The last few years have witnessed a sluggish primary market
activity and very few start ups and mid-size companies have taken
effective steps towards going public. In this background, one of
the typical exit strategies that assumes importance as a feasible
exit option remains the put/call option.
SEBI has historically objected to options as being in
contravention to Securities Contracts (Regulation) Act, 1956
("SCRA") which permitted only spot
delivery contracts. Initially, the Government vide its notification
dated June 27, 1961 exempted specified contracts for pre-emption or
similar rights contained in the promotion or collaboration
agreements or in the articles of association of limited companies.
Although there was no specific mention of "options",
however the same could be implied to be similar to
'pre-emption'. However, vide a notification dated June 27,
1969, the Government under Section 16 of the SCRA prohibited all
kinds of contracts except spot delivery
