Introduction Section 198 of the Companies Act, 2013 (‘2013 Act’), prescribes a special method for computation of ‘net profits’ of a company in a financial year — which has different rules for arriving at net profit than the one prescribed under Accounting Standards. The special methodology for computation of net profits prescribed under Section 198 is used for two purposes – (i) for determining managerial remuneration under Section 197 and Schedule V; and (ii)…

Employee stock options (“ESOPs”) have been used as an effective retention tool globally. Cross-border ESOP structures can be considered by a variety of global businesses with existing Indian presence and by investors that propose to set up greenfield presence or acquire operating businesses in India. Moreover, Indian companies can also issue ESOPs to employees of their foreign holding, subsidiary or joint venture companies. This article discusses various cross-border ESOP structures and identifies key considerations arising…

  In Kalpana Mehta v Union of India (‘Kalpana Mehta judgment’)[1], a Constitution Bench of the Supreme Court (‘SC’) pronounced a detailed judgment on whether Courts can place reliance on the Report of a Parliamentary Standing Committee (‘PSC’). The SC also examined whether the factual observations made in a PSC Report can be contested or challenged by the parties, during a judicial proceeding. This decision arose from a referral order issued by a…

The Securities and Exchange Board of India (“SEBI”) recently approved amendments to the SEBI (Mutual Funds) Regulations, 1996 (“MF Regulations”) at its December 16, 2020 board meeting, notified on February 4, 2021 through the MF Regulations by way of the SEBI (Mutual Funds) (Amendment) Regulations, 2021, with effect from March 5, 2021. Currently, a Mutual Fund (“MF”) ‘sponsor’ is required to have a ‘sound track record’ i.e. having profits  in 3 out of the last…

Introduction An issue of significant relevance to financial regulators world-over is the fitness and propriety of key shareholders of financial entities. The objective of this blog is to analyse IRDAI’s approach to assessment of ‘fit and proper’ status of significant owners of insurers, especially in light of the order passed by the IRDAI in the matter of M/s Sahara India Life Insurance Company Limited (“Sahara Life”) on December 30, 2020 (“IRDAI Order”). Before we delve…

  The Serious Fraud Investigation Office (‘SFIO’) is an organisation established under the aegis of the Ministry of Corporate Affairs (‘MCA’) – for investigation and prosecution of white-collar crimes. The SFIO was constituted in July 2003 following the recommendations of the Naresh Chandra Committee. In 2002, the Naresh Chandra Committee had recommended setting up a ‘Corporate Serious Fraud Office’, to uncover corporate fraud, and supervise prosecutions under various economic legislations.…