Corporate governance and upside sharing agreements

By Vijai Mathur and Saiyam Chaturvedi, Link Legal India Law Services
0
4593
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

Upside sharing agreements (otherwise referred to as compensation agreements) are arrangements which are sometimes entered between an investor (usually a private equity investor) and the promoters and/or management of a listed company with an understanding that if the investor (at the time of its exit) makes a profit on its investment, a certain portion of such profit will be shared in an agreed proportion with the promoters and/or management by the investor. These agreements are quite common in merger and acquisition deals and are often linked to the company achieving performance criteria, continued employment, etc.

Vijai_Mathur_-_Link_Legal_India_Law_Services
Vijai Mathur
Partner
Link Legal India Law Services

In most cases companies are not party to such agreements and no obligations are undertaken by the companies. Moreover, there is no outflow of funds from the company and therefore companies in most cases have not sought approval of the board or shareholders for such an agreement. With this background, the Securities and Exchange Board of India (SEBI) took cognizance of this and decided to regulate such agreements by way of a recent amendment to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

SEBI decided that any new upside sharing agreement between promoters/directors including the management and a shareholder including a third-party investor in a listed company will require prior approval from the board of directors and the public shareholders of the listed company. Additionally, all existing agreements of a like nature will also require approval from the board and need to be put before the public shareholders for approval in the next general meeting of the company.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Vijai Mathur is a partner and Saiyam Chaturvedi is a senior associate at Link Legal India Law Services.

link_legal_india_law_services_-_logo_2

Thapar House, Central Wing

First Floor, 124 Janpath

New Delhi – 110 001

India

Contact details:

Tel: +91 11 4651 1000

Fax: +91 11 4651 1099

Email: delhi@linklegal.in

Website: www.linklegal.in

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link