Companies Bill: Ups and downs for private equity investors

Aug 17 2013, 11:10 IST
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SummaryThe Bill restricts multiple subsidiaries and stops a company from giving its PE investors timely exit

This in-built protection should make it easier for private equity investors to nominate directors on boards of their portfolio companies, as it attempts to define the scope of liability of independent directors.

Lastly, the Bill has permitted entrenchment provisions in the articles of association of companies whereby the articles may contain certain specific provisions which can be amended only by way of adopting a standard higher than that prescribed by the law. This will allow private equity investors to negotiate certain protective clauses under their investment agreements to be entrenched in the articles such that these may be amended only with their prior approval, notwithstanding the promoters of their respective portfolio companies having majority voting power.

Authors are with J Sagar Associates. Views are personal

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