 1956 is devoid of merit and is dismissed.

Very Interesting part of Reduction of share Capital and measures thereof. section 66 of the Companies Act, 2013, the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016, reduction of paid-up share capital of the Company, on proportionate basis and writing off accumulated losses of the Company against such reduction of capital. Must read -

NCLT: APPROVES DELISTING OF SHARES, SCHEME OF ARRANGEMENT BETWEEN ICICI BANK AND ICICI SECURITIES NCLT approves the Scheme of Arrangement between ICICI Bank Ltd. (Holding Company) and ICICI Securities Ltd. (Subsidiary Company) under the Companies Act, 2013 and sanctions the delisting of equity shares of ICICI Securities from BSE and NSE under Reg. 37 of SEBI's Delisting Regulations, 2021, making it a wholly-owned subsidiary of ICICI Bank; Notes that - (i) the public shareholders of ICICI Securities will have their shares cancelled and in exchange, they will receive new shares in ICICI Bank based on a specified ‘swap ratio’, (ii) shareholders will receive 67 shares of ICICI Bank for every 100 shares of ICICI Securities they hold, and (iii) NCLT Mumbai has already dismissed the objections raised by minority shareholders and also approved the delisting of ICICI Securities shares from the stock exchanges; Highlighting that the sanction marks a key development in the restructuring process for both entities, which is expected to streamline the corporate structure and enhance business efficiencies, the Tribunal states that, “After analyzing the scheme in detail, this Tribunal is of the considered view that the Scheme as contemplated between the Companies seems to be prima facie beneficial to the Company and will not be in any way detrimental to the interest of the shareholders of the Companies”; Further, NCLT acknowledges that the scheme aligns with ICICI Bank’s “Customer 360°” focus and affirms the submission that such delisting would provide significant benefits for the public shareholders as they will get equity shares in the Parent Company, thereby providing them access to a much larger and more diversified business with greater stability in revenue unlike the securities business which is inherently cyclical; Lastly, NCLT elaborates that SEBI has granted an exemption to the cos. from the strict enforcement of its Delisting Regulations and various statutory authorities including the Regional Director, MCA, ROC, CCI and the Income Tax Dept. have carefully examined the scheme to ensure compliance with all the applicable legal and regulatory requirements, however, clarifies that the new shares will not be registered with the US SEC:NCLT AHM The order was passed by Mr. Sameer Kakar (Member – Technical) and Mr. Shammi Khan (Member – Judicial).

SEBI BSE Listing Case Law : December 10, 2024 Jyoti Limited [Appellant(s)] Vs. BSE Limited & Anr [Respondent(s)] Supreme Court of India Civil Appeal No. 4707 of 2022 2024 INSC 992 Conflict: Approval of the Shareholders would be Mandatory before the Shares are accepted for Listing? Brief Facts The appellant-Jyoti Limited applied for listing of certain equity shares to the Bombay Stock Exchange1 but the application to that effect was not accepted for the reason that the appellant had not taken in principle approval from the Stock Exchange and that the appellant had not even taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited (RARE). The above order of the BSE rejecting the application of the appellant for the listing of shares was upheld and confirmed by the Securities Appellate Tribunal by the order impugned. Thereafter Appellant appeal to the Supreme Court. Order Hon’ble Supreme Court ruled that the conversion of the debt into additional shares had taken place with the agreement of the appellant company and RARE, and it is on the basis of such an agreement between the parties that a resolution was passed on 02.05.2018 by the Board of Directors of the appellant company accepting the proposal to convert the debt into shares and to allot them in favor of RARE, thus, resulting in increase of the equity capital of the appellant company. Even the application for listing of the aforesaid additional shares was made by the appellant company to the BSE meaning thereby that the proposal for increasing the subscribed capital of the company by converting part of the debt into equity shares, as aforesaid, was initiated by the appellant company itself and not actually by RARE. Accordingly, as contemplated by Section 62(1)(c) of the Companies Act, 2013, the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE. Hon’ble Court said that insofar as the other ground for rejection of the application is concerned, that is to say, for want of approval of the BSE, the Securities Appellate Tribunal has returned a clear finding that the approval of the BSE is necessary in view of Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and we do not have different opinion on it rather we accept the said finding which is not perverse in any manner. Apex Court opined that no error or illegality has been committed either by the BSE or the SAT in refusing to accept the request of the appellant company for the listing of the shares at the Stock Exchange inasmuch as Section 62 of the Companies Act stands duly attracted and in the light of sub-clause (c) of sub-section (1) of Section 62 of the Companies Act, special resolution of the shareholders is necessary which is lacking in the instant case. For details: https://lnkd.in/gH_qsqCQ

Penalty of Rs.7 crores u/s 42 of CA 2013 for raising Rs.3.90 crores through portal: Unlisted public company issued shares to one group company through its online portal on private placement basis. Issuer company allowed  the group company to use its portal to sell the shares to investors treating it as secondary market transactions. Accordingly, the group company transferred these shares to 76 investors using the portal at varying consideration totalling to Rs.3.90 crores. Issuer company arranged its valuation report but surprisingly the data given therein was that of the group company which was allotted shares. Issuer company held the valuer responsible for this. ROC levied penalty of Rs.7 crores on the company and its directors, including non-executive/independent directors who were about the business model of the company, for violation of Sec.42 of Companies Act 2013 since group company was used as distribution channel for offering shares to public through its portal.

❓Should the seller of a company use a share or asset sale❓ ✔️When selling shares in a limited company, the seller loses the connection to the company and the assets and liabilities are transferred across to the buyer ✔️As part of an asset sale, the buyer can cherry pick 🍒 the assets they want from the company and they only take on the assets and liabilities they choose ✔️Both agreements for a share or asset sale will contain warranties and indemnities given by the seller in favour of the buyer. Protection for the buyer will be wider in a share sale and when using the asset sale route there is no need for complex taxation warranties as the tax liabilities remain with the seller ✔️The due diligence process is usually more extensive during a share sale, as the buyer will be taking on the liabilities of the company, so being aware of them at the outset it key 🔑 ✔️Transferring the shares will be completed by a stock transfer form and stamp duty will need to be paid by the buyer if the amount triggers it. Each asset during an asset sale will need to be transferred and this may involve consents from a third party. ✔️During a share sale, the target company will remain the employer to all of the company’s employees, so it will have no direct effect on them. During an asset sale the TUPE regulation comes into play and an employment solicitor will need to be part of this process, as they have the special skill set to deal with this part. ✔️Both processes have their pros and cons and before using one of them, speaking to your advisors is advisable to ensure the method is correct for you and your company. #sharesale #assetsale #companylaw #commerciallaw

❓Should the seller of a company use a share or asset sale❓ ✔️When selling shares in a limited company, the seller loses the connection to the company and the assets and liabilities are transferred across to the buyer ✔️As part of an asset sale, the buyer can cherry pick 🍒 the assets they want from the company and they only take on the assets and liabilities they choose ✔️Both agreements for a share or asset sale will contain warranties and indemnities given by the seller in favour of the buyer. Protection for the buyer will be wider in a share sale and when using the asset sale route there is no need for complex taxation warranties as the tax liabilities remain with the seller ✔️The due diligence process is usually more extensive during a share sale, as the buyer will be taking on the liabilities of the company, so being aware of them at the outset it key 🔑 ✔️Transferring the shares will be completed by a stock transfer form and stamp duty will need to be paid by the buyer if the amount triggers it. Each asset during an asset sale will need to be transferred and this may involve consents from a third party. ✔️During a share sale, the target company will remain the employer to all of the company’s employees, so it will have no direct effect on them. During an asset sale the TUPE regulation comes into play and an employment solicitor will need to be part of this process, as they have the special skill set to deal with this part. ✔️Both processes have their pros and cons and before using one of them, speaking to your advisors is advisable to ensure the method is correct for you and your company. #sharesale #assetsale #companylaw #commerciallaw

❓Should the seller of a company use a share or asset sale❓ ✔️When selling shares in a limited company, the seller loses the connection to the company and the assets and liabilities are transferred across to the buyer ✔️As part of an asset sale, the buyer can cherry pick 🍒 the assets they want from the company and they only take on the assets and liabilities they choose ✔️Both agreements for a share or asset sale will contain warranties and indemnities given by the seller in favour of the buyer. Protection for the buyer will be wider in a share sale and when using the asset sale route there is no need for complex taxation warranties as the tax liabilities remain with the seller ✔️The due diligence process is usually more extensive during a share sale, as the buyer will be taking on the liabilities of the company, so being aware of them at the outset it key 🔑 ✔️Transferring the shares will be completed by a stock transfer form and stamp duty will need to be paid by the buyer if the amount triggers it. Each asset during an asset sale will need to be transferred and this may involve consents from a third party. ✔️During a share sale, the target company will remain the employer to all of the company’s employees, so it will have no direct effect on them. During an asset sale the TUPE regulation comes into play and an employment solicitor will need to be part of this process, as they have the special skill set to deal with this part. ✔️Both processes have their pros and cons and before using one of them, speaking to your advisors is advisable to ensure the method is correct for you and your company. #sharesale #assetsale #companylaw #commerciallaw

❓Should the seller of a company use a share or asset sale❓ ✔️When selling shares in a limited company, the seller loses the connection to the company and the assets and liabilities are transferred across to the buyer ✔️As part of an asset sale, the buyer can cherry pick 🍒 the assets they want from the company and they only take on the assets and liabilities they choose ✔️Both agreements for a share or asset sale will contain warranties and indemnities given by the seller in favour of the buyer. Protection for the buyer will be wider in a share sale and when using the asset sale route there is no need for complex taxation warranties as the tax liabilities remain with the seller ✔️The due diligence process is usually more extensive during a share sale, as the buyer will be taking on the liabilities of the company, so being aware of them at the outset it key 🔑 ✔️Transferring the shares will be completed by a stock transfer form and stamp duty will need to be paid by the buyer if the amount triggers it. Each asset during an asset sale will need to be transferred and this may involve consents from a third party. ✔️During a share sale, the target company will remain the employer to all of the company’s employees, so it will have no direct effect on them. During an asset sale the TUPE regulation comes into play and an employment solicitor will need to be part of this process, as they have the special skill set to deal with this part. ✔️Both processes have their pros and cons and before using one of them, speaking to your advisors is advisable to ensure the method is correct for you and your company. #sharesale #assetsale #companylaw #commerciallaw

SEBI BSE Listing Case Law : December 10, 2024 Jyoti Limited [Appellant(s)] Vs. BSE Limited & Anr [Respondent(s)] Supreme Court of India Civil Appeal No. 4707 of 2022 2024 INSC 992 Conflict: Approval of the Shareholders would be Mandatory before the Shares are accepted for Listing? Brief Facts The appellant-Jyoti Limited applied for listing of certain equity shares to the Bombay Stock Exchange1 but the application to that effect was not accepted for the reason that the appellant had not taken in principle approval from the Stock Exchange and that the appellant had not even taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited (RARE). The above order of the BSE rejecting the application of the appellant for the listing of shares was upheld and confirmed by the Securities Appellate Tribunal by the order impugned. Thereafter Appellant appeal to the Supreme Court. Order Hon’ble Supreme Court ruled that the conversion of the debt into additional shares had taken place with the agreement of the appellant company and RARE, and it is on the basis of such an agreement between the parties that a resolution was passed on 02.05.2018 by the Board of Directors of the appellant company accepting the proposal to convert the debt into shares and to allot them in favor of RARE, thus, resulting in increase of the equity capital of the appellant company. Even the application for listing of the aforesaid additional shares was made by the appellant company to the BSE meaning thereby that the proposal for increasing the subscribed capital of the company by converting part of the debt into equity shares, as aforesaid, was initiated by the appellant company itself and not actually by RARE. Accordingly, as contemplated by Section 62(1)(c) of the Companies Act, 2013, the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE. Hon’ble Court said that insofar as the other ground for rejection of the application is concerned, that is to say, for want of approval of the BSE, the Securities Appellate Tribunal has returned a clear finding that the approval of the BSE is necessary in view of Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and we do not have different opinion on it rather we accept the said finding which is not perverse in any manner. Apex Court opined that no error or illegality has been committed either by the BSE or the SAT in refusing to accept the request of the appellant company for the listing of the shares at the Stock Exchange inasmuch as Section 62 of the Companies Act stands duly attracted and in the light of sub-clause (c) of sub-section (1) of Section 62 of the Companies Act, special resolution of the shareholders is necessary which is lacking in the instant case. For details: https://lnkd.in/gH_qsqCQ