Tag: Companies Act

Dish TV gains 13% after Yes Bank move to sack board, BFSI News, ET BFSI

Banking & Finance

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Mumbai: Shares of Dish TV were up nearly 13% on Tuesday after Yes Bank moved a shareholder proposal to overthrow the board, including the managing director and CEO Jawahar Lal Goel. The private lender, which acquired just below 26% in the company following debt resolution, served notice to remove five directors and proposed seven directors to be appointed in their place.

In June, the company’s board had approved the raising of funds through a rights issue of Rs 1,000 crore. The promoters of Dish TV had pledged their holding for credit facilities used by the Essel Group.

With lenders revoking the pledge, the promoter stake in the firm had fallen to below 6%. Yes Bank’s notice comes ahead of the company’s annual general meeting on September 27. Shares of the company rose to a high of Rs 16 during intraday trade on Tuesday before closing at Rs 15.5, up 12.7% from the previous close of Rs 13.8.

Explaining the grounds for removal of the board, the bank said the directors approved a rights issue process despite pending objections raised with them time and again, solely to dilute the shareholding of the bank, which is the largest shareholder, and to prejudice its interest.

According to a Yes Bank notice to the exchange, banks and financial institutions hold around 45% stake in the company, but the board is acting at the behest of minority shareholders holding merely 6% of the shares. The bank also said that the board had completely sidelined its multiple requests to reconstitute the board.

The notice has been sent to the board under Section 169 of the Companies Act, which empowers shareholders to remove a director. The company secretary has informed the exchange that it is taking steps to get the candidatures of the proposed new directors cleared from the information & broadcasting ministry, as prior approval of the authority is required.

The other four directors sought to be removed are Rashmi Aggarwal, who is currently associated with IMT-Ghaziabad and is on the board of other Essel Group companies, B D Narang, former chairman of Oriental Bank of Commerce, Shankar Aggarwal, an IAS officer, and Ashok Mathai Kurien, an entrepreneur.

Yes Bank has informed the exchanges that it has made repeated requests to the board to induct Akash Suri and Sanjay Nambiar who are part of the company’s top management and experts in their respective field. The bank has again proposed their names with five other directors. These are Vijay Bhatt, Haripriya Padmanabhan, Girish Paranjpe, N V Prabhutendulkar and Arvind Nachaya.



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Bidders may walk away as NCLT delays erode value, tests patience, BFSI News, ET BFSI

Personal Finance

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After the one-year suspension, the Insolvency and Bankruptcy Code (IBC) is now dealing with an acute shortage of members, or judges, that is forcing companies into liquidation which could have otherwise been revived.

Nearly 47 per cent or 1,349 cases closed under the insolvency law ended up in liquidation till the end of June this year but the economic value in the majority of the cases had eroded even before the commencement of the corporate insolvency resolution process.

The absence of members, the equivalent of judges, in the National Company Law Tribunal, which deals with both bankruptcy cases as well as those related to Companies Act matters, is showing and threatens to stall the landmark reform.

Bidders who are willing to take over the distressed companies may walk away due to the delays.

Depleted strength

The parliamentary standing committee on finance had noted that there were only 28 members in NCLT as against the sanctioned strength of 62. “The committee is deeply concerned to note that more than 50% of the sanctioned strength of NCLT is lying vacant and that the issue of vacancy has plagued the tribunal for years,” the panel observed, while noting how it had been working without a regular president either.

The report also showed how at the end of May, 71% of the IBC-related cases were pending in the NCLT for over 180 days when the law seeks to ensure that a case is decided within six months. At the end of May, over 40% of the cases filed in the tribunal were pending.

The recommendations for appointments are lying with the government for close to a year.

In contrast, fearing a rush of cases following the pandemic, the US had hired several of its retired judges to ensure that cases were decided quickly.

Parliamentary Committee suggestions

While speaking to ETCFO last month, Jayant Sinha, chairman of the Parliamentary Standing Committee on Finance, had suggested three steps to reduce litigation.

Firstly, fill the vacancies at NCLT as quickly as possible because then there is more time to adjudicate a case well and come up with a good resolution, he had said.

If judges don’t have enough time and rush through cases, they won’t give good judgments, and then things will end up in litigation. Therefore, adding capacity as soon as possible is one way in which we can deal with these endless litigation type issues.

Secondly, improve the quality of NCLT members. The parliamentary committee has recommended that the NCLT should at least have high court judges so that we can benefit from their experience and their wisdom. That’s another way to prevent litigation.

The third way of preventing litigation is to ensure when people submit the resolution plan as per the deadline, they do not have an opportunity to come in with another resolution plan after that. Because not doing so, will again rest in litigation, and a lot of contentions back and forth.

“So these are three very concrete steps that we have suggested to reduce litigation as it is one of the reasons a lot of these timelines are being extended,” he said.



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HDFC Bank plans to raise funds via AT-1 bonds from overseas market, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: HDFC Bank on Monday said the bank plans to raise capital by additional tier- I (AT1) bonds in the overseas market to fund its business growth.

The bank is expected to raise up to USD 1 billion from these dollar denominated bonds.

“We hereby inform you that the bank had approved the issuing of debt instruments in the form of the notes, subject to market conditions,” HDFC Bank said in a regulatory filing.

An offering memorandum (OM) has been prepared and shall be made available to the prospective investors in relation to the contemplated issue of notes, it said.

The notes will not be offered or sold in India under the applicable laws, including the Companies Act, 2013, as amended from time to time, it added.

Earlier in April, the bank had informed that it is planning to raise up Rs 50,000 crore during the next 12 months through issuing bonds.

“The bank proposes to raise funds by issuing perpetual debt instruments (part of additional tier-I capital), tier-II capital bonds and long-term bonds (financing of infrastructure and affordable housing) up to a total amount of Rs 50,000 crore over the period of the next 12 months through the private placement mode,” HDFC Bank had said.

Perpetual bonds carry no maturity date, so they may be treated as equity, not as debt.



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CII wants RBI to review circular on appointment of bank, NBFC auditors, BFSI News, ET BFSI

Banking & Finance

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Industry chamber CII has asked the Reserve Bank to review its circular on appointment of auditors for banks and NBFCs saying it was inconsistent with the provisions of the Companies Act and would create hardship for businesses in times COVID.

The Reserve Bank in its circular on April 27, 2021 imposed various restrictions on appointment of auditors by banks and NBFCs and prescribed a cooling off period for re-appointment.

Urging the RBI to review the circular, the Confederation of Indian Industry (CII) said the proposals “will cause significant hardship to the companies, its stakeholders as well as industry in general”.

The chamber said that few matters that warrant an immediate attention of the RBI include a clarification that the circular is only intended to cover banks and NBFCs and their respective audit firms.

“The RBI may not apply the same principles to the commercial banks and NBFCs, including in respect of cap on maximum number of audits, mandatory joint audits, and rotation/cool off principles. The NBFCs may continue to be governed by the Companies Act, 2013,” it said.

It also suggested to re-consider severe restrictions on capacity and eligibility requirements, limit on number of audits, maximum engagement period of 3 years and 6 years cool off period after rotation.

“The RBI may consider aligning them with the provisions in the Companies Act, 2013. The RBI may still achieve its objectives, without diluting any of the principles,” it said.

The chamber further asked for review of definition of related parties, which as per the circular include the group entities using a common brand name as this has far reaching implications and unintended consequences; and restrictions on audit/non-audit services during one year before/after the appointment as auditors of a bank/NBFC, covering the entity and its group entities.

“These provisions may create severe capacity constraints, without adding any qualitative parameters,” CII said, requesting the RBI to help in facilitating an effective implementation of regulation, without disrupting the ease of doing business.

It also said that a sudden change in major policies, without any reasonable transitional provisions, is bound to create several practical challenges in successful implementation.

“It should also be noted that appointment of auditors is a critical and important process for an organisation and merits right level of attention especially from senior management, board and audit committee, and approval from RBI,” CII said.

It added that all these amendments will create inconsistent policies without adding any qualitative parameters.

“It is all the more challenging in present times, severely impacted by COVID-19, to implement these requirements without any transitional provisions,” it said.



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