51% vote enough for forensic audit of corporate debtor: NCLT
The city bench of the National Company Law Tribunal (NCLT) on Thursday clarified that a 51 per cent vote of the Committee of Creditors (CoC) was enough to initiate a forensic audit of an insolvent company.
 
Citing Section 21(8) of the Insolvency and Bankruptcy Code (IBC), the NCLT bench said the provision makes it necessary for all decisions of the CoC to be taken by a vote of not less than 51 per cent and the same goes for forensic audit.
 
In a case related to Viceroy Hotels, where the resolution professional declined a forensic audit citing Section 28(3) which requires 66 per cent voting for matters mentioned in Section 28(1), the bench said forensic audit did not fall in the category.
 
While Section 28(1) needs 66 per cent votes to make changes in the appointment of contract of statutory auditors or internal auditors of the corporate debtor, conducting a forensic audit did not amount to changing the terms of the statutory auditors, the bench said.
 
In several insolvency cases with the bankruptcy court, creditors are interested in knowing the actual details of the financial transactions of the company funded by them as it may expose some fraudulent activities that led the company to bankruptcy.
 
Forensic audit uses financial and qualitative tools to detect fraud patterns. The auditors, who need specific skills to conduct forensic audits, also use special software for financial analysis.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Only banks, FIs exempt from open offer in corporate debt restructuring: SEBI
Market Regulator SEBI on Friday came out with rules for providing exemption from open offer requirements for corporate debt restructuring, which will now be restricted to scheduled commercial banks and all-India financial institutions.
 
The decision could help the cash-strapped Jet Airways which is looking for investment from lenders.
 
The market watchdog met in Delhi on Friday and decided that "such exemptions will not be available for acquisition of shares by persons other than lenders by way of allotment by the target company or purchase from lenders".
 
Under SEBI's takeover code, any firm acquiring control in a listed company, or when its stake crosses 25 per cent, must make an open offer to its minority investors.
 
The issue of open offer exemptions made headlines in recent times when the lead lender to Jet Airways -- State Bank of India (SBI)-- sought clarity from SEBI on open offer exemption possibilities in the current ongoing debt restricting of the ailing airline.
 
The SBI is the lead banker of Jet Airways's lenders' consortium, where the Punjab National Bank (PNB) is also a key lender as well. Jet has a debt of Rs 8,000 crore. 
 
In this context the SEBI and SBI were said to have discussed if an open offer exemption was possible under the takeover code to save a company in the larger investors' interest. 
 
Section 11 empowers the SEBI board to allow exemptions if it deems it a fit case in the interest of investors in securities. Section 10 of the SEBI takeover code allows exemption if it is made under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985, or any statutory modification or re-enactment.
 
The two sections are frequently used to give exemptions to public sector banks and undertakings when the government recapitalises them.
 
The board which met under Chairman Ajay Tyagi also noted that relevant exemptions, including open offer obligations are available under the SEBI regulations of Issue of Capital and Disclosure Requirements (ICDR) for acquisition while pursuing a resolution plan approved under the IBC. 
 
This will be related to allotment of shares to lenders pursuant to debt conversion.
 
Therefore with Friday's board decision, the open offer exemption would not be made available to persons (other than lenders).
 
The regulator has deleted the word "Competent Authority" in takeover regulations with respect to open offer exemption.
 
The exemption is now made available only for "scheme of arrangement or reconstruction pursuant to order of a court or tribunal", SEBI said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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COMMENTS

V.Krishnamoorthy

1 week ago

Why are the companies then send papers to get the votes for approval of their deliberations from the retail share holders?

SEBI allows MFs, portfolio managers to invest in commodity derivatives
The Securities and Exchange Board of India (SEBI) on Friday allowed mutual funds (MFs) and portfolio managers to invest in commodity derivatives to strengthen the market offerings and attract more players.
 
"The Board deliberated and approved the proposal contained in the memorandum to enable the participation by mutual funds and portfolio managers in exchange traded commodity derivatives in India subject to certain safeguards," SEBI said after its board meeting here.
 
"Further, Category III alternative investment funds, which are already permitted to participate in commodity derivatives, have now been permitted to deal with goods received in delivery against physical settlement of such contracts, if any," the regulator added.
 
Currently, the commodity markets are dominated by retail level traders and a few corporate hedgers and speculators. The entry of mutual funds and portfolio managers will attract more hedgers to the market and lead to its overall development. 
 
Market players said the SEBI move could offer structured and attractive products to deepen the commodity derivatives market. It would also lead to more participation from the funds.
 
Institutional participants like mutual funds and portfolio managers will add long-term liquidity to the markets, said the member of a commodity exchange.
 
The participants in the commodity derivatives market comprise retail and wholesale commodity traders and a few corporate clients and punters across asset classes. 
 
The SEBI also allowed Category III alternative investment funds to trade. Foreign companies with exposure to Indian commodities not having presence in India were also allowed to trade recently.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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