Corporate and M&A

Contact: Elaine Hughes

The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (“2019 Regulations”) were signed on 22 March 2019. The 2016 Regulations[1] that came into force on 15 November 2016 have been revoked and replaced by the 2019 Regulations. In effect, the 2019 Regulations reinstate and enhance the obligations which were contained in the 2016 Regulations.

Entities that the 2019 Regulations apply to

As with the 2016 Regulations, the 2019 Regulations apply to all “Relevant Entities”, which are defined as corporate or other legal entities incorporated in the State. This definition includes private limited companies (which account for over 90% of the companies incorporated in the state) and other bodies corporate. However, an exemption exists for companies listed on a regulated market that is subject to disclosure requirements consistent with the laws of the EU or to equivalent international standards.

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Author: Mauricio Duarte

Cybersecurity and data-protection in M&A using Blockchain

As the digital environment continues to grow rapidly, it is time to acknowledge that in any effort to complete a successful M&A transaction, privacy and data security due diligence of the target company is needed. In a world hurtling through one technological breakthrough after another, we are entering into an exciting-yet dangerous-new era. Privacy and data security, once overlooked in many corporate transactions, is now taking center stage. The increasing wave of cyberattacks, without appropriate safeguards, has caused governments around the globe to scramble for new ways to secure records and data from theft, damage or alteration. Nevertheless, there is one exceptional enhanced form of technology, known as “blockchain”, that might be useful to secure data from the target company before any type of merger or acquisition.

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Completion accounts have been the traditional pricing mechanism used to deal with uncertainty in the valuation of a target company in acquisitions, but the locked box mechanism has become increasingly popular in recent deals.

Using the completion accounts mechanism, a price is agreed to be paid at completion, which is subject to adjustment after completion based on a set of accounts for the target company prepared after completion that confirm the exact financial position of the target on the completion date.

Using the locked box mechanism, the price to be paid on completion is based on the financial position of the target company as set out in a historical set of accounts for the target company. The target company is deemed a 'locked box' from the date of those historical accounts, and the seller agrees to reimburse the buyer in respect of leakage of value occurring between the locked box accounts date and the completion date (e.g. any value extracted by the seller from the target company, for example dividend payments, management charges, transactions at under/over value, etc.).

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Author: Piyush Gupta, Partner, Kochhar & Co.

1. Introduction

1.1 The law governing companies globally, and in India, recognises a company to be a personality, distinct from its shareholders. In the celebrated case of Salomon v Salomon & Co. Ltd[1]., Lord Halsbury LC, had stated:

“[A] company must be treated like any other independent person with its rights and liabilities [legally] appropriate to itself ... whatever may have been the ideas or schemes of those who brought it into existence.”

1.2 As a rule, a subsidiary remains a separate legal entity, distinct from its holding / parent company. However, the doctrine of ‘piercing the corporate veil’ is an exception to the rule that a company is a legal entity, separate from its shareholders.

1.3 In the Escorts[2] case, the Indian Supreme Court had opined that “the corporate veil may be lifted where the statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern.”

1.4 Thus, it may be safe to say that the Courts lift the “corporate veil” when the device of incorporation has been used for illegal or improper purpose such as to defraud creditors, to evade an existing obligation, to circumvent a statute etc.

1.5 The Single Economic Entity doctrine (‘SEE Doctrine’), on the other hand, goes beyond the company law concept of a company having a ‘separate legal personality’ and recognises that different juristic persons may, in certain cases, be acting and behaving as one.

1.6 This paper aims to provide a brief overview as to the interplay between the applicability of the SEE Doctrine vis-à-vis the corporate separatedness doctrine (piercing the corporate veil), which has not been discussed by any regulator / authority / court in India. In fact, not just in India, there is not much commentary on the juxtaposition in international jurisprudence either.

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The long awaited reforms to Australian whistleblower legislation was passed on 19 February 2019. Partner, Andrea Beatty; Law Graduate, Chelsea Payne and Law Graduate, Danielle Bonanno outline the significance of the reforms and what they signify for companies and individuals.

On 19 February 2019, the long awaited reforms to Australian whistleblower legislation was passed by Parliament. The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth) (Whistleblower Act) will mostly take effect three months after the Act receives Royal Assent, which could be as early as 1 July 2019.

The significance of the Whistleblower Act lies in its ability to harmonise current whistleblower regimes under federal law, expand protections and remedies and create a regime for tax-related misconduct and contraventions.[1] The amendments will apply to disclosures made on or after the commencement of the Act which may extend to matters that may have occurred before commencement.[2] However, matters relating to compensation and remedies will apply retrospectively to disclosures made prior to commencement.[3]

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