Institutional EYE

Commentary on Corporate Governance Issues

Dual-Class Shares will weaken the corporate governance ecosystem in India

SEBI’s decision to allow companies to issue shares with differential voting rights attempts to facilitate promoters of new-age companies while protecting shareholders. While the intent may be right, we have often seen a difference between regulatory intent and the reality of its implementation. Given the weak enforcement environment in India and the strength of the corporate lobby, it is the corporate governance agenda that will be compromised the most. The debate on dual class shares (DCS) or shares with differential voting rights (DVR) – in India and globally – is largely centred around new-age technology companies that are currently unlisted, of reasonable size, and with a set of external

Kneeling to ‘Royalty’?

SEBI’s decision to delay the implementation of shareholder approval for royalty payments is yet another tug-of-war between the market regulator and the Ministry of Finance. The Indian economy needs both foreign direct investments as well as foreign portfolio inflows – one cannot exist at the cost of the other. The uncertainty over regulations does not augur well for investor confidence in India. The Securities and Exchange Board of India’s (SEBI) proposal that companies need shareholder approval to pay over 2% of revenues in royalty was welcomed by investors. While this was at the behest of the Kotak Committee, SEBI saw the need to address the issue of indiscriminate royalty payments being m

Quick Take: Infibeam Avenues Limited and their auditors

What has happened Infibeam Avenues Limited’s (Infibeam) board met on 5 May 2019 (Sunday) and decided to remove SRBC & Co LLP, part of the E&Y network, as their joint statutory auditors. They accused SRBC & Co. LLP of sharing unpublished price sensitive information on the personal emails of the team and third parties on multiple occasion. Shah and Taparia, the joint auditors with SRBC & Co LLP, will continue as the statutory auditor. SRBC & Co LLP has vehemently denied any wrong-doing and has stated that it is open to a third-party investigation to examine the issue. The removal of auditors will require a shareholder vote. An extraordinary meeting will be held on 30 May 2019 for the removal

FY 20 : Expect a single-point board agenda

As companies enter the new financial year, there are a few lessons that the just completed year has had to offer. This year governance issues became central to debt investors - Rating agencies will be under greater scrutiny Expectations from independent directors have changed The relationship between corporates and investors has changed permanently, as reflected in their voting and engagement The role of the company and board vis-à-vis all stakeholders is getting reshaped However, investors should expect the SEBI mandated separation of the role of the chairman and CEO to dominate the board agenda this financial year. Read the full report ‘A single-point agenda,’ by clicking this link.

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