Allowing 'Put' & 'Call' options in shareholders' agreements will boost investment: CII

(UNI) India inc welcomed government decision to allow incorporation of 'call' and 'put' options in shareholders' agreement. The proposal to remove restrictions on using options in shareholders' pact for M&A and PE transactions would encourage inflow of foreign investment into the country. This was one of the key impediments to FDI flow into the infrastructure sector, CII DG Chandrajit Banerjee said in a statement. Law Minister Kapil Sibal has approved a proposal to include 'call' and 'put' options for companies in shareholders' agreements. The proposal will come into force after approval by Finance Ministry and Securities and Exchange Board of India (Sebi). 'Put' option gives shareholder the right to sell a certain amount of shares at a specific price and within a given time-frame. In 'call' option, the buyer has the right to purchase specific amount of shares at a certain price and specified time. CII said the clearance from the Law Ministry would pave the way for an amendment to be moved to the Securities Contracts (Regulation) Act, against the proposal initially moved by SEBI. 'Industry has been seeking an amendment to SCRA to allow 'put' and 'call' options not only to offer an opportunity to investors, especially foreign investors, to hedge their risks but also put to rest any doubts regarding the use of options,' Mr Banerjee added. Overseas investors and lenders may be willing to consider short to medium term lock in periods of 3 to 5 years if put option from the resident promoters are allowed, it added. UNI