VIKAS GOEL’S THREE POINTERS  AT INDIA INFRASTRUCTURE FORUM ON EFFICIENT DISPUTE RESOLUTION IN THE ROAD SECTOR

VIKAS GOEL’S THREE POINTERS AT INDIA INFRASTRUCTURE FORUM ON EFFICIENT DISPUTE RESOLUTION IN THE ROAD SECTOR

Vikas Goel, Partner Singhania & Partners LLP spoke at the India Infrastructure Forum which was organized by India Infrastructure Publishing from Monday, 8 April to Wednesday 10 April 2019.

The conference discussed the steps to be taken by the New Government and the initiative taken by the various different states to ensure efficient development in the Road Sector of India.

Vikas spoke in the session on Road Policies and Programmes: Experience, Issues and the Way Forward

He threw light on the major issues that arise during a dispute resolution procedure in the road sector. Furthermore, he provided valuable suggestions in order to make the Dispute Resolution procedure in the Road Sector efficient and less time consuming for the contractors and Concessionaires.

Click on the video to know more about the legit pointes he made regarding Dispute Resolution in the Road Sector.

 

Other speakers in the session included, Nagendra Nath Sinha, Chairman, NHAI; Sudhir Hoshing, Joint MD, IRB Infrastructure; T.R. Rao, Executive VP, PNC Infratech; and Nirpesh Kumar, Partner, Ernst & Young

MISCELLANEOUS QUESTIONS ON M&A IN INDIA

MISCELLANEOUS QUESTIONS ON M&A IN INDIA

Regulatory Requirements – Deposit Monies & Third-Party Intermediary

 Q1) Is there any mandatory requirement to deposit monies with the third party?

There is no mandatory requirement to deposit monies with the third party; the same depends upon the intention of the parties to the transaction.

Appointment process for changing stockholders (any tax payable) officers and directors

Q2) What is the procedure to appoint directors and any other officer of the company?

New stockholders and directors require approval of the Board of Directors. In some cases approval of the shareholders at a general meeting may also be required for appointment of directors. Other officers are generally appointed by any director/management personnel so authorised by the Board of Directors in this regard.

Powers of the Attorney Restrictions

Q3) What are the limitations of power endowed by a power of attorney?  

The powers of the attorney is limited by the terms & conditions contained in the power of attorney.

Evidence of Due Execution – Faxed/emailed Documents Admissible in Court?

Whether a document sent through fax or email admissible in court of law? Yes a faxed/e-mailed document could be admissible in court of law as evidence of due execution subject to the condition that the party submitting it as evidence has the original document in possession.

 Digital signatures admitted as evidence of execution?

 Q4) Whether digital signature certificates admissible as evidence in court of law?

Yes.

Strictly Enforced “Undertakings”

Q5) Do lawyers give any strictly enforced undertakings?

Lawyers generally do not give “undertaking” in India.

Required due execution legal opinions, requirements, and rules concerning the giving of opinions?

Q6) Is there a statutory requirement to seek legal opinion before execution of transactional documents or closing of transaction?

It is common for parties to seek legal opinion to ensure that the documentation required to be executed is in order and complies with the closing formalities (representation & warranties on part of the buyer). But there are no specific rules or legislation governing the same.

Non-compete enforceable? If so, how long for?

Q7) Whether a non-compete clause enforceable in India?  

Non-compete may be enforceable provided restriction is for a reasonable period. Generally, restrictions for a period from one to two years may be considered reasonable depending on the nature of business.

PROCEDURE OF TRANSFER OF SHARES DURING M&A

PROCEDURE OF TRANSFER OF SHARES DURING M&A

Private Limited Company – Transfer Title to Shares

Q1) What is the procedure to transfer shares of a company?

The share transfer deed, duly stamped, is required to be executed both by the transferor and the transferee and delivered to the company along with the share certificates. The company will approve the transfer of shares and record the transfer in its registers and endorse the transferee details on the share certificate, and return it to the transferee. Where shares are held in dematerialized form, the delivery instruction slip, relating to shares, signed by the transferor is required to be deposited with Depository Participant where transferee is maintaining his de- mat account. Thereafter, shares will be credited in the de-mat account of the transferee.

Share & Asset Sales Timetable

 Q2) Is there any statutory time limit to complete sale of shares or assets?  

The time frame for sale of asset and shares entirely depends on the parties and the complexity of the transaction.    

EMPLOYEE MATTERS DURING M&A IN INDIA

EMPLOYEE MATTERS DURING M&A IN INDIA

Management Representation and/or Consultation in relation to Corporate Transactions

Q1) Whether the company is required to obtain consent from its employee before amalgamation or merger?

Employees are not entitled to management representation. However, as the amalgamation/merger is required to be approved by the court, the court may look into the employees’ interest while approving amalgamation/merger. Further, labour legislations also provide that in case of transfer of ownership or management of any undertaking, the workmen of such transferred undertaking shall be entitled to retrenchment compensation, if their services are being terminated. Alternatively, they are entitled for no less beneficial terms and conditions of employment. Workman is entitled to compensation in case of redundancies.  

Individual Employment Contracts – Termination Regulation

Q2) What are the provisions under labour laws with respect to termination of an employee?

If the person whose services are being terminated is a “workman” who has been in more than 1 year of continuous employment, then his services can only be terminated in accordance with the provisions of Industrial Disputes Act, 1947, by giving him appropriate compensation and notice as provided under the Act. Further, if the undertaking whose workman is being retrenched has more than 100 workmen in employment, it will also have to obtain prior permission of the appropriate authority before retrenching any workman. Further, if the employee is covered by the provisions of Shops & Establishment Act, which is enacted by each State in India, the employee’s services can be terminated by giving him such notice as is provided under the provisions of Shops & Establishment Act of the concerned State in which the undertaking is situated. In certain States the employees working in managerial or administrative capacity are excluded from the applicability of this legislation. In case an employee is not covered by the aforementioned legislations, which is generally true for managerial and administrative employees, such employees are governed only by the terms of their employment contract and their services can be terminated in accordance with the terms & conditions of their employment contract. There is no labour legislation governing such employees and such contracts are governed by the provisions of Indian Contract Act, 1872.

Redundancies/Layoffs Regulation

Q3) What are the legislations that govern retrenchment of an employee?

The retrenchment of a “workman” is governed by the Industrial Disputes Act, 1947. The retrenched (redundant) workmen are entitled to compensation as per the provisions of the Act.

MANAGEMENT OF TAX DURING M&A IN INDIA

MANAGEMENT OF TAX DURING M&A IN INDIA

Tax Charges – Sales of Shares/Assets and Issues of Shares

Q1) What is the tax regime in case of (i) sale of shares and assets due to acquisition; and (ii) sale of shares and assets due to merger?

(i) Sale of shares

Depending upon the time period for which the shares were held before being transferred, the seller will be liable to pay Capital Gains tax. Shares of an unlisted company held for more than 24 months (12 months in case of shares of a listed company) are considered as Long term capital assets and attract long term capital gains tax. Shares held for 24 months or less (12 months or less in case of shares of a listed company) are considered as Short term capital assets and attract Short term capital gain tax. If the seller is a non-resident, Long term capital gain tax at the rate ranging from 10.4% to 10.92% and Short term capital gain tax at the rate ranging from 41.6% to of 43.68% shall be charged.

Transfer of shares also attracts Stamp Duty on the execution of share transfer instrument. The applicable rate of stamp duty on such instrument is 0.25% of the amount of consideration or fair value of the shares, whichever is higher. This rate is uniform all over the country. No share transfer duty shall be payable in case shares are held in dematerialised form.

(ii) Sale of Assets

Depending upon the time period for which the assets (other than shares) were held before being transferred the seller will be liable to pay Capital Gains tax. If asset is held for more than 36 months it is considered as Long term capital asset and attracts long term capital gains tax. Asset held for 36 months or less is considered as Short term capital asset and attracts Short term capital gain tax. If the seller is a non-resident Long term capital gain tax at the rate ranging from 20.8% to 21.84% and Short term capital gains tax at the rate ranging from 41.6% to of 43.68% shall be applicable.

Transfer of assets further entails the payment of Stamp Duty on the execution of any conveyance deed. The applicable rate of stamp duty on such deed will differ in each State depending upon where the transferred assets are located.

  1. Merger Sale of Shares/Sale of Assets

There is no capital gains tax on amalgamation if it complies with the specific conditions as provided in Income Tax Act, 1961. In case these conditions are not met, capital gains tax will be levied.

The scheme of amalgamation/merger is approved by the National Company Law Trinbunal (“NCLT”). The NCLT order approving such scheme may or may not be chargeable to stamp duty depending upon the State in which the NCLT giving such order is situated.

(iii) Issue of Shares

No income tax is payable on the issue of shares. However, the certificate evidencing the title of shares (share certificate) is liable for Stamp Duty at such rate as is applicable in the State in which the company issuing shares is located.