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International banks face regulatory uncertainty when underwriting India block trades

The Securities and Exchange Board of India (Sebi) is considering easing restrictions on put and call options, which may lessen M&A uncertainty

Leonardo Fernández Rodríguez According to Law 9/2012 on restructuring of credit entities and Royal Decree 1559/2012 that develops Law 9/2012, the Spanish bad bank Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria (Sareb) is entitled to incorporate separate estates under the form of bank assets funds (fondos de activos bancarios, or FABs) to which it may assign either assets or assets and liabilities from its balance. FABs will operate as a mix of a securitisation fund and a collective investment vehicle. Assets eligible to be transferred to any FAB are not limited to those previously assigned to Sareb by credit entities subject to public aid according to applicable legislation, since the eligibility criteria also extends to money and deposits as well as fixed income notes listed in any official secondary market.

On April 11 2013, the Philippine Bureau of Internal Revenue issued Revenue Regulations No 6-2013 (RR 6-2013) amending certain provisions of Revenue Regulations No 6-2008, which provides for, among other things, the rules involving the determination of the fair market value of shares of stock not listed and traded in the local stock exchanges. These regulations implement the provisions of the Philippine National Internal Revenue Code (the Tax Code) relating to the imposition of capital gains tax on the sale or transfer of shares that are not traded through a local stock exchange. The general rule under the Tax Code is that gains realised from the sale or disposition of shares of stock is subject to a capital gains tax of 10% (other than a sale of shares through a stock exchange, which is generally subject to a stock transfer tax of 0.5%). For the purposes of calculating the tax, the gain is the amount by which the selling price or fair market value of the shares (whichever is higher) exceeds the seller's acquisition cost. Under the previous set of rules, the fair market value of the shares was deemed equal to their book value, as shown in the financial statements duly certified by an independent certified public accountant nearest to the date of sale. In case the fair market value of the shares of stock sold or transferred was greater than the amount of money and/or fair market value of the property received, the excess received as consideration will be deemed a gift subject to the donor's tax under section 100 of the Tax Code (at a rate of up to 30% of the net gifts).

Anna Pinedo Five years following the outset of the financial crisis, the debate regarding regulatory capital levels for US banks only seems to have intensified. The US banking agencies released notices of proposed rulemaking relating to regulatory capital in mid-2012; these proposals were the subject of intense commentary. To meet G-20 commitments, it was assumed final capital requirements for US banks would be released by mid-2013. However, given new legislative proposals, and new recommendations from policymakers, the country seems to be further from any consensus regarding an approach to regulatory capital and prudential regulation. Recently, Senators Sherrod Brown and David Vitter introduced proposed legislation that would set Basel III aside, and require adoption of new capital requirements focused principally on common equity, or an equity capital ratio, and impose at least a 15% minimum capital requirement on large US banks. The bill also would require separate capital requirements for subsidiaries, and limit the permitted activities of banks and their non-bank subsidiaries. Although the bill may never receive the bipartisan support required for approval, it is nonetheless important in that it illustrates the continuing debate over too-big-to-fail institutions. It also suggests that perhaps the actions that already have been taken following enactment of the Dodd-Frank Act are not sufficiently well-understood.

With debate continuing around the interpretation of standard provisions in sovereign debt, the International Capital Market Association (ICMA) plans to help better facilitate sovereign debt restructurings. ICMA’s general counsel, Leland Goss, explains how

Muharrem Küçük Mustafa Yigit Örnek When international banks and financial institutions finance a project or provide acquisition financing, they need to acknowledge certain restrictions under the Turkish Commercial Code No 6102 (TCC) in respect of security granted to secure such financing. For any project or acquisition financing, the borrower itself is able to provide a corporate guarantee to the lenders. But there is a concern if a subsidiary company is required to provide a corporate guarantee in respect of the obligations of its parent company. According to article 202 of the TCC, a parent company cannot cause any loss to its subsidiary. Although abuse of control by the parent company does not render the relevant transaction void, the parent company is obliged to compensate the losses of the subsidiary within the same financial year or provide a method for compensation within the same financial year. If the parent company fails to compensate, the other shareholders or creditors of the subsidiary are entitled to commence proceedings against the parent company and the directors of the parent company for compensation of losses. Article 202 also applies if either the parent or the subsidiary is incorporated in Turkey.

Mian Muhammad Nazir The judgment of the Dubai Court of First Instance, in a case involving an ijara contract (lease contract), contemplates the UAE courts' level of familiarity with complex Islamic finance contract instruments. Though the court decision may be subject to appeal, but as it stands, it reveals an evidence of adequate judicial recognition for Islamic finance contracts. Although it is not the first case that recognises the application of principles of Shariah and Islamic contracts and instruments, the decision will nevertheless confirm the UAE legal and judicial systems' readiness to dispense justice and adjudicate civil and commercial disputes strictly in accordance with the terms and conditions of the underlying contracts and the governing law of such contracts.

Veena Sivaramakrishnan Pooja Yedukumar Restructuring continues to be the buzz word in India in 2013. It is not just in the context of non-performing assets that banks and financial institutions are seeking to restructure their books. Be it corporate debt restructuring (CDR) or restructuring under the statutory realm of the Board for Industrial and Financial Reconstruction (BIFR), companies seem to be resorting to these methods as an easy means of rehabilitation. The CDR mechanism is technically voluntary, though most Indian banks (especially in the public sector) are members of the CDR Cell, thereby making it mandatory for them to participate in the restructuring of a company to which they have an exposure in India. The CDR process provides for banks and financial institutions (which are not a party to the Cell) to enforce their rights outside the CDR mechanism. Effectively this allows companies to get some leeway especially from CDR participating banks in relation to their obligations, while continuing to ensure that the rights of the non-participating banks are not adversely affected.

Mark-Oliver Baumgarten, Thiemo Sturny, Andreas Bättig and Stefan Knobloch of Staiger Schwald & Partner examine the reasons why Switzerland has remained a financial hub while economic instability has claimed so many of its neighbours