CS.Shefali Bharti’s Post

The Supreme Court has recently held that companies must obtain prior approval from their shareholders before listing shares on a stock exchange. This decision emphasizes the necessity of adhering to Section 62(1)(c) of the Companies Act, 2013, which mandates shareholder consent for such allotments. The SC order arose on account of a company which had issued equity shares to an Asset Reconstruction Company (ARC) by converting a portion of its debt into equity without obtaining prior shareholder approval. The Securities Appellate Tribunal (SAT) had previously rejected the company's application to list these shares on the Bombay Stock Exchange (BSE) due to this failure by the company. The company argued that shareholder consent was unnecessary as the proposal originated from the ARC, however the Court determined that the Board of Directors' resolution and application for listing made the company the actual proposer, activating the need for shareholder approval. The Supreme Court upheld SAT's decision, reinforcing the mandatory requirement of obtaining shareholder approval in such scenarios. Case Details: Supreme Court Jyoti Limited vs BSE Limited Civil Appeal No. 4707 of 2022 Date of Order: 10 December 2024 #companylaw #companiesact #shareholderrights #corporatelaw

Bombay High Court Quashes NSE’s 2007 Directive to Halt Share Transfer, Citing Lack of Statutory Authority and Unsupported Ownership Claims Court’s Decision: The Bombay High Court quashed the National Stock Exchange (NSE)’s 2007 directive to halt the transfer of shares held by the Petitioner in Dr. Reddy’s Laboratories, citing a lack of statutory authority by NSE to issue such a directive. The court directed NSE to comply with procedures for issuing duplicate share certificates and instructed Respondents to transfer accumulated dividends to the Petitioner’s account. Facts: The Petitioner acquired shares in Dr. Reddy’s Laboratories between 1986 and 1997. However, a directive issued by NSE in 2007 instructed the Transfer Agent to halt any share transfer. The Petitioner, despite holding 1800 shares, was unable to transfer or receive dividends due to NSE’s directive. NSE alleged that the shares were connected to a defaulted trading member and intended to transfer them under Section 108 of the Companies Act, 1956. Despite numerous efforts by the Petitioner to resolve the issue and obtain duplicate share certificates, the Transfer Agent and NSE continued to deny the request. Issues: Whether NSE’s 2007 directive to halt the transfer of shares held by the Petitioner was legally valid. Whether the shares constituted assets of the defaulting member, as claimed by NSE, thereby justifying NSE’s directive. Whether NSE could raise defenses of delay and alternative remedies in light of its actions. Court’s Reasoning: The Court reasoned that NSE’s directive lacked statutory authority, as the shares did not belong to the defaulting member, and NSE’s claim to the shares was unsupported by any transfer forms listing the defaulting member as a transferee. Further, the Court noted that NSE’s reliance on a decade-old recovery claim without any follow-up action undermined their position. NSE’s arguments on delay and alternative remedy were dismissed as irrelevant, given the absence of statutory authority for its directive. Conclusion: The Court quashed the NSE’s directive, emphasizing that the 2007 communication lacked legal basis to restrict the Petitioner’s right to shares and dividends. NSE was directed to lift its directive, enabling the Petitioner to receive duplicate share certificates and withheld dividends. #BombayHighCourt #NSEDirective #CorporateLaw #ShareTransfer #StatutoryAuthority #SecuritiesLaw #JudicialReview #LegalUpdate #CompaniesAct #InvestorRights

The Hon’ble Supreme Court of India, in Jyoti Limited v. BSE & Anr., upheld the rejection of Jyoti Limited’s application for listing equity shares on the Bombay Stock Exchange (BSE), citing non-compliance with shareholder and regulatory approval requirements. This judgment reinforces the importance of corporate governance and adherence to legal norms in financial operations. Key Legal Issues and Court Findings 1. Mandatory Shareholder Approval Under Section 62(1)(c) of the Companies Act, 2013, shareholder approval via a special resolution is required for increasing subscribed share capital, even in debt-to-equity conversions. The Court rejected Jyoti Limited’s argument that approval was unnecessary since RARE initiated the conversion. Regardless of initiation, companies must comply with shareholder approval requirements. 2. Stock Exchange Approval The Court upheld Regulation 28 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which mandates prior approval from stock exchanges for listing additional shares. Jyoti Limited’s failure to comply led to BSE rejecting the application. Judgment Highlights and Implications The Supreme Court dismissed Jyoti Limited’s appeal, emphasizing: a. Mandatory Shareholder Consent: Shareholder democracy is central to corporate governance, and a special resolution is non-negotiable. b. Regulatory Compliance: Adhering to SEBI and stock exchange regulations is critical for ensuring smooth market operations. Key Lessons for Companies 1. Governance and Compliance: Companies must respect shareholder rights and statutory mandates in any capital restructuring exercise. 2. Regulatory Preparedness: SEBI norms and stock exchange regulations must be diligently followed to avoid listing disruptions. 3. Integrated Approach: Boards must balance internal governance (shareholder approvals) with external compliance to minimize legal and procedural risks. This judgment serves as a reminder that corporate governance and regulatory adherence are inseparable in maintaining financial market integrity. Let’s Discuss: How can boards strengthen governance to avoid similar pitfalls? #CorporateGovernance #SEBIRegulations #SupremeCourt #LegalInsights #FinancialRestructuring

Happy to share my views published in the Economic Times - Wealth today When are shares transferred to the IEPF Authority? Company Secretary (CS) and corporate lawyer Vinita Sahitya, Founder, of LexFulcrum, a law firm, shares her experience in regard to why shares may get transferred to IEPF Authority. "Dividend from shares usually comes directly into the bank account of the shareholder. However, if the bank account is not active for some reason like freeze, lapse of KYC, and other non-compliances, then the dividend may not get credited resulting in the commencement of the countdown of seven consecutive years or more," she says. Sahitya also says that she has experienced cases where the family members of a deceased shareholder did not claim the dividend on shares, as they were not even aware of such investment in shares by the deceased shareholder. "Hence investors must also inform their family members about the folio number, DP ID, and other relevant details about shares and other investments," she says. The chances of dividends getting unclaimed are higher in case the shares are held through physical certificates and are not dematerialised. "People who invest or hold shares of private companies which are not mandated by the law to dematerialise their shares also need to be cautious," says Sahitya. Read more at: https://lnkd.in/g7R6jTie #law #legalissues #demat #shares #india

The Bombay Bumrah Trading Corporation (BBTC) is facing allegations of non-compliance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST) and related party disclosure norms. The charges include: 1. Non-Disclosure of Shareholding Changes: BBTC allegedly failed to report significant shareholding changes, as required under SAST regulations, which mandate disclosures for acquisitions or disposals crossing thresholds like 5%, 10%, or 25%. 2. Related Party Transaction Irregularities: The company reportedly omitted details of transactions with related parties, such as directors or subsidiaries, which may have benefited these parties while harming shareholder interests. 3. Accounting Standards Violation: BBTC is accused of non-compliance with Ind AS 24, failing to disclose the financial impact of related party transactions in its statements. 4. Lack of Transparency in Takeover Processes: BBTC may not have disclosed critical details about acquisitions, including valuation and funding sources. Potential Outcomes SEBI could impose penalties, suspend trading, or bar directors. The company may face investor lawsuits, reputational damage, and mandatory rectifications like restating financials. Recommendations BBTC should immediately rectify lapses, strengthen governance via an independent audit committee, adopt transparency in reporting, and consult legal and financial experts to ensure future compliance.

"What Legal Risks Should Be Considered in Equity Investments?" A common question: "What are the key legal risks in equity investing in India?" Answer: ⚖️ Regulatory Compliance: Equity investments are subject to SEBI regulations, which mandate disclosures and ensure transparency in the trading process. Non-compliance with these regulations could result in fines or penalties. 📜 Misleading Information: Sometimes companies provide inaccurate financial or operational data. Always perform thorough due diligence and rely on credible sources to assess the health of the company. 💼 Market Manipulation: The equity market is prone to price manipulation, including pump-and-dump schemes. Stay vigilant and trade on regulated platforms to avoid falling prey to fraudulent activities. 🔐 Insider Trading: Buying or selling stocks based on confidential, non-public information is illegal. Familiarize yourself with insider trading laws to avoid penalties or legal trouble. 💡 Tax Implications: Capital gains tax applies to profits earned from equity investments. Ensure proper reporting and calculation of taxes on short-term and long-term capital gains. Key Takeaways: Follow SEBI regulations ⚖️ Perform due diligence on companies 📜 Trade on regulated platforms 💼 Avoid engaging in insider trading 🔐 Report capital gains tax accurately 💡 --- Need legal advice on equity investments? Our team helps ensure compliance, minimizes risks, and supports you in making secure investment choices. 📞 Contact: +91-9051112233 💻 Website: https://zurl.co/yuzVP #EquityInvestments #SEBICompliance #MarketRisks #InsiderTrading #DueDiligence #CapitalGainsTax #LexCliq #LegalInvesting

The Hon’ble Supreme Court recently ruled that reduction in share capital of subsidiary company and proportionate reduction in the shareholding of the shareholder company would be covered within the ambit of the expression “sale, exchange or relinquishment of the asset” used in Section 2(47) the Income Tax Act, 1961 and thus, result in transfer of shares, triggering a capital gains / loss for the shareholder.   Please refer to our alert summarizing the said ruling. #Capital reduction #capital gains #transfer of asset #Aurtus Aurtus Consulting LLP | Vishal Gada | Rutul Shah | Zeel Jambuwala | Jay Parmar | Ritesh Kanodia | Mahip Gupta

Circulars Listed Companies: Filing done on one Stock Exchange should be automatically disseminated to other Stock Exchange.👏👏🎉 The 𝐅𝐢𝐫𝐬𝐭 𝐏𝐡𝐚𝐬𝐞 - for the single filing system shall be implemented for “equity” listed and “equity and debt” listed companies for disclosure of Grievance Redressal Mechanism falling under Regulation 13(3) of SEBI LODR from 𝐎𝐜𝐭𝐨𝐛𝐞𝐫 𝟎𝟏, 𝟐𝟎𝟐𝟒, onwards, which will be effective for the disclosures to be filed for quarter ended September 30, 2024. #singlefiling #circular #update #compliances #notification #amendments #new #legal #CompanySecretary #CharteredAccountant

NCLAT: LODR COMPLIANCE INAPPLICABLE FOR REVIVAL SCHEME; QUASHES NCLT-ORDER DIRECTING NOC FROM BSE NCLAT allows appeal filed by the acquirers (Petitioners) of Birla Cotsyn India Ltd. (Corporate Debtor under liquidation) challenging the NCLT order directing the Liquidator of the Corporate Debtor to seek a No Objection Certificate (NOC) from Bombay Stock Exchange (BSE) under the SEBI LODR Regulations before approval of the Scheme of Arrangement by NCLT for revival of the Corporate Debtor under the Companies Act; Further, NCLAT highlights that Sec. 230(1) of the Companies Act treats the liquidator as a separate and distinct category of person who can file a scheme before the NCLT and it does not consider the liquidator to be the same as the company, hence the rigors of LODR Regulations shall not apply herein, and opines that, “If Reg. 37 is considered to impose a mandatory requirement for prior NOC from stock exchanges for a scheme for revival of a company in liquidation also, it would conflict with the strict timelines provided under the Code and the Liquidation Process Regulations. In case of any such conflict, the provisions of the Code must prevail given the non-obstante clause contained in Sec. 238 of the Code.”; Therefore, quashing the impugned NCLT order, NCLAT directs NCLT to proceed with the hearing of scheme on merits without insisting on prior NOC from stock exchanges and ultimately concludes that, “If a restrictive literal interpretation of Reg. 37(7) of LODR is accepted then the same will lead to manifest absurdity…If the scheme fails and the Corporate Debtor is liquidated, its shareholders will get nothing. Under the Scheme, they are retaining some value whereas in the alternative scenario, they would get ‘nil’ value. That being so, the Scheme cannot possibly be contrary to the interests of public shareholders.”:NCLAT NDEL The judgment was delivered by Justice Yogesh Khanna (Member – Judicial) and Shri. Ajai Das Mehrotra (Member – Technical).

#InLawThisWeek Delays in winding up of estates caused by inefficient government agencies Billions of rands are stuck in deceased and insolvent estates due to inefficiencies in government entities like the Government Printing Works, Home Affairs, Justice, and SARS. Katherine Gascoigne, a senior associate at Gascoigne Randon & Associates, highlighted that over R100 million in her practice alone is tied up, delaying heirs from receiving funds and affecting the economy. Estate finalizations, which once took 6-9 months, now take double the time. These delays reflect systemic inefficiencies causing widespread frustration. Delays caused by the Government Printing Works (GPW) are significantly disrupting the administration of estates in the early stages. The SA Restructuring and Insolvency Practitioners Association (Saripa) secured a court order in 2021 compelling the GPW to print mandated gazettes. Recently, Saripa sought to hold the GPW CEO, Home Affairs Minister, and DG in contempt for non-compliance but had its application struck due to lack of urgency. Despite assurances that the e-Gazette system's automation is complete, Saripa remains cautious and prepared to take further legal action if failures persist. Saripa member Rikus Hartman reports at least 2,000 unfinalized insolvent estates, underscoring the widespread impact of these delays. Read the full Moneyweb report at t.ly/uThHW. #EstateDelays #SystemicInefficiencies #LegalChallenges