Legal Due Diligence Report of Solar / Power Company
A solar power/renewable energy company can grow organically over time through joint ventures,
technology partnerships, bootstrapping, etc. However, it can also grow inorganically through the
acquisition of other Solar / Power Companies as a ‘going concern’. TILA has deployed five
mechanisms for such inorganic growth:-
Option One - Merger & Acquisition in terms of Companies Act 2013
Option Two - Filing Resolution plan& acquisition of distressed Power asset in terms of Insolvency &
Bankruptcy Code 2016
Option Three – Bidding in case of Bank Auction of NPA Power assets in terms of Securitisation &
Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002
Option Four - Transfer/Privatisation of the Power Utility through statutory transfer Scheme in term
of Part XIII of the Electricity Act 2003
Option Five - Solar/Renewable Energy Power Plant Sale & Purchase Agreement/Deed (This involves
only transfer/acquisition of the plant or assets of the plant and not the company).
The greatest challenge the investor/buyer of the Power/Solar Plant faces is information asymmetry
(the seller knows certain facts which are not known to the buyer). To protect the interest of our
clients, TILA has assisted Solar/Power Companies in removing this information asymmetry by
preparing a “Legal Due Diligence Report” for acquisition and inorganic growth of the RE/Power
Company.
Deal Structuring for a Solar / Power Company Acquisition
Irrespective of the method of acquisition discussed above, a structure of deal helps in outlining a set
of terms that enable a smooth transfer of Power/Renewable Energy business. The TILA Deal
structure additionally provides the stages of compliance that are to be met, such as prior approval of
Electricity Regulatory Commission or Competition Commission or Ministry of Power, or other
regulators.
TILA has assisted Solar/Power Companies in removing ambiguity and bringing certainty in Deal
Structuring for a Solar / Power Company Acquisition.
Drafting of Resolution Plan for the acquisition of a stressed asset in terms of Corporate Insolvency Resolution Process
Stressed Power assets can be acquired at a marginalized price through the Insolvency and
Bankruptcy Code 2016. The potential of these assets remains untapped due to the financial crisis of
the insolvent. However, it can be used for the benefit of the acquiring company. The first step for
acquisition through the IBC route is the submission of the Resolution Plan to the Resolution
Professional (RP)/ Committee of Creditor (COC).
TILA has assisted Power Companies in drafting Resolution Plans to enable a hassle-free acquisition
of such stressed power projects/plants/assets and protect the interest of the company and its
directors.
Drafting of Transaction Documents & Definitive Agreement for the acquisition of Power Company in terms of Companies Act 2013
The process of Merger & Acquisition can be prolonged and cumbersome. From registration of M&A
to meeting the disclosure requirements, several documents and agreements are to be filed.
Conveyance deed for transfer/transaction of the Power Company through Merger & Acquisition
under Companies Act 2013 is the definitive agreement but various other documents such as Share
Purchase agreement, Novation of Power Purchase Agreement, Operation and Maintenance
Contract, EPC Contract, etc. have to be drafted for a complete transfer of the Company or assets.
TILA has assisted Power Companies in drafting air-tight Transaction documents and Definitive
Agreements so that the Power Project/Plant is acquired and future Legal interest of acquiring
company and its Directors is protected.
Legal Opinion on the applicability of Central Laws (Electricity Act 2003 etc) and State Laws (State Electricity Reforms, Electricity Duty Act, etc) read with National Solar Policy / State Solar Policy for compliance before/during/after M&A
Power is a concurrent subject in the Constitution of India, which means the Power Companies / Solar
developers have to comply and deal with both the Central Government and the State Governments,
of the concerned states.
Secondly, the Power companies also have to deal with the Central Electricity Regulatory
Commission, Central Electricity Authority, Bureau of Energy Efficiency, and State Electricity
Regulatory Commission.
Laws applicable to Power/ RE sector include Constitution of India, Electricity Acts (Central & State),
Rules (Central & State), Regulations (CERC/ SERC/ JERC), Notifications.
Power Policies include – Statutory Policy & Solar Policies, Guidelines, Schemes, Plan & Programme,
By-Laws, etc.
Power Standards include standards made by CEA (Central Electricity Authority), BIS (Bureau of Indian
Standards), BEE (Bureau of Energy Standards), ALMM, etc.
To simplify the complexity concerning Laws, Policies & Standards applicable to Renewable Energy &
Power Sector TILA renders Legal Opinion on the applicability of Central laws & State Laws read with
National Solar Policy / State Solar Policy to guide and safeguard the interest of the Power /
Renewable Energy Company for compliance before/during/after M&A.
Legal Opinion on the Acquisition of Transmission lines /Transmission Infrastructure including Right of Way
The Renewable Energy /Power Industry faces issues with respect to Right of Way for evacuation
Lines, dedicated Transmission lines, etc. especially concerning the list of compliances/approvals from
State Government / Central Government and also the amount of compensation payable/paid in rural
and urban areas for ROW corridor, crop compensation and tower base of the overhead transmission
lines. These issues generally take the face of litigation and huge amounts of compensation fall due
on the acquiring companies.
To safeguard the investment & Legal transfer of the transmission infrastructure TILA renders Legal
Opinion on the acquisition of Transmission lines including the Right of Way and the way forward
for compliance, therefore.
Litigation Support Services before NCLT/NCLAT/Supreme Court for RE/Power Projects
During the acquisition process, several Petitions/Documents have to be filed before NCLT/NCLAT/
Supreme Court in terms of the Companies Act 2013, Insolvency & Bankruptcy Code 2016, etc. for
approval of the Transaction & Resolution plan respectively. Litigation may also arise post-acquisition
and make the whole process very challenging for the acquiring companies.
Further, application for the moratorium etc has to be filed before any Arbitral Proceedings & Other
Court during the process of acquisition.
To safeguard the interest of the RE / Power Company and to protect the Directors & Promoters from
unnecessary impediments, TILA provides Litigation Support Services, before NCLT/ NCLAT for the
acquisition of the Power / RE Companies.
Litigation Support Services for Prior approval before CERC/SERC/JERC, Competition Commission of India /Supreme Court for RE/Power Projects
During the acquisition process, PRIOR APPROVAL OF REGULATORS may be required for RE/ Power
Companies in terms of Electricity Act 2003 and Competition Act, 2002, etc for final approval of the
Transaction & Resolution plan respectively.
Before the acquisition of Power / Renewable Energy Company, Petition may be required to be filed
before Central Electricity Regulatory Commission or State Electricity Regulatory Commission or Joint
Electricity Regulatory Commission in terms of Section 17 of the Electricity Act 2003 and Combination
Petition may be required to be filed under Section 5 of the Competition Commission of India in term
of Competition Act 2002.
To safeguard the interest of the RE / Power Company and to protect the Directors & Promoters TILA
provides Litigation Support Services, before CERC/ SERC/ JERC/ Competition Commission of India
for the acquisition of the Power / RE Companies.