Time will test efficiency of 2013 act for PE investors

The Companies Act, 2013, which received the president’s assent on 29 August, will replace the decades old Companies Act, 1956. Although only 98 sections of the 2013 act have been notified till date, the 2013 act as a whole will bring in sweeping changes to India’s corporate law regime. It is, therefore, important that private equity (PE) investors analyse the effect of the 2013 act on their existing investments and, keeping in mind the act’s provisions, conduct proper diligence and negotiate adequate contractual protections for their future investments.

Some of the key changes and provisions that PE investors should keep in mind are outlined below.

Key provisions

An investor should ascertain the true status of the Indian investee company. The ambiguity regarding a subsidiary of a public company has been put to rest by the 2013 act, which clearly provides that a private subsidiary of a public company will be deemed to be a public company, even if its articles are in the nature of a private company.

Aakash Choubey is a partner at Khaitan & Co. The views of the authors are personal and should not be considered as views of the firm.