These changes are likely to help boost the interest of foreign investors, who tend to prefer clauses like 'right of first refusal, tag-along and drag-along' in their M&A deals
Market regulator Securities and Exchange Board of India (SEBI) on Thursday allowed entities entering into merger and acquisition (M&A) deals to include preferential clauses like 'right of first refusal, tag-along and drag-along' in their share purchase agreements. This would give more flexibility to entities entering into M&A deals.
These changes are likely to help boost the interest of foreign investors, who tend to prefer such clauses in their deals. However, the amendments would be effective with prospectively and not to the deals already having taken place.
The demand for allowing such clauses has been gaining ground for quite some time, as certain high-profile merger and acquisition deals, including the Diageo-United Spirits deal and Cairn-Vedanta deal, had to face regulatory hurdles amid lack of clarity on regulations on such clauses.
The government recently cleared a proposal to amend the Securities Contracts (Regulation) Act (SCRA) regulations for allowing put and call options as well as some other provisions to give special rights to investors.
Such options in shareholder agreements give the investor an option to either sell the shares (put option), or to buy additional shares (call option) at a future date.
"... Contracts for pre-emption including right of first refusal, or tag-along or drag-along rights contained in shareholders agreements or articles of association of companies or other body corporate," have been allowed in share purchase agreements, according to SEBI notification.
Right of refusal gives one of the parties in an M&A deal the first option to buy out its partner in the event of the latter wishing to exit from the agreement at a later stage.
Tag-along and drag-along clauses allow one of the partners to join the other party in cases like further acquisition or sell out deals.
Such rights to the parties entering into M&A deals are also covered under 'put and call' options, which allow one party to sell or buy the securities or assets involved in a transaction.
For the first time ever, a cabinet note, otherwise deemed `secret document’ is uploaded in the public domain to facilitate public consultations; thanks to public outcry
A handbook issued by the Cabinet Secretariat, on guiding Parliamentarians on how to write cabinet notes states importance of such notes, as, “the decisions taken by the Cabinet and Cabinet Committees are fundamental to the governance of the country and form the basis of policy formulation as also for evaluating the impact of programs, policies, plans, projects and schemes of the Government.”
Cabinet notes are deemed as secret documents and seeking copies of the same under the Right to Information (RTI) Act can be rejected under Section 8. However, thanks to the hue and cry by RTI activists and citizens all over the country, the RTI Amendment Bill, 2013, has been sent to the Parliamentary Standing Committee, making it open for public consultations too. When RTI activists questioned as to how can credible public suggestions/ objections be made without being informed about the arguments made in favour of keeping political parties out of the RTI Act, the Ministry of Personnel uploaded the secret cabinet note on its website.
This public disclosure is indeed historic and it gives a peek into the enthusiasm of the cabinet committee to keep political parties outside the purview of the RTI Act, out of which was born the RTI Amendment Bill, 2013.
Some points which highlight the unusual speed and desperate arguments with which the Cabinet operated to slip out of the RTI Act:
Thus, it is imperative that a very large number of citizens send their suggestions/ objections to the Standing Committee by 6th October. The Standing Committee would be submitting its report by mid-December.
Venkatesh Nayak, who has picked up cudgels for the people on this campaign through Commonwealth Human Rights Initiative (CHRI), says, “While the powers that be might be inclined to do a rethink on the Ordinance intended to let convicted MPs and hold on to their seats, the effort to amend the RTI Act to keep political parties out of its ambit goes on without much soul-searching. “
Recent news reports about the Cabinet Note attached to the Bill (accessible on the Dept. of Personnel’s website ) have indicated that the Government intends to exclude all political parties from the Right to Information Act, 2005 (RTI Act) and not just those six national parties which were declared as public authorities by the CIC in June this year. In fact the text of the RTI Amendment Bill itself makes this intention very clear. The Cabinet Note only provides the reasoning for this retrograde move of the Government.
Nayak adds, “Unfortunately, by claiming that political parties are private bodies, political leaders opposed to transparency have reduced the status and prestige of their parties to the level of ordinary associations and clubs which appear and disappear with time.”
Other stories on this issue: RTI Amendment Bill: Why people can’t file suggestions, objections in languages other than Hindi, English?
(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”)
Government expect state-run banks to lend this additional money to consumers for buying auto, consumer durables at lower rates during the festival season
Ahead of the festival season, the Indian government on Thursday decided to enhance capital infusion into the public sector banks (PSBs) over and above what was provided in the Budget to enable them to extend more credit to auto and consumer durables sectors to stimulate demand and combat slowdown.
The decision to increase the quantum of capital infusion was taken at a meeting between the Finance Minister P Chidambaram, Reserve Bank of India (RBI) governor Raghuram Rajan and Economic Affairs Secretary, Arvind Mayaram.
“This amount (Rs14,000 crore provided for capital infusion in the Budget) will be enhanced sufficiently. The additional amount of capital will be provided to banks to enable them to lend to borrowers in select sectors such as two-wheeler, consumer durables, etc at lower rates in order to stimulate demand,” a finance ministry statement said.
It further said the additional fund infusion would help in combating slowdown and boost output.
“While this will bring relief to consumers, especially the middle class, it is also expected to give a boost to capacity addition, employment and production,” it added.
Consumer durables, a reflection of demand for manufactured products, include TV, fridge, washing machine.
The two-wheeler sales recorded a flat growth of 0.72% in April-August period current fiscal, as against a growth of 6.8% in the corresponding period last year.