Skip to main content

Sebi scraps ´ brightline´ control test proposal

Sebi scraps ´ brightline´ control test proposal
The Securities and Exchange Board of India (Sebi) on Friday said it has dropped the proposal of adopting the “brightline test” to determine acquisition of “control”.
In March 2016, the market regulator had floatedadiscussion paper on “brightline tests for acquisition of ´control´ under Sebi Takeover Regulations”.
The brightline test isadifferent approach to defining control, which prescribesalist of protective rights which do not amount to acquisition of control.The current framework, is largely formulaebased, with one of the criterion being acquisition of 25 per cent stake or voting rights.
Determining change of control is critical as it triggers an open offer to the public shareholders.
“The relevant issues have been examined intensively and in view of the aforesaid comments received and considering the current regulatory environment, it has been decided to continue with the practice of ascertaining acquisition of ´control´ as per the extant definition in the Takeover Regulations,” Sebi said inarelease. “It is felt that any change or dilution in the definition of control would have farreaching consequences sinceasimilar definition of ´control´ is used in the Companies Act, 2013, and other laws,” the regulator further said.
Sebi had received “mixed response” on the discussion paper with some supporting the idea for the “brightline” test, terming it asasubstantial step towards ease of doing business.
However, key stakeholders including the Ministry of Corporate Affairs (MCA) recommended against it.The MCA told the Sebi that changing the current definition of ´control´ may reduce regulatory scope and may be prone to abuse.
It told Sebi that it would be more appropriate to take decisions onacasetocase basis.
Moving to the “brightline” method would have entailed preparing an exhaustive list of situations, which could have posedabig challenge to the Sebi. “Even though debates have done the rounds among various stakeholders in the last couple of years, defining control is like defining honesty.
One cannot say thataperson is 99 per cent honest and one per cent dishonest.
Either one is honest or not at all. Similarly inagiven set of facts, Sebi has to say if it feels there is control or not, and then you havearight to appeal.
Defining negative or positive control based on various protective rights may beabad policy.
It has to be principlebased to be applied onacasetocase basis.
Let the jurisprudence develop from courts and judgments rather than being influenced,” said Sumit Agrawal, partner, Suvan Law Advisors.
The Business Standard, New Delhi, 09th september 2017


Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Coffee-Toffee, the GST Debate Continues

Hundreds of crores of rupees in the form of taxes ride on the exact categorisation of products Is Parachute hair oil or edible oil? Is KitKat a chocolate or a biscuit? Is a Vicks tablet medicament or confectionery? For the taxpayer and the tax collector, this is much more than an exercise in semantics -hundreds of crores of rupees ride on the exact categorisation.
As the government moves closer to rolling out the goods and services tax (GST) on July 1, many such distinctions are being debated so that no ambiguity remains. Not just that, the government is revisiting old tax cases that were lost over product categorisation, according to people with knowledge of the matter, presumably with a view to making sure that revenue collections can be maximised. “In the past, several tax officers had challenged some of the product categorisations, including those in the retail segment, but lost out in court or at appellate level,“ said one of the persons. “Now we have a chance to go ahead with speci…

Deposit gush:-CA Institute Bats for Special Audit