INDIA Law and Practice Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
director is required to refrain from participating in any such meeting of the board. Such conflict of interest has also been subject to judicial review where the courts have reinforced the principle of an interested director abstaining from weighing in on matters where there is a conflict.
directors are restricted from using certain defen - sive measures during the offer period. 9.3 Common Defensive Measures Common defensive measures seen in India include enlisting assistance from third parties to acquire a non-controlling stake in the target so as to prevent a hostile bidder from acquiring a controlling stake in the target. As an example, iReliance Industries played the role of “white knight” for an Oberoi group entity when it blocked ITC’s attempted takeover by acquiring a non-controlling stake in the Oberoi group entity. With family-owned businesses being common in India, consolidation of shareholding at the promoter level for safeguarding the company from hostile takeovers is an effective strategy deployed by many Indian companies (eg, Bharti Airtel and Tata Sons). Lastly, in the case of L&T – Mindtree, the board of directors of Mindtree declared a dividend to reduce the cash reserves of the company so as to render it unattractive. 9.4 Directors’ Duties Other than setting up a committee of independ - ent directors for opining on the open offer and the delisting offer and conducting business in the ordinary course, under the Takeover Regu - lations, directors are not subject to any duties, other than their customary fiduciary/statutory duties, when enacting defensive measures. The statutory duties under the Indian company law includes acting in good faith, exercising duties with due and reasonable care, skill and diligence and without a conflict of interest, and their fiduci - ary duties to the company. 9.5 Directors’ Ability to “Just Say No” Business combinations which are merely inter- se shareholders, such as secondary acquisitions and open offers, do not provide the directors of the target company with the ability to “just
9. Defensive Measures 9.1 Hostile Tender Offers
While hostile tender offers are not restricted in India, they are not very common. One of the reasons for the lack of hostile takeovers is the concentration of shareholding in the hands of the promoters and the hurdles to stake build - ing which are discussed in section 3. Significant Court Decisions or Legal Developments . Recently, the most prominent hostile takeovers in India have been: • the Burman’s proposed acquisition of Relig - are, which turned litigious; • Adani’s takeover of NDTV in 2023, structured as an indirect acquisition; and • Larsen & Toubro’s takeover of Mindtree in 2019, where the target’s promoters were unable to thwart the takeover. 9.2 Directors’ Use of Defensive Measures When a tender offer is ongoing, the Takeover Regulations impose an obligation on the board of directors of the target company to conduct its business in the ordinary course and in accord - ance with past practice. Additionally, matters such as alienation of material assets or effecting any material borrowings, which could be con - strued as defensive measures, are required to be undertaken with the prior shareholder approval (by way of a special resolution). Accordingly, the
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