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?…

      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…

          Decoding Boardroom Dilemmas (Part III): Can Nominee Directors Share UPSI with Nominating Shareholders?

          • No express framework exists for nominee directors to share UPSI with nominating shareholders
          • Natural expectation that nominee directors should represent their nominators’ interests – not permitted under law
          • Since nominee directors’ fiduciary duty remains towards the company and stakeholders, nominee directors are paradoxically placed and exposed to significant…

            Decoding Boardroom Dilemmas – Hiving Off to Fundraise Through Subsidiaries – Commercial Wisdom or Short-Changing Public Shareholders?

            • Transferring a majority-revenue generating business into a private subsidiary (hiving off) and raising funds at the subsidiary level is increasingly seen as a preferred alternative to direct listed acquisitions or slump sales
            • Hiving off may result in a ‘holding company discount’ and public shareholders lose out on value…

              Private Funds: SEBI holds AIF investors in breach of insider trading norms for AIF’s investments decisions

              • SEBI holds investors of AIFs having UPSI/ MNPI in breach of insider trading norms for investment decisions of AIFs
              • Investors into pooled investment vehicles exposed to substantial risk for actions beyond their control and visibility
              • Compliance seems rather impractical and creates complications for both the AIF and its investors – bad law that needs to studied for its potential implications…

                Should Offshore Funds Appoint Directors?

                The issue of director duties and attendant liabilities has been a subject of immense debate as the role of directors evolves in the Indian context. India is perhaps a decade behind the west in this evolution process, though rapidly catching up driven by increasingly proactive proxy advisory firms and institutional capital taking significant positions in Indian companies, though activist funds are still a rarity. Transcendence from ‘complying with their obligations’ to ‘performing their duties’ has probably been most transformational and manifested only in the past couple of years…

                Threat of valuation litigation in Public M&A – Carlyle-PNB Effect! 

                • SEBI floor price prescription in case of fund raises should not automatically dislodge directors’ duty to exercise independent judgment and maximise shareholder value
                • Target boards to proactively consider appointing an independent banker and running a robust auction process for capital raises…

                  InvITs: Gamechanger in the Indian Infrastructure Story!

                  Infrastructure has been the highest capital receiver in 2021, and InvITs continue to be the most favoured investment vehicle for sponsors and global investors alike. InvITs have received >USD 10 billion of investments in the last couple of years, with investments from some of the largest fund houses. The roads regulator of India (NHAI) has also launched its maiden InvIT – with an EV of >USD 1.1bn and participation from large pension funds (CPPIB and OTPP). KKR has again sponsored another InvIT in the renewables space (Virescent Infrastructure) – raising capital from a clutch of investors led by Alberta Investment Management Corporation…


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