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Vodafone's High Court Ruling on Share Purchase Agreement: Insights and Implications

This presentation explores the significant ruling by the Bombay High Court regarding Vodafone's USD 11.08 billion acquisition of CGP Investments, which involved a change in control of Hutchison Essar Limited (HEL) and its implications for withholding tax in India. Key aspects covered include the nature of the transaction, the determination of capital gains for non-residents, and the legal nuances surrounding economic interest and rights transferred. The presentation also addresses the importance of appropriate legislation and the specific challenges faced by multinational corporations operating in India.

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Vodafone's High Court Ruling on Share Purchase Agreement: Insights and Implications

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  1. C h a l l e n g e U s Visual Identity Guidelines for PPT Presentation

  2. VODAFONE – THE FACTS AND HIGH COURT RULING Share Purchase Agreement (“SPA”) for shares of CGP Decision of the Bombay High Court (“HC”) • Essence of the transaction was a change in the ‘controlling interest’ of HEL, which constituted a source of income in India • Transaction had significant nexus with India; hence withholding tax provisions applicable • Several other rights transferred besides the CGP share - the consideration should be allocated over such rights also Hutch Telecommunication International Ltd (“HTIL”) Vodafone Netherlands 100% CGP Investments Limited (“CGP”) Direct and indirect shareholding in HEL - 52% Cayman Islands 12 intermediate holding companies Direct and indirect shareholding of 52% + Options over the indirect shareholding of 15% of Other Indian entities in HEL = ‘Economic interest’ of 67 percent (approx) in HEL transferred to Vodafone Mauritius / India India Other Indian entities Indirect shareholding in HEL – 15% Hutchison Essar Limited (“HEL”) | 2

  3. VODAFONE – THE FACTS (CONT) • The consideration of USD 11.08 billion paid by Vodafone was for the following – • 52 percent direct and indirect equity shareholding in HEL • Control premium • Use of rights of the Hutch brand in India • A non-compete agreement with the Hutch group • Value of non-voting, non-convertible preference shares • Value of loan obligations • Entitlements to further acquire 15 percent indirect interest in HEL • Question before the Supreme Court of India (“SC”) – Whether capital gains arise from the sale by a non-resident of the share capital of CGP, a foreign entity, which held • underlying Indian assets? | 3

  4. HOLDING STRUCTURES | 4

  5. SCOPE OF SECTION 9 AND DETERMINATION OF SITUS OF SHARES | 5

  6. SCOPE OF SECTION 9 AND DETERMINATION OF SITUS OF SHARES (CONT) | 6

  7. ROLE OF CGP IN THE TRANSACTION | 7

  8. CONTROLLING INTEREST AND OTHER RIGHTS AND ENTITLEMENTS | 8

  9. CONTROLLING INTEREST AND OTHER RIGHTS AND ENTITLEMENTS (CONT) | 9

  10. AZADI BACHAO ANDOLAN REGARDING TAX AVOIDANCE | 10

  11. VALIDITY OF MAURITIUS TAX RESIDENCY CERTIFICATE | 11

  12. WITHHOLDING TAX | 12

  13. WITHHOLDING TAX (CONT) | 13

  14. NEED FOR LEGISLATION AND CERTAINTY | 14

  15. BMR ANALYSIS | 15

  16. C h a l l e n g e U s Visual Identity Guidelines for PPT Presentation

  17. OTHER CONSIDERATIONS | 17

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