India – SEBI Primary Investment By FPI

On 13 July, SEBI updated investment by FPIs in primary issuance.

  • SEBI (FPI) Regulations, 2014 mandates that purchase of equity shares of each
    company, by single FPI or group, shall be below 10% of the total issued capital.

Beneficial Owners

  • Rule 23(3) of FPI Regulations requires if same set of ultimate beneficial owners
    invest through multiple entities, they will be treated as part of the same group.
  • Investment limits of such entities are clubbed at investment limit as single FPI.
  • For purpose of identifying investor group, the designated depository participant
    shall obtain details provided by FPI under clause 2.2 of the FPI application form.
  • Monitoring investment limits at group level, done by depositories based on this.

Compliance Process

  • At time of finalized basis of allotment in primary market issuance, registrar and
    transfer agents, use a permanent account number (PAN) issued by Income Tax
    Department of India for checking compliance of single foreign portfolio investor.
  • Obtain validation from depositories for the foreign portfolio investors who have
    invested in particular primary market issuance, to ensure is no breach of limits.
  • Depositories put in place the necessary systems for sharing of information with
    RTAs in timelines for issue procedures, as prescribed by SEBI from time to time

Hong Kong – SFC Amends Codes on Mergers, Takeovers

On 13 July 2018, HK SFC, gazetted amendments to codes on mergers, takeovers.

  • Released consultation conclusions and respondents were generally supportive of
    proposals, majority of which were adopted with some modifications from feedback.
  • The amended codes which were gazetted on 13 July, will be effective immediately.

 

Key Proposals from Original Consultation:

  • Increase voting approval threshold for whitewash waivers to 75% of shareholders.
  • Panel to require compensation be paid to shareholders who suffered from breach.
  • Clarify the obligations of persons dealing with the Takeovers Executive, Takeovers
    Panel and the Takeovers Appeal Committee in all Codes transactions, cooperation.
  • Also sets out proposed amendments to the term “associate” as well as approval
    of delistings in jurisdictions which do not afford the compulsory acquisition rights.