Ambiguity with thin cap norms: Private credit players risk significant tax leakage

  • Accurate reading of thin capitalization norms is highly relevant to maximize IRRs, especially in asset heavy sectors
  • Currently, norms interpreted such that sometimes the entire interest paid to foreign related parties is disallowed for the target (as expense)…

    Budget 2023: Impact on InvITs

    • Distributions out of repayment of debt principal could now be taxed as ‘other income’ – at odds with global standards
    • Distributions out of debt repayments through redemption of units not treated as ‘income’, but reduce cost of acquisition – InvIT / REIT Regulations do not permit redemption of units…

      SEBI’s Proposed Disclosure Regime: Impact on Public M&A and Directors’ Liabilities

      • Most proposals are well thought through – unintended impact in a few cases
      • Mandatory clarification of media rumours – M&A dealmaking compromised and potential creation of a false market?…

        Private Funds: SEBI introduces investor diligence requirements for AIFs

        • SEBI has cast new investor diligence obligations on AIF managers, which extends to underlying investors
        • As per the new rule, the manager of an AIF is not permitted to on-board new investors or draw down capital from existing investors unless the diligence conditions have been complied with…

          How to Negotiate Key Person Provisions – A Lawyer’s Guide

          • The occurrence of a key person event should not trigger a domino effect across other funds managed by the sponsor
          • The ‘time and attention’ requirement should be drafted so as to avoid inadvertent foot faults
          • The question of whether or not a key person event has occurred should not be the subject of a long-drawn determination process…

            EduInfra – Emergence of a new asset class

            • EduInfra offers a promising 10 – 11% entry cap rate for annuity investors with rental escalations in the region of 3
              – 5%

            • Infrastructure classification allows for tax optimal exit through InvITs
            • Seller awareness needed – operators slowly moving towards asset light models; depth, but potential…

              Investor or developer? Real estate regulator (RERA) classifies real estate fund as a promoter

              • The term ‘causes to construct’ in the definition of ‘promoter’ under RERA has been interpreted to include private funds exercising rights typical to such investments

              • Protective rights of investors have been interpreted as being secondary to the rights of the homebuyers – in a conflict, the latter should be protected, notwithstanding inter-se contractual relationship between developer and fund…

                What’s Holding Back Indian Fund Managers From Raising Global Capital?

                • Indian fund managers, thus far restricted, may now be able to setup India-focussed offshore funds
                • Is investment by resident individuals in offshore funds now restricted, even under LRS? Not quite – we address the ambiguity
                • Will GIFT now emerge as the most favoured jurisdiction for setup of India-focussed funds?…

                  Unexplored Strategies in the Fortis Saga: Public shareholders and IHH Healthcare exposed to significant collateral damage?

                  • Latest SC judgement uncovers Daiichi’s new approach – Fortis, IHH and, public shareholders under the gun for liabilities of Fortis’ erstwhile promoters
                  • Public shareholders will need to brace for impact and be proactive – else risk getting the short end of the stick
                  • Legal sanctity of the ‘theory of attribution’ possibly misplaced in the Fortis context…

                    SEBI orders public disclosure at M&A negotiation stage: Compromises deal certainty and amplifies directors’ liabilities

                    • Listed companies forced to publicly disclose deal details pending finalization of negotiations
                    • Investors bereft of price and deal certainty, may even face reputational damage
                    • Directors of listed companies may be liable for market manipulation and exposed to litigation if they publicly disclose a deal which then falls through…