Employee stock options under the new corporate law regime

Introduction

Employee stock options are popular instruments used by companies for rewarding employees since rewards earned by employees pursuant to exercise of these options are linked to the performance and growth of the company.  As opposed to the Companies Act, 2013 (“New Act“), the Companies Act, 1956 (“Old Act“) did not regulate issue of employee stock options.  Now, pursuant to section 62 (1) of the New Acteffective since 1 April 2014, issue of employee stock options by a company will require passing of a special resolution by shareholders in a general meeting.  Further, Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014 (“Share Capital and Debentures Rules“) effective since 1 April 2014, and framed pursuant to section 62 (1) read with section 469 of the New Act, prescribes additional conditions which will need to be satisfied by private companies and unlisted public companies.  However, additional conditions for issue of employee stock options by listed companies were and will continue to be regulated by the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (“ESOS Guidelines“).

Definition of ’employees’ stock option’ under the New Act

The New Act defines employees’ stock options as an option given to directors, officers or other employees of a company, its holding or subsidiary company pursuant to which such persons are provided the benefit or right to subscribe to or purchase the company’s shares at a pre-determined price.  Further, pursuant to Share Capital and Debentures Rules, the term ‘employee’ includes permanent employees of the company and directors or employees of its subsidiary, holding or associate company.  However, the term ‘employee’ excludes promoters, independent directors, and all directors who directly or indirectly, through a relative or body corporate, hold more than ten percent of the equity share capital of the company.  Therefore, pursuant to the Act, employee stock options cannot be issued to above mentioned excluded persons.  These exclusions are also applicable to listed companies pursuant to the ESOS Guidelines and Circular No. CIR/CFD/POLICY CELL/2/2014 dated 17 April 2014 issued by the Securities and Exchange Board of India.

Conditions for issue of employees’ stock options

The Share Capital and Debentures Rules prescribe one year as the minimum vesting period for employee stock options. However, the company will be free to determine the exercise price and lock-in period on shares issued pursuant to exercise of the option. While employee stock options must not be subject to any encumbrance and are non-transferable, they can be inherited. Additionally, in case of permanent incapacity during the employment, all options granted to the employee as on the date of incurring such incapacity will stand vested.  On the other hand, in case of resignation or termination all unvested options will expire and vested options may be exercised by the employee in accordance with the terms and conditions of the employee stock option scheme.

Variation in terms of employees’ stock option scheme

Pursuant to the Share Capital and Debentures Rules, a company may vary the terms of any existing employee stock option scheme which has not been exercised by employees by way of a special resolution only if such variation is not prejudicial to the option holders. The notice for calling a meeting to vary such existing employee stock option scheme must state the variation, reason for such variation and the details of employees who are beneficiaries of such variation.

Compliance requirements

Additionally, from a compliance perspective, a company proposing to issue employee stock options is required to make certain disclosures in the explanatory statement at the time of calling the shareholders meeting for authorising the issuance of employee stock options.  Among others, these disclosures include the number of employee stock options, cap on employee stock options per employee and in aggregate, eligibility criteria, vesting conditions, exercise price or formula for determining the exercise price, lock-in period, method to be used by company to value its options, conditions for lapse of employee stock options and statement to the effect that the company will comply with applicable accounting standards.  Further, shareholders’ approval will be required by way of a separate resolution where the options are granted to employees of its subsidiary or holding company or to identified employees for at least one percent of the issued share capital, not including warrants and conversions, during one year.

Additionally, the company is required to maintain a register of employee stock options in Form No. SH.6 specified under the Share Capital and Debentures Rules.  Further, the director’s report must specify the details of the employee stock option scheme including the options granted, options vested, options exercised, shares resulting from exercise of options, options lapsed, exercise price, variation in terms, amounts realised pursuant to exercise of options and options in force, employee wise details of options granted to key managerial personnel and employees who have received at least five percent of options granted in that year and identified employees who have been granted options equal to at least one percent of the issued share capital, not including warrants and conversions, during one year.

Conclusion

While the New Act seeks to regulate the issue of employee stock options by private and unlisted public companies, other than prescribing a minimum vesting period of one year, there appear to be no significant restrictions on issue of employee stock options. Additionally, listed companies will continue to be regulated by the ESOS Guidelines and therefore the issue of employee stock options by such companies remains unaffected by the New Act.

Saumya Sharma

saumya.sharma@pxvlaw.com

CAG can audit accounts of private companies in revenue sharing arrangements with the Government: Supreme Court

The Supreme Court of India has declared that the Comptroller & Auditor General of India (“CAG”) has the power to call for and audit the accounts of private companies who are parties to revenue sharing arrangements with the Government in order to ensure that the Government was receiving the revenue lawfully due to it. The ruling was delivered on April 17, 2014 by a bench comprising of Justice K.S. Radhakrishnana and Justice Vikramajit Sen in the case of Association of Unified Tele Services Providers & Others v. Union of India.

Impact

The Supreme Court verdict directly affects private companies who are presently parties to revenue sharing arrangements with the Government, particularly companies engaged in the business of telecommunications, mining natural resources, public private partnerships involving infrastructure projects and private entities engaging in any transaction which would require them to credit a revenue receipt to the Government of India/State Government or Government of a Union Territory.

Brief Facts

The appellants in the case were the Association of Unified Tele Services Providers. It is an association comprised of licensees of unified access service licenses.  On 28.1.2010 the Telecom Regulatory Authority of India (“TRAI“) addressed a letter to one of the service providers stating that the CAG has decided to audit the books of accounts of the service provider for a period of three years commencing form 2006-2007. The service provider responded to this letter on 15.4.2010 stating that the service provider was already undergoing a special audit by an independent auditor appointed by the Department of Telecommunications. The service provider further stated that the auditing powers of the CAG under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 (“CAG Act”) pertain only to the accounts of government companies and therefore the CAG could not order an audit on the service provider. The TRAI in its letter dated 21.5.2010 to one of the service providers stated that the audit by the CAG was being done in terms of Section 16 of the CAG Act and the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts) Rules 2002 (“TRAI Rules”) and therefore was independent of any audit being conducted by TRAI.

Section 16 of the CAG Act and Rule 5 of the TRAI Rules state the following:

“16. It shall be the duty of the Comptroller and Auditor-General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each Union Territory having a Legislative Assembly and to satisfy himself that the rules and procedures in that behalf designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon.”

“5. Audit

Every service provider shall produce all such books of accounts and documents, referred to in sub-rule (1) of rule 3, that has a bearing on the verification of the Revenue, to the Authority –

(i) for the purpose of calculating license fee; and

(ii) to furnish to the Comptroller and Auditor General of India the statement or information, relating thereto, which the Comptroller and Auditor General of India may require to be produced before him and the Comptroller and Auditor General of India may audit the same in accordance with the provisions of Section 16 of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 (56 of 1971).”

The appellants moved the Delhi High Court in WP 3673 of 2010 for a declaration that Rule 5 of the TRAI Rules was ultra vires of Section 16 of the CAG Act and Article 149 of the Constitution of India as the said provisions did not cover private entities under their scope.

Article 149 of the Constitution of India states:

“Article 149- Duties and powers of the Comptroller and Auditor General

The Comptroller and Auditor General shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States as were conferred on or exercisable by the Auditor General of India immediately before the commencement of this Constitution in relation to the accounts of the Dominion of India and of the Provinces respectively.”

The Delhi High Court while dismissing WP 3673 of 2010 stated that the accounts of the service providers, in relation to the revenue receipts can be said to be the accounts of the Central Government and, thus, subject to a revenue audit under Section 16 of the CAG Act.

The Appellants thereafter moved the Supreme Court challenging the order of the Delhi High Court.

Decision

The Supreme Court upheld the order of the Delhi High Court and dismissed the appeal.

Reasoning  

The Supreme Court observed that Section 16 of the CAG Act, Rule 5 of the Rules and Article 149 of the Constitution need to be understood in light of the fact that ‘spectrum’ is a natural resource, which belongs to the nation as a whole, and as such, the people through Parliament should know how the country’s natural resources have been dealt with by the Union, State or its instrumentalities or even by private licence holders.

The Court went on to state that parliamentary debates that refer to Article 149 of the Constitution in a restrictive sense may not be the sole criteria to be adopted by a court while examining the meaning and content of the said Article, since its content and significance has to vary from age to age, and generation to generation. Therefore the Court interpreted the provisions of the Constitution as well as the CAG Act in their widest amplitude.

The Court made reference to Article 266 of the Constitution of India which states that “all revenue receipts by the Government of India shall be credited into the Consolidated Fund of India. The Court reasoned that license fees and spectrum charges are revenue receipts that will be credited to the Consolidated Fund of India in terms of Article 266. These license fees being based on the gross revenue of the companies, the CAG is empowered by Section 16 of the CAG Act to audit the same.

Harmoniously reading Article 149 and Article 266 of the Constitution with Sections 16 and 18 of the CAG Act and Rule 5 of the TRAI Rules, the Supreme Court concluded that the CAG is empowered to call for the accounts of private service providers to verify if the Government has received its lawful share of revenue. Accordingly the audit powers of the CAG in this case would be limited to a revenue audit rather than a full audit.

Analysis 

While the Court’s decision was rendered in the specific context of a regulation which permitted the CAG’s examination of the accounts of service providers, based on the observations of the Court related to the nature of natural resources and the importance of CAG’s oversight on whether revenue sharing is accurate, it would be possible to conclude that even absent such a specific provision, the CAG will have the right to examine the accounts of a company which has been allotted the right to exploit a natural resource and which has a revenue sharing arrangement with the Government.

Ajay Kumar (ajay.kumar@pxvlaw.com)

Neha Vijayvargiya (neha.vijayvargiya@pxvlaw.com)

 

Presentation on Guidelines on the name of a company under Companies Act 2013

Presentation prepared by Mohar Majumdar, Associate at PXV Law Partners (mohar.majumdar@pxvlaw.com), on ‘Guidelines on the name of a company under Companies Act 2013’ can be accessed here.

The principle of ‘good faith’ negotiation in English law as discussed in Knatchbull-Hugessen & ors. v SISU Capital Ltd.

Historically, English law has been reluctant to imply the obligation of conducting negotiations in good faith into an agreement. Although in the recent past English courts have tried to adopt the implied concept of good faith in contracts after taking into account the factual background of the contracts, the High Court judgment in Knatchbull-Hugessen and others v SISU Capital Ltd. (Case No. A40BM014 on 02/04/2014), has once again asserted that in case an agreement contains an exclusivity clause for a specified period during which the parties agree to act in good faith, the contractual value of such a clause can only be upheld for the specified duration and cannot be said to be implied in the agreement for as long as the negotiations continued.

Facts of the matter:

This judgment is a result of the Alan Edward Higgs Charity (the “Charity”) filing a claim before the court for the recovery of professional fees and other expenses incurred in connection with the abortive negotiations between a London-based hedge fund named SISU Capital Limited (“SISU”) and the Charity.

The home ground of the Coventry City Football Club (the “Club”) at Richoh Arena in Coventry was operated by the Arena Coventry Limited (“ACL”) which was partly owned by the Charity. The Club had a license to use the arena which was granted to them by a wholly owned subsidiary of ACL.  ACL had incurred a substantial loan of £22 million from the Yorkshire Bank for obtaining the funds for acquiring the lease of the arena and ACL serviced its debt to the bank through the license fee from the Club.

Around March 2012, the Club stopped paying the fee to ACL due to financial difficulties. In a bid to rescue the Club, SISU decided to enter into negotiations with the Charity of which an element was to purchase the 50% interest of the Charity in ACL for a total consideration of £1.5 million. Indicative terms were agreed between the parties for a share purchase agreement (“Term Sheet”) which was signed on 19 June 2012.

The Term Sheet mentioned that the offer was non-binding till the completion of due diligence by SISU, which was expected to last for 30 days, save only two clauses that would have binding value once the Term Sheet was countersigned. Thus the only clauses having contractual value were the clauses on ‘Costs’ and ‘Exclusivity’. The first clause stated that SISU shall be liable to underwrite the costs and expenses incurred by the Charity in connection with the transaction up to a maximum of £29,000 in case the transaction remained unconcluded due to certain pre-conditions mentioned in the Term Sheet; the latter clause states that the parties have agreed to a period of exclusivity for a period of 6 weeks during which the Charity shall conduct negotiation with SISU in good faith and shall not enter into any negotiations related to this transaction with a third party (“Exclusivity Period”).

The Exclusivity Period expired on 31 July 2012 without any share purchase agreement being concluded and no further share purchase agreement was ever concluded. Subsequently, the Charity, represented by Knatchbull-Hugessen, brought an action against SISU for recovery of the maximum amount of £29,000 on the ground that the conditions precedent could not be met as the Charity had repaid its loan to the bank with assistance from the Coventry City Council which made it impossible for the transaction to be concluded. The negotiations for this transaction had taken place in August 2012.

SISU contested the claim and filed a counter-claim alleging breach of an implied term of the contract that the parties were to conduct the negotiations in good faith and that the claimants were not entitled toact in a way that would render the conclusion of the transaction impossible. SISU alleged that the Charity’s negotiations with the bank during the pendency of its negotiations with SISU would amount to breach of conducting negotiations in good faith. Thus one of the main issues before the court was to decide whether the Charity did actually breach the implied term of conducting negotiations in good faith.

Judgment:

With regards to the above mentioned issue, the Hon’able Judge laid down the default position with respect to the claims of both the parties. The Judge stated that there is no general duty currently recognised in English law to conduct contractual negotiations in good faith. Although there is a duty not to misrepresent facts, there is no duty to disclose facts which would be material for the other parties to the negotiation to know and nor is there any constraint in law which prevents a party from carrying on negotiations with anyone else other than the counterparty at the same time without informing them of the existence of the others. Similarly, it is also not the general principle that a party may recover costs in case of an aborted negotiation. However, it is open to the contracting parties to depart from such general principles in their agreement.

In the present matter such default positions are applicable except to the extent that the contract provides otherwise. The Judge took into account the Exclusivity Period clause in the Term Sheet which provides for the Charity to conduct negotiations in good faith and not contract with a third party only for duration of 6 weeks and not beyond the expiry of the said term. The negotiations between the bank and the Charity had taken place in August 2012 after the expiry of the term. The Judge held that in circumstances where the parties have specifically mentioned an exclusive period for such good faith negotiations against the background that in absence of such agreement there is no legal duty to act in good faith, the clear and unambiguous meaning of the agreement is that the undertaking is limited to the period of exclusivity and the obligation does not extend beyond the expiration of such period.

Other English Judgments on Good Faith Negotiations:

As per the rulings of several English judgments, a legally binding principle of conducting negotiations or acting in good faith undermines the commercial freedom of the parties to regulate their contractual relationship in accordance with express terms in a written contract, rather than by reference to an unwritten and implied standard of commercial morality.

However, in the recent past, the courts have on certain occasions implied terms into contracts in circumstances where the concluded contract is not clear or is ambiguous. In such cases, the courts have taken into account the relevant facts and circumstances for the formation of the contract in order to interpret whether the parties may have intended to imply into the contract the conducting of negotiations in good faith.

The courts have been prepared to imply an obligation of good faith in relation to the exercise of certain specific rights or obligations by one party to a contract. For example, in the case of Astrazeneca UK Limited v. Albemarle International Corporation and another ([2011] EWHC 1574 (High Court)),the High Court held that a contractual clause in a supply agreement which granted the supplier a ‘right of first refusal’ must be invoked by the customer in ‘good faith’. In Lymington Marina v McNamara ([2007] EWCA 151 (Court of Appeal)), the Court of Appeal confirmed that where the contract does not explicitly give the decision-maker absolute discretion, the right to withhold such consent must still be exercised in “good faith” and not ‘capriciously’ or in an ‘arbitrary fashion’.

Most recently, the decision in Yam Seng Pte. Ltd. v International Trade Corporation Ltd. ([2013] EWHC 111 (QB)) has come to be regarded as a major change of direction in English law with regards to the ‘good faith’ principle. Yam Seng claimed that it was an implied term of the contract that the parties would deal with each other in good faith and asserted that ITC had certain implied obligations under the contract. Upholding two of the three claims made by Yam Seng, Leggatt J commented obiter that the contract was a long-term distributorship agreement which required the parties to communicate effectively and cooperate with each other in its performance. Accordingly, there would probably have been an implied obligation upon ITC to keep Yam Seng informed of any material change in the relevant information without Yam Seng having to ask.

Analysis:

However, the above judgments cannot be construed to mean that the English courts are ready to imply upon contracting parties a duty to act in good faith even in the absence of an explicit term stating the same. The courts have adopted more of a piece-meal approach, taking into account the background and facts and circumstances of the contract but have not evolved a general principle of reading an obligation of good faith in the contacts. In cases where it is evident that the parties could not have meant to include a term to conduct negotiations in good faith at all or beyond a specified period, courts may not apply the principle of good faith going against the intention of the parties. The present judgment by the High Court further intensifies such approach taken by the courts that the will and understanding of the parties, as borne out by the agreement, shall be given primary importance.

Position under Indian Law:

Following common law, Indian laws too do not have an implied principle of conducting negotiations in good faith. While the Indian courts have repeatedly implied the principle of negotiations in utmost good faith in insurance contracts, no such explicit judgment has been passed regarding the application of the principle in general contracts. However, in cases where the contract contains an explicit clause of conducting negotiations in good faith within a fixed time period, the courts have followed the intention of the contract to limit the conducting of negotiations in good faith to the specified period. In a parallel to the Kantchbull vs. SISU matter, the Supreme Court, in the matter of Percept D’Markr (India) Pvt. Ltd. v Zaheer Khan and Anr. (AIR 2006 SC 3426), held that a party to a contract may be free to conduct negotiations with a third party after the expiry of the specified period of conducting negotiations in good faith unless the other party to the contract has a ‘right of first refusal’ after the expiry of the said period, and so long as such right does not result in restraint of trade.

Mohar Majumdar

mohar.majumdar@pxvlaw.com

Presentation on legal aspects of setting up start-up businesses/SMEs

Further presentation made by Souvik Bhadra, Partner at PXV, at the FRO 2014 – Start Up Summit, Kolkata on 6 April 2014, on the legal aspects of setting up start up businesses/SMEs  may be accessed at: PPT_Start Ups.

Presentation on Competition Law in Retail

Souvik Bhadra, Partner at PXV, made a presentation on ‘Competition Law in the Retail Sector’ at the FRO 2014 – Start Up Summit, Kolkata on 6 April 2014.

The presentation can be accessed here.

Impact of notified provisions of Companies Act, 2013 on financing transactions

After having been passed by both houses of the Parliament, the Companies Bill, 2012 received the President’s assent on 29th August 2013. The Ministry of Corporate Affairs (“MCA“) via its notification dated 12th September 2013 notified 98 Sections of the Companies Act, 2013 (“2013 Act”) for implementation. On 26th March 2014, the MCA has notified 183 additional sections of the 2013 Act and the rules for various Chapters under the 2013 Act, effective as on 1st April 2014. We have discussed below the impact of some of such provisions of the 2013 Act and rules on a financing transaction involving an Indian corporate as borrower or security or guarantee provider:

 

  1. Requirement of a special resolution of shareholders for exercise of borrowing and other powers by the Board of Directors:

Section 180(1) of the 2013 Act provides that the Board of Directors of a company could exercise certain powers, including the power to borrow money and create security on undertakings of the company, only with the consent of the company by a special resolution.

Section 180(1) of the 2013 Act corresponds to Section 293(1) of the Companies Act, 1956 (“1956 Act”).

While under Section 293 of the 1956 Act, the Board of Directors could exercise such powers once an ordinary resolution was obtained from the shareholders, Section 180 of the 2013 Act requires a special resolution to be passed by the shareholders. Further, Section 180 of the 2013 Act is applicable to all private companies and not only subsidiaries of public companies, which was the case with section 293 of 1956 Act.

The MCA had notified Section 180 on 12th September 2013. On 18th September 2013, it issued a clarification that the relevant provisions of the 1956 Act, which correspond to provisions of the 98 sections of the 2013 Act brought into force on 12th September 2013, cease to have effect from that date. The effect of this clarification was that Section 293 of 1956 Act stood repealed due to the new Section 180 which mandated a special resolution. However, the savings clause in the 2013 Act which provides for resolutions passed under the 1956 Act to continue to be valid, had not been notified.

Another notification dated 13th September 2013, probably aimed at ensuring smooth transition from the application of Section 293 of the 1956 Act to Section 180 of the 2013 Act, stated that if notice for any general meeting was issued prior to 12th September 2013, then such resolution may be passed in accordance with the requirement of the 1956 Act. However, it only purported to afford a remedy for companies that had already issued a notice for a general meeting to be held after 12th September 2013, leaving the companies that had passed resolutions under 1956 Act before 12th September 2013, to wonder about whether they were now required to pass fresh resolutions under Section 180.

Finally, the MCA issued a further clarification on 25th March 2013 stating that the resolutions passed under section 293 of the 1956 Act prior to 12th September 2013 with reference to borrowings (subject to the limits prescribed) and/ or creation of security on undertakings of the company will be regarded as sufficient compliance of the requirements of section 180 of the 2013 Act for a period of one year from the date of notification of section 180 of the 2013 Act, i.e., till 12th September 2014.

Therefore, any ordinary resolution with reference to borrowings or the creation of security on the undertakings of the company, passed prior to 12th September 2013 will be regarded to be sufficient compliance of the requirements of Section 180 of the 2013 Act until 12 September 2014. Further, any notice issued prior to 12th September 2013 for any general meeting, the ordinary resolution passed at such meeting will also be regarded to be sufficient compliance of the requirements of Section 180 of the 2013 Act.

 

  1. Requirement to register a pledge:

Pledges, which were earlier exempted from registration requirements under the 1956 Act, will now have to be registered with the Registrar of Companies. All subsequent procedures relating to entry in the register of charges and filing of forms for the modification and/ or satisfaction of charges will also need to be followed for pledges.

Section 125(4) of the 1956 Act provided a list of charges requiring registration, which specifically excludes a pledge. However, the 2013 Act does not list the charges that require registration. Section 77(1) of the 2013 Act, effective since 1st April 2014, provides that a company creating a charge within or outside India, is required to register the charge with the Registrar, in the manner prescribed, within thirty days of its creation. The 2013 Act defines the term “charge” in an inclusive manner, to include an interest or lien created on the property or the assets of the company or any of its undertakings.

The Companies (Registration of Charges) Rules, 2014, notified by the Ministry of Corporate Affairs on 27th March 2014 has dispensed with the list of charges requiring registration, which had initially been included in the draft rules. In the absence of the list, it is assumed that all charges would now require registration with the Registrar.

 

  1. Restrictions on loans/guarantees/security to directors etc.:

Please see our previous post at:  https://pxvlaw.wordpress.com/2014/03/31/rules-notified-by-mca-ease-up-restrictions-on-inter-corporate-loans/

 

  1. Restrictions on loans/guarantees/security by companies:

Additionally, financing transactions will be affected by the implementation of Section 186 of the 2013 Act with effect from 1st April 2014. Section 186 of the 2013 Act corresponds to Section 372A of the 1956 Act.As per Section 372A, public companies intending to make investments by way of subscription or acquisition of shares, or to extend loan to other corporates, or guarantee, etc. to other persons could do so with shareholders’ approval by a special resolution, wherever the prescribed threshold of higher of (a) 60% of paid up share capital and free reserves and (b) 100% of free reserves, was exceeded. All private companies enjoyed an exemption from the application of this provision of the 1956 Act. However, with Section 186 of 2013 Act coming into effect, this exemption has been withdrawn and all private companies will now need to comply with it.

However, the Companies (Meetings of Board and its Powers) Rules, 2014 have brought some respite as well. While Section 186 does not exempt from the requirement of approval by shareholders, a holding company’s investment in a wholly owned subsidiary, loan or guarantee given or security provided to its wholly owned subsidiary company, as its predecessor did, the said rules have provided this exemption, additionally exempting loans or guarantees given to joint venture companies, provided that the company providing the loan, guarantee or security shall disclose the details of such loans or guarantee or security in the financial statement as provided under sub-section (4) of Section 186. Section 186(4) requires the company providing the loan, guarantee, security or making the investment to disclose to its members in the financial statement, the full particulars of the loans, investment, guarantee or security, including the purpose for which it is proposed to be utilised by the recipient.

 

Neha Vijayvargiya (neha.vijayvargiya@pxvlaw.com)

Anjali Viswamohanan (anjali.viswamohanan@pxvlaw.com)