INDIA Law and Practice Contributed by: Anish Mashruwala, Utsav Johri, Megha Upadhyaya and Sahil Unadkat, JSA
get is through an Offshore SPV, the Offshore SPV can borrow funds offshore from offshore lend- ers, funds, capital markets and other financial institutions. Further, ECB can also be raised by an Indian company from overseas lenders and other recognised lenders for the acquisition of an overseas target. Creating security and providing guarantees are also permitted, subject to certain conditions. Additionally, the Insolvency and Bankruptcy Code, 2016 (IBC) also enables the acquisition of Indian distressed companies through a statu- tory process. Domestically, in certain cases such acquisitions have been leveraged buyouts. The RBI also introduced the Prudential Frame- work for Resolution of Stressed Assets on 7 June 2019, which requires banks to resolve a stressed asset in a time-bound manner and may involve resolution by way of a change of owner- ship of the borrower. Some leveraged buyouts have also been seen in such restructurings. Financing documents for acquisition finance raised by an offshore borrower are typically gov- erned by English law. Financing documents for acquisition finance raised by an Indian borrower domestically, and transaction documents in rela- tion to NCD issuance by an Indian company, are governed by Indian law. Security and guarantee documents are generally governed by the law of the jurisdiction where the assets are located or the jurisdiction of which the guarantors are nationals or in which they are incorporated. The choice of foreign law for an agreement is generally upheld by Indian courts unless, in the 2. Documentation 2.1 Governing Law
view of the Indian courts, the choice of foreign law is not bona fide or if the application of for- eign law is opposed to the public policy of India. In any proceedings in India, foreign law has to be proved as a matter of fact by leading expert evidence of foreign legal counsel. 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans In any acquisition financing where the funding is in a foreign currency and obtained from foreign lenders, the credit agreements and intercreditor agreements will generally be based on the latest Asia Pacific Loan Market Association (APLMA) or Loan Market Association (LMA) forms. For acquisition financings in Indian rupees (INR), where the lenders are Indian NBFCs, funds or FPIs, the nature of documentation varies with every transaction, and there is no industry- accepted market standard. Some banks and NBFCs may have their own formats of facility agreements or debenture documents. In relation to the issue of NCDs, the Companies Act, 2013 (the “Companies Act” ) and its relat - ed rules prescribe certain prerequisites for the debenture trust deed. Debenture trust deeds are also governed by various SEBI regulations if the NCDs are listed on a stock exchange. In addi- tion, the placement memorandum or the offering memorandum for NCDs must be in a format as prescribed by the Companies Act and applicable SEBI regulations. There is no market-accepted form of docu- mentation for security documents in relation to assets located in India.
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