Position of an Independent Director: Companies Act, 2013

On 1 March 2021, the Securities and Exchange Board of India (hereinafter referred to as “SEBI”) introduced a consultation paper.[1] The paper suggested amendments to improvise the role and the position of an Independent Director (hereinafter referred to as “IDs”) in corporate governance. It proposed to make changes in the provisions of the Listing Obligation and Disclosure Requirements Regulations with respect to the appointment and re-appointment of IDs, the removal of IDs, nomination, resignation, and remuneration of IDs. These changes, if applied in letter and spirit, will change the future of corporate governance. This paper aims to highlight the position of IDs under current provisions and the changes suggested by the SEBI in order to analyze their effect on the role and functioning of IDs in a company.

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Promoter of a Company: Legal Position

Promoter is someone who brings about the incorporation and organization of a corporation. He brings together the persons who become interested in the enterprise, aids in procuring subscriptions, and sets in motion the machinery which leads to the formation itself.
Section 2(69) of The Companies Act, 2013 defines the term “promoter” as a person who has been named in the prospectus or is identified by the company in the annual return referred to in section 92, a person who has control over the affairs of the company, directly or indirectly whether as a shareholder, director and a person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to the act.

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What Is Insider Trading and How does SEBI Deals with It?

Insider trading includes trading in a public company by someone who has confidential, price sensitive information, and who uses and deals with such information. Insider trading can either be illegal or legal depending on the knowledge, based on which the individual is trading. According to section 2(h)(ha) of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992[i] ‘price sensitive information’ means any information relating to present, future or even past, that has the potential to affect the prices of securities and value of the company.

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Impact of Capital Market on India

The Indian capital market played a vital role in saving mobilization in the year 1950. During the period of 1960-1980, the importance of the capital market was diminished and during the same time as a proportion of national income, the domestic savings were increased from 13%- 22%. From the capital market amount fund was raised up to 13% of net domestic saving. 

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Regulation of Companies: Raising of Capital Issue of Prospectus

Raising of capital refers to the process of procuring capital funds that are undertaken by companies, governments, etc. Companies may raise capital either by means of a debt instrument or through the issuance of shares. Depending upon the structure of a company, the method of raising capital generally varies. Factors that affect the raising of capital by a corporate include management structure, governance and quality, strategies, and the purpose and funding requirements of the company.

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