Compensation Agreements Under SEBI Scanner

1. SEBI's view on Compensation Agreements.

1.1 Earlier in its meeting of September 23, 2016, the Securities and Exchange Board of India ("SEBI"), had expressed its concerns regarding instances of private equity ("PE") funds entering into compensation agreements with promoters, directors and key managerial personnel of listed investee companies, based on performance of such companies, without approval of the shareholders. It, thereafter, issued a consultation paper on October 4, 2016 on the corporate governance issues in such compensation agreements in case of listed companies, for public comments ("Consultative Paper").

1.2 The Consultative Paper highlighted that these compensation agreements envisages the PE funds sharing a certain portion of the gains above a certain threshold limit made by them at the time of divestment of their shares of the listed company, subject to the company achieving certain performance targets and continued employment of such personnel