All About Fast Track Mergers in India

Concept of Fast Tracker Mergers in India u/s 233 of the Companies Act, 2013

First of all, we will go through the concept of fast track merger under Section 233 of the Companies Act, 2013. This section has been notified by The Ministry of Corporate Affairs 

On 15 December 2016, introduces the concept of Fast Track Merger (FTM) along with the given procedure for mergers and amalgamations of certain classes of companies which include small companies as well as whether it’s called company being “hold” or wholly -owned subsidiary companies. However, the section provided under the Companies Act deals with both fast track mergers and traditional mergers. It takes approximately ten months to regulate bodies and every type of company must go through this route. 

[Suggested Read: Difference between Authorised and Issued Shares]

Highlights of Fast-track Merger Process in India

  • The scheme of merger or amalgamation may be entered between toe or more than small companies.
  • Between a holding company and its fully owned subsidiary company.
  • In case of other class or classes of companies as may be prescribed or yet to be prescribed.
  • In some other following types of companies exclude public companies, section 8 companies and cooperates governed by the Special Act.

Difference between Traditional Mergers and Fast-Track Mergers (FTM)

A traditional merger is a “corporate strategy of combining different companies into a single company in order to enhance the financial and operational strengths of both organizations. When two companies merged, gives new branding or identity to make it stronger. In recent top mergers are the biggest mergers of all time, the following are:

Vodafone and Mannesmann

This merger company took place in 2000 and made it to the largest merger and acquisition deal in history. The U.K.- based Vodafone acquired with German Company Mannesmann. Here the deal is related to telecom and mobile phones.

[Suggested Read: MCA to revise SPICe MoA & SPICe AoA]

America Online and Time Warner

This merging company made it to the second largest in history and took place in 2000. Most Americans used their landline phone service to access the internet through provider America Online (AOL).

Fast-Track Merger (FMT)

The Companies Act,2013 has introduced the ingenious concept of fast track merger for very small corporate or companies with its wholly owned subsidiary companies. However, it has been introduced in Section 233 of the Companies Act read with Rule 25 of Companies Act. In it, there is no transfer of ownership but in case of Traditional Merger – there is wholly transfer of ownership.

Well! First of all, we need to know why does merger matters?

To make a stronger company or to have real combined assets, competencies or profit in the market?

It’s obvious two company merged to single company result into a dilution of the financial strengths of one of the companies, provided to that new company will give more profit in stock across the same asset base better with merged companies.

There are few advantages of FTM over normal mergers- it is an eco-friendly time bound registration and best cost-effective process. Another reason for that it doesn’t require any judicial process concerning NCLT. Sometimes it could happen for the classes of companies eligible to opt for FTM may instead opt for the traditional merger route per normal provision given the Companies Act.

[Suggested Read: Free Startup Tools & Resources]

What are the benefits of Fast Track Merger?

  • Till now, the government passes that it is not mandatory to get approval from NCLT (National Company Law Tribunal).
  • There will no need for issuing Public Advertisement.
  • It has been found that FTM provides less Administrative Burden.
  • The court will avoid a series of hearing.
  • It is all eco-friendly and has comparatively less cost.

As of now, Fast-Track Merger is the best option to go ahead in Mergers and Acquisitions because it’s saved time to complete merger through the court process and save cost too. FTM will help small companies in strengthening the position in their market.

[Suggested Read: Statutory Compliances of a Private Limited Company]

Checklist of Fast Track Mergers in India

  • Verify if there’s a specific clause for mergers in the Articles of Association (AoA)
  • Issue notice for the Board Meeting
  • Prepare the draft scheme of Amalgamation or Merger
  • Get the draft scheme approved in the board meeting by the director or its authorized agent
  • Prepare the Statement of Assets and Liabilities
  • Get Auditor’s Report on the Statement of Assets and Liabilities
  • Send a notice in Form CAA-9 of the proposed scheme inviting objections or suggestions, if any, within 30 days of issuing the notice from the Registrar and Official Liquidators where the registered office of the respective companies are situated or persons affected by the scheme with the attachments are given below: Scheme of Merger or Amalgamation, Pre and post Merger Shareholding of the Transferee Company, Last 3 years Audited financial statements with Auditors report thereon filed to ROC, MOA and AOA and Board Resolution
  • Valuations report for Share Exchange ratio from the registered Valuer
  • Valuation report may not be required in case of WOS Company

For a complete list of checklist and guidance, reach out to our experts.

Statutory Compliances of a Private Limited Company

Following are the statutory compliances of a Private Limited Company.

Hold the annual general meeting to approve financials

It is needed to be held every year for the purpose of the declaration of dividends, approval of financial statements etc. It has to be held in the city where the registered office is situated in the company.

Conduct board meetings every quarter

In a year four meetings have to be held and at least one in every quarter. The quorum for the meeting is 1/3rd or 2 Directors whichever is higher. Minutes of the meeting needs to be maintained at the registered office.

[Suggested Read: Companies (Registration Offices and Fees) Rules, 2014]

File annual compliance forms on time

Must be certified by a practising Chartered Accountant or a company secretary before filing. A compliance certificate needs to be filed from a practising company secretary in case the company has a paid-up capital in the range of Rs. 10,00,000 or Rs. 50,00,000.

Maintain register for the company

A register of Members, A register of directors, Register of Contracts, Minutes of the meeting etc have to be kept at the registered office of the company. The director’s directorship in other companies has to be informed by them every year.

Appointment of Auditor, Statutory Audit of Accounts, Filing of Annual return (Form MGT-7), Filing of Financial Statements (Form AOC-4) are some of the other statutory compliances of a Private Limited Company.

[Suggested Read: Difference between Authorised and Issued Shares]

Voluntary Retention Route for Investments by Foreign Portfolio Investors (FPIs)

Introducing Voluntary Retention Route for Investments by Foreign Portfolio Investors (FPIs) 

The Statement on Development and Regulatory Policies in the Monetary Policy Statement dated October 05, 2018 had announced a separate scheme called ‘Voluntary Retention Route’ (VRR) to encourage Foreign Portfolio Investors (FPIs) to undertake long-term investments in Indian debt markets. Under this scheme, FPIs have been given greater operational flexibility in terms of instrument choices besides exemptions from certain regulatory requirements. A discussion paper on the VRR scheme was placed on the Reserve Bank’s website for public consultation. Based on the feedback from the public and in consultation with Government of India, the scheme has been finalized and has been notified today, vide, A.P (DIR Series) Circular No. 21 dated March 1, 2019.

Investment under the VRR scheme shall be open for allotment from March 11, 2019. The details are as under:

  1. The aggregate investment limit shall be ? 40,000 crores for VRR-Govt and ? 35,000 crores for VRR-Corp.

  2. The minimum retention period shall be three years. During this period, FPIs shall maintain a minimum of 75% of the allocated amount in India.

  3. Investment limits shall be available on tap for investments and shall be allotted by Clearing Corporation of India Ltd. (CCIL) on ‘first come first served’ basis.

  4. The investment limits under the current tranche shall be kept open till the limits are exhausted or till April 30, 2019, whichever is earlier.

  5. FPIs desirous of investing may apply online to CCIL through their respective custodians.

  6. CCIL will separately notify the operational details of application and allotment.

Source: RBI

[RBI Regulatory Update] – FPI NCD route – Voluntary Retention Route (Revised scheme)

RBI notifies the revised Voluntary Retention Route for Investments by Foreign Portfolio Investors (FPIs) and opens allotment ‘on tap’

Reserve Bank of India introduced the Voluntary Retention Route for Investments by Foreign Portfolio Investors (FPIs) on March 01, 2019. Limits for investment in debt by Foreign Portfolio Investors (FPIs) were offered for allotment ‘on tap’ during March 11 – April 30, 2019. Based on the feedback received, and in consultation with the Government, the Bank has made certain changes in the scheme to increase its operational flexibility. The revised scheme has been notified today, vide, A.P. (DIR Series) Circular No. 34 dated May 24, 2019.

The revised VRR scheme shall be open for allotment from May 27, 2019, as per the following details:-

  1. The investment limit shall be ? 54,606.55 crores, under the VRR–Combined category, which allows investment in both government securities and corporate debt.

  2. The minimum retention period shall be three years. During this period, FPIs shall maintain a minimum of 75% of the allocated amount in India.

  3. Investment limits shall be available ‘on tap’ and allotted on ‘first come, first served’ basis.

  4. The ‘tap’ shall be kept open till the limit is fully allotted or till December 31, 2019, whichever is earlier.

  5. FPIs may apply for investment limits online to Clearing Corporation of India Ltd. (CCIL) through their respective custodians.

  6. CCIL will separately notify the operational details of application and allotment.

  7. FPIs that were allotted investment limits under the tap that was open during March 11-April 30, 2019, may, at their discretion, opt to convert their full allotment to ‘VRR-Combined’ by advising CCIL through their custodians. Such conversions shall not use up the investment limit of ? 54,606.55 crores indicated in para (a) above.

Sr. no

 

Particulars

 

Original scheme

 

Revised scheme

 

1

 

Categories for debt investment

 

·VRR-Corp – Investment in Corporate Debt

·VRR-Govt – Investment in Government Securities

 

Additional category introduced i.e.

VRR-Combined – Investment in instruments eligible under both VRR-Govt and VRR-Corp

 

2

 

Investment Limits

 

·INR 40,000 crore for VRR-Govt; and

·INR 35,000 crore for VRR-Corp

 

The overall limit of INR 75,000 crore or higher, as may be decided by RBI

·INR 54,606 crore limit for VRR Combined

 

3

 

Availability of investment limits

 

Till the limits are exhausted or till 30 April 2019, whichever is earlier

 

Till the limit is fully allotted or till 31 December 2019, whichever is earlier

 

4

 

Time Limit for investment

 

·Invest 25% of the amount allocated within one month; and

·remaining amount within three months from the date of allotment.

 

·Invest 75% of the amount allocated within three months

 

5

 

Exiting from VRR at the end of the retention period

 

·Liquidate its portfolio and exit,

·Shift investments to the General Investment Limit, subject to availability of limits.

 

The Additional option of holding investments until the date of maturity or date of sale, whichever is earlier

 

6

 

Exiting from VRR prior to the end of retention period

 

·Selling investments to another FPI(s) (such FPI shall abide by all terms and conditions applicable to the selling FPI)

 

·Option of PART exit by sale to another FPI(s) has been provided

Source: RBI, Dhruva Advisors

Clarification on Form ADT 1 Form for Appointment of Auditor filed through GNL 2

Relaxation from payment of additional fees

The Ministry of Corporate Affairs (the MCA) had received representation from various stakeholders seeking for relaxation from payment of additional fee specifically with respect to filing e-form ADT-1 which was filed through Form GNL-2 during the period from 1 April 2014 to 20 October 2014 for appointment of Auditors for the period 2014 to 2019 as the e-form ADT-1 was not available for filing during the said period and consequent to this, companies were facing difficulties in filling the details of Auditor in e-form INC-22A Active (One time return to be filed by companies on details of registered office of the Company).

Fee waived for e-form ADT-1 for the appointment of Auditor in certain cases

MCA has considered the matter and issued a General Circular on 13 May 2019 clarifying that the companies which had filed Form ADT-1 through form GNL-2 during non-availability of e-form ADT-1 i.e, from 1 April 2014 to 20 October 2014 may file e-form ADT-1 for appointment of Auditor for the period up to 31 March 2019 without any fee till 15 June 2019.

Additional fee applicable

Further, the Companies which had filed form ADT-1 through e-form GNL-2 even after the deployment of e-form ADT-1 will have to file the e-form ADT-1 now with an additional fee.

Source: http: //www.mca.gov.in/Ministry/pdf/GeneralCircular13052019.pdf

Step by step approach to Private Equity deals

The first step in a private equity deal would be to assemble potential investors interested in the desired company. This may prove to be the most difficult step as most companies are ambiguous with their decisions regarding whether they wish to contribute to the said Private Equity deal. 

Once this step is completed, the next step would be to approach a banker. In most probability, the amount required to buy said company would be more than the accumulated sum from all the investors.

As soon as the investors have discussed upon the various aspects of the P.E., they must decide upon its execution.

On acquisition of the desired company, they have the option of stripping it down completely and building it up from scratch. This process is called ‘buying out’ and may include employing new staff and selling off assets.

After a certain period of time, they have the option of selling the built company for a potential profit. This helps in repayment of any bank loans previously taken.

2018 was a record-setting year, with P.E. exits reaching $26 billion, almost equal to the value of exits in the previous three years combined. The sharp rise was mainly due to the mega deal of Walmart buying a controlling stake in Flipkart for $16 billion from investors including Tiger Global. Other highlights include record deal value pushed by large investments, strong tech flow and very large exits.

Both open markets exists and P.E.-backed initial public offerings (IPOs) saw significant declines due to unstable stock markets. 2018 recorded $1.7 billion in open market exits across 56 deals- more than 70% decline by value and over 56% drop by volume.

A series of laws govern P.E. deals in India. The important laws include-

The Companies Act, 2013

Where an investor approaches a company, questions regarding the procedure of the investment and in what manner rights can be granted to the investor come to surface. Depending on the manner as mutually agreed upon between the Company and the Investor, the P.E. Investment is made in a company. Accordingly, statutory compliances that the companies need are ascertained. These statutory compliances can further be subdivided into those which relate to a) the transaction related to the investment and b) other conditions precedents to the investment.

 Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014

Where a Company is willing to raise funds through a private placement of securities, the provisions of Section 42 need to be complied with. Private Placement means any offer of securities or invitation to subscribe to securities made to a group of persons selected by the company (other than by way of public offer) through the issue of a private placement offer letter and which satisfies the conditions specified in section 42.

References


  • 2018 was the best year for PE/VC exits in India: Report, LiveMint – https://www.livemint.com/Companies/c6DalEPnDt9bfW7xI0xiEI/2018-was-the-best-year-for-PEVC-exits-in-India-Report.html
  • Private Equity in Asia-Pacific 2019, Bain & Company  – https://www.bain.com/insights/apac-pe-2019-infographic/
  • Private Equity in India: The Legal Perspective, Apurv Sardeshmukh, LegallyIndia – https://www.legallyindia.com/private-equity-unleashed/private-equity-in-india-the-legal-perspective-20180327-9205

Startup Legal Guide: Get upto 5% Incentives of your foreign income under Service Export from India Scheme (SEIS)

About Service Export from India Scheme (SEIS)

SEIS is one of the Service Exports from India Scheme launched by DGFT in Chapter 3 of Free Trade Policy 2015-20. This scheme aims to incentivize service exporters of India with the objective to encourage and maximize export of notified Services from India Under the scheme, service providers, located in India, would be rewarded under the SEIS scheme, for all eligible export of services from India.

How the net foreign exchange earnings are calculated?

Net foreign exchange earnings for the SEIS scheme is calculated as:

Net Foreign Exchange = Gross Earnings of Foreign Exchange – Total Expenses or payment or remittances of Foreign Exchange.

Can we claim the incentive as cash?

Unfortunately, No. The rewards under the scheme are not given in the form of money but in the form of Duty Credit Scrips. Duty Credit Scrip is a scrip issued by the DGFT and can be used to pay various duties/taxes to the Central Govt. Split certificates of such Duty Credit Scrip may also be issued, at the time of application and are freely transferable.

List of notified services along with the rate of reward

The following services and rates of rewards were applicable for services export made between 1-4-2015 to 30-09-2015:

  • Professional Services – 5% Rate of Reward
    • Legal services
    • Accounting, auditing and bookkeeping services
    • Taxation services
    • Architectural services
    • Engineering services
    • Integrated engineering services
    • Urban planning and landscape architectural services
    • Medical and dental services
    • Veterinary services
    • Services provided by midwives, nurses, physiotherapists, and paramedical personnel
  • Research and Development Services – 5% Rate of Reward
    • R&D services on natural sciences
    • R&D services on social sciences and humanities
    • Interdisciplinary R&D services
  • Rental/Leasing Services without Operators – 5% Rate of Reward
    • Relating to ships
    • Relating to aircraft
    • Relating to other transport equipment
    • Relating to other machinery and equipment
  • Audiovisual Services – 5% Rate of Reward
    • Motion picture and video tape production and distribution service
    • Motion picture projection service
    • Radio and television services
    • Radio and television transmission services
    • Sound recording
  • Construction and Related Engineering Services – 5% Rate of Reward
    • General construction work for building
    • General construction work for civil engineering
    • Installation and assembly work
    • Building completion and finishing work
  • Educational Services – 5% Rate of Reward
    • Primary education services
    • Secondary education services
    • Higher education services
    • Adult education
  • Environmental Services – 5% Rate of Reward
    • Sewage services
    • Refuse disposal services
    • Sanitation and similar services
  • Health and Social Services – 5% Rate of Reward
    • Hospital services
  • Tourism and Travel Services – 3% or 5% Rate of Reward
    • Hotel (3% Rate of Reward)
    • Restaurants (3% Rate of Reward)
    • Travel agencies and tour operators services (5% Rate of Reward)
    • Tourist guides services (5% Rate of Reward)
  • Recreational, Cultural and Sporting Services – 5% Rate of Reward
    • Entertainment services (including theatre, live bands, and circus services)
    • News agency services
    • Libraries, archives, museums, and other cultural services
    • Sporting and other recreational services
  • Transport & Auxiliary Services – 5% Rate of Reward
    • Passenger transportation
    • Freight transportation
    • Rental of vessels with crew
    • Maintenance and repair of vessels
    • Pushing and towing services
    • Supporting services for maritime transport
    • Rental of aircraft with crew
    • Maintenance and repair of aircraft
    • Airport Operations and ground handling
    • Rental of commercial vehicles with the operator
    • Maintenance and repair of road transport equipment
    • Supporting services for road transport services
    • Cargo-handling services
    • Storage and warehouse services
    • Freight transport agency services
  • Other Business Services – 3% Rate of Reward
    • Advertising services
    • Market research and public opinion polling services
    • Management consulting service
    • Services related to management consulting
    • Technical testing and analysis services
    • Services incidental to agricultural, hunting and forestry
    • Services incidental to fishing
    • Services incidental to mining
    • Services incidental to manufacturing
    • Services incidental to energy distribution
    • Placement and supply services of personnel
    • Investigation and security
    • Related scientific and technical consulting services
    • Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment)
    • Building- cleaning services
    • Photographic services
    • Packaging services
    • Printing, publishing
    • Convention services

Can startups apply for this SEIS scheme?

Yes. If you are providing an export of services and your foreign exchange remittances falls under ‘earned for rendering of notified services’, then you can get benefit from the Service Export from India Scheme (SEIS).

Who are not eligible under the SEIS scheme?

Those foreign exchange remittances or earnings that fall outside the scope of notified services, then such services will not be taken into consideration.

How to apply?

An Online Application needs to be filed on the DGFT Server and the relevant fields of information need to be entered in the SEIS ECOM Module. All the relevant forms which are ANF3B and Annexure to ANF3B are available online. You may also refer the link http://dgft.gov.in/links/appendices-and-anf-ftp2015-2020 on the DGFT Server to view the Forms applicable for SEIS Application.

  • Online filing: An application for grant of duty credit scrip for eligible services rendered shall be filed online for a financial year on an annual basis in ANF 3B using a digital signature.
  • Last date: The last date for filing application shall be 12 months from the end of the relevant financial year of the claim period.
  • Jurisdiction: Applicant shall have the option to choose Jurisdictional Registering Authority on the basis of Corporate Office/ Registered Office/ Head Office/Branch Office address endorsed on IEC for submitting application/applications under SEIS.
  • Start of the financial year: This option needs to be exercised at the beginning of the financial year.
  • No changes: Once an option is exercised, no change would be allowed for claims relating to that year.
  • Scrutiny of documents: RA shall process the application received online after due scrutiny.

[IMPORTANT] RoC Compliances for LLP

Registrar of Companies (RoC) Compliances for LLP

Three mandatory compliances for LLP

  • Annual Return – Form 11
  • Statement of the Accounts/Financial Statements – Form 8
  • Income Tax Returns Filings

Form 11 – LLP Annual Returns

Annual Returns or you can say Form 11 is a Summary of LLP's Partners like whether there are any changes in the management of the LLP. Every LLP is required to file Annual Return in Form 11 to the Registrar within 60 days from the closure of financial year i.e before 30th May every year.

Form 8 – Statement of the Accounts for LLP

All LLPs are required to maintain the Books of Accounts and have to prepare a Statement of Solvency (Accounts) every year ending on 31st March. Form 8 is to be filed with the Registrar of LLPs on or before 30th October every year.

Income Tax Returns Filing for LLP

Every LLP has to file the Income Tax Returns using form ITR 5. The deadline for LLP ITR filing is July 31st if tax audit is not required. LLP whose turnover exceeded Rs. 40 Lakh or whose contribution exceeded Rs. 25 Lakh are required to get their accounts audited by a practicing Chartered Accountant. The deadline for tax filing for LLP required to obtain an audit is September 30th. 

Legal and Financial Consequences of GDPR for Indian Startups

The General Data Protection Regulation, abbreviated as GDPR, was introduced on May 25, 2018. The regulation applies to every entity – big or small that has operations in the European Union in processing the data in an automated manner. This means that even if you are an Indian company having EU customers and process their data, then you will need to comply with this new data protection regulation. 

What is Personal data?

The new regulation slightly changes the definition of personal data, as it also extends it to ID numbers, location information, property, and social status, as well as indicators relating to physical and mental health. What's more, even genetic and biometric data that could identify the chosen person will be considered personal data. This may lead to some kind of revolution in this field. Data owners will gain new permissions, and administrators will be forced to perform further duties. This means that it will be necessary to introduce numerous safety mechanisms on many levels, including administrative and technical. 

The need for GDPR

Personal data leakage has become a routine phenomenon these days. Such data leaks is a threat to millions of individuals as their personal identity, financial details are made public. The new GDPR law may put an end to these crimes whether intentional or system failure. A heavy financial penalty may be a deterrence for large companies to strengthen their systems and processes in accordance with the law. Every aspect of data processing needs to be well-planned out without a room for any error. 

In addition, the basis for their processing must be determined, which is connected with the preparation of an information clause for all persons whose data will be obtained. However, this is not all. The most important change concerns the purpose for which personal data is to be obtained. It should be legally justified. Data that are outdated or incorrect must be removed immediately. This provision may be problematic for entities that collect personal data for many years and have not yet verified them. Updating such a database will certainly take a lot of time, but it is obligatory.

The GPDR also involves setting the maximum time at which personal data will be stored. The base should enable achievement of the previously assumed goal, and when it is completed – it should be removed. Therefore, the data processors have a lot of responsibility because they will be obliged to verify them. They must also check whether the data is used for specific pre-defined purposes.

Legal consequences for non-compliance with the GDPR

Each entity that owns and manages a personal database must assess the risk of undesirable disclosure of personal data before taking any action. The changes also apply to the formal consent that must be given to the person whose data will be processed. In the beginning, all these changes may turn out to be a bit problematic, especially due to the amount of work and time spent on the database verification or its current update. Non-compliance with the regulation introduced soon will, however, be associated with legal consequences in the form of high financial penalties.

Ensuring an adequate level of data protection is a priority and should be treated as such. Thanks to GDPR, it is possible to effectively fight cybercrime and data leaks. It seems, therefore, that the changes introduced will have a positive effect on everyone.

Private Equity Deal: A Step-By-Step Approach

Contributed by Ishani Chakrabarty, Symbiosis Law School, Pune

Private Equity (PE) Basics

The first step in a private equity deal would be to assemble potential investors interested in the desired company. This may prove to be the most difficult step as most companies are ambiguous with their decisions regarding whether they wish to contribute to the said Private Equity deal.

Once this step is completed, the next step would be to approach a banker. In most probability, the amount required to buy said company would be more than the accumulated sum from all the investors.

As soon as the investors have discussed upon the various aspects of the P.E., they must decide upon its execution.

What is Buying out in a PE Deal?

On acquisition of the desired company, they have the option of stripping it down completely and building it up from scratch. This process is called ‘buying out’ and may include employing new staff and selling off assets.

After a certain period of time, they have the option of selling the built company for a potential profit. This helps in repayment of any bank loans previously taken.

Growth of PE Deals

2018 was a record-setting year, with P.E. exits reaching $26 billion, almost equal to the value of exits in the previous three years combined. The sharp rise was mainly due to the mega deal of Walmart buying a controlling stake in Flipkart for $16 billion from investors including Tiger Global[1]. Other highlights include record deal value pushed by large investments, strong tech flow, and very large exits.[2]

Both Open Market Exits and P.E.-backed initial public offerings (IPOs) saw significant declines due to unstable stock markets. 2018 recorded $1.7 billion in open market exits across 56 deals- more than 70% decline by value and over 56% drop by volume.

A series of laws govern P.E. deals in India. The important laws include-

  • The Companies Act, 2013: Where an investor approaches a company, questions regarding the procedure of the investment and in what manner rights can be granted to the investor come to surface. Depending on the manner as mutually agreed upon between the Company and the Investor, the P.E. Investment is made in a company. Accordingly, statutory compliances that the companies need are ascertained. These statutory compliances can further be subdivided into those which relate to a) the transaction related to the investment and b) other conditions precedents to the investment.[3]
  • Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014: Where a Company is willing to raise funds through private placement of securities, the provisions of Section 42 need to be complied with. Private Placement means any offer of securities or invitation to subscribe to securities made to a group of persons selected by the company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in section 42.

[1] 2018 was the best year for PE/VC exits in India: Report, livemint – https://www.livemint.com/Companies/c6DalEPnDt9bfW7xI0xiEI/2018-was-the-best-year-for-PEVC-exits-in-India-Report.html

[2] Private Equity in Asia-Pacific 2019, Bain & Company – https://www.bain.com/insights/apac-pe-2019-infographic/

[3] Private Equity in India: The Legal Perspective, Apurv Sardeshmukh, legallyindia – https://www.legallyindia.com/private-equity-unleashed/private-equity-in-india-the-legal-perspective-20180327-9205