India based Azure Power Global Limited “is one of India’s leading utility scale renewable energy project developers and operators.”
Earlier this month, the company announced (see here) that, following its review of the determination of the staff of New York Stock Exchange Regulation to delist the Company’s equity shares from trading on the New York Stock Exchange LLC on October 30, 2023, a Committee of the Board of Directors of the NYSE reached a final decision to uphold the delisting determination. On October 31, 2023, the NYSE filed a Form 25 notification of removal from listing with the U.S. Securities and Exchange Commission (the “SEC”).
In line with earlier guidance on the issue, last month Azure filed an annual report with the SEC which stated, in pertinent part, as follows:
“[A] Special Committee of the Board of Directors (the “Special Committee”) was convened in August 2022 to review certain material projects and contracts over a three-year period for anti-corruption and related compliance issues. Independent outside counsel and forensic advisors were engaged to support the Special Committee. The Special Committee’s investigation has identified evidence that former executives were involved in an apparent scheme with persons outside the Company to make improper payments in relation to a project but no related improper payments or transfers by the Group have been identified. The Special Committee’s review and its findings could impact our decision-making in connection with such projects. We have disclosed the details of the Special Committee’s investigation to the SEC and the U.S. Department of Justice, and we continue to cooperate with those agencies.”
Recently, Azure filed audited financial results which included this qualified opinion from its auditor stating in pertinent part:
“A special committee was constituted by the Board of Directors of the Parent (‘Special Committee’), to review certain material projects and contracts for anti-corruption and related compliance issues. Independent external counsel and forensic advisors were engaged to support the Special Committee. The Special Committee’s investigation has identified evidence that certain former senior management of the Parent may have been involved and certain former directors of the Parent may have had the knowledge of an apparent scheme with persons outside the Company to make improper payments in relation to certain projects. The Special Committee’s investigation is not yet complete. The current Board of Directors of the Parent has represented to us that none of them were aware of such apparent scheme. As informed by the management, no adjustments would be necessary in the financial statements of the Group for the financial year ended March 31, 2022. Refer to Annexure 1 for the representation. In view of pending investigation, we are unable to comment whether the outcome of the investigation will result in possible adjustments and/or disclosures to the special purpose combined financial statements, and the status of compliance with the applicable laws and regulations.”
While there have been several Foreign Corrupt Practices Act enforcement actions regarding conduct in India (see here for some of the actions), and while certain of those enforcement actions involved the conduct of Indian subsidiaries of U.S. issuers, it is believed that there has never been an FCPA enforcement action against an Indian issuer.
As highlighted in this prior post, in 2020 Dr. Reddy’s Laboratories Ltd., (an India-based pharmaceutical company with ADRs listed on the New York Stock Exchange) disclosed that it “has commenced a detailed investigation into an anonymous complaint” alleging that “healthcare professionals in Ukraine and potentially in other countries were provided with improper benefits in violation of U.S. laws.”
“The Company received an anonymous complaint in September 2020, alleging that healthcare professionals in Ukraine and potentially in other countries were provided with improper payments by or on behalf of the Company in violation of U.S. anti-corruption laws, specifically the U.S. Foreign Corrupt Practices Act. The Company disclosed the matter to the U.S. Department of Justice (“DOJ”), Securities and Exchange Commission (“SEC”) and Securities Exchange Board of India. The Company engaged a U.S. law firm to conduct the investigation at the instruction of a committee of the Company’s Board of Directors. On July 6, 2021 the Company received a subpoena from the SEC for the production of related documents, which were provided to the SEC.
The Company made presentations to the SEC and the DOJ in relation to the investigation with respect to certain countries during the previous fiscal years. The Company also made a presentation to the SEC and the DOJ in relation to its Global Compliance Framework, including the ongoing enhancement initiatives, during the year ended March 31, 2023. The Company is complying with its listing obligations as it relates to updating the regulatory agencies. While the findings from the aforesaid investigations could result in government or regulatory enforcement actions against the Company in the United States and/or foreign jurisdictions, which can lead to civil and criminal sanctions under relevant laws, the outcomes including liabilities are not reasonably ascertainable at this time.”