Updated: July 29, 2021 3:34:02 am
An expert committee of the Securities and Exchange Board of India (Sebi) is examining whether a framework for special purpose acquisition companies (SPACs) can be introduced, the market regulator’s Chairman, Ajay Tyagi, said on Wednesday.
SPAC or so-called blank check companies are entities that raise money from the capital markets and use the funds to merge with a target company. Recently popular in the US, SPACs are usually floated by private equity funds and financial institutions.
“Sebi’s Primary Market Advisory Committee is deliberating on whether a framework for SPACs should be introduced in India and if yes, given certain concerns being raised on such vehicles, with what safeguards,” said Tyagi, while speaking at the annual Capital Market Conference of the Federation of Indian Chambers of Commerce & Industry.
In his speech, Tyagi also stressed upon the need for companies to improve the quality of their disclosures.
“On periodic disclosures such as annual reports, while all the fields are being filled in, in many cases, they appear more like a check-box exercise. This is not acceptable,” Tyagi said. He added that documents as important as the financial results, annual reports, corporate governance reports and others need the level of quality the investors deserve.
What is a SPAC?
Special purpose acquisition companies or so-called blank check companies are entities that raise money from the capital markets and use the funds to merge with a target company.
Apart from mandatory disclosures, companies also have to disclose material events to investors. However, often companies do not go beyond the deemed material events specified in Sebi rules, he said . “In several cases, articles appear in the media, which are followed by stock exchanges seeking clarification on the same from the companies and the companies then replying to the exchanges on the queries sought. This is surely not the right way to go,” Tyagi said.
The Sebi chief asked companies and their boards to actively revisit their materiality policies and see whether disclosures of material events as per the rules are being met not just in letter but in spirit as well.
Tyagi also stressed the need to continuously improve corporate governance standards and transparency. He said while independent directors had a critical role in protecting the interests of minority shareholders, another set of directors — who ought to play a more active role in improving corporate governance standards — are representatives of institutional shareholders on the board, whether as nominee directors or otherwise, the Sebi chief said.
“Of particular concern are the issues of confidentiality in board meetings and whether shareholders’ voice is being properly heard in shareholder meetings. While Sebi will definitely examine specific cases which are brought to its notice, I would advise companies and their top management to ensure that such concerns are adequately addressed,” said Tyagi.
Meanwhile, Sebi Whole Time Member G Mahalingam suggested routing all imports of gold via the exchange ecosystem in future.
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