Govt to legalise put & call options with prospective effect

The government will soon be legalising put and call options. The CCEA had deferred the note on taking a decision to legalising them. This note was sent back to the finance ministry which has now reworked on it and decided to legalise it with prospective effect, reports Aakansha Sethi of CNBC-TV18, quoting sources.

Also read: FinMin floats Cabinet note to legalise Put & Call options The ministry of mines had said that the options were legalised with retrospective effect, their cases as far as Hindustan Zinc and Balco are concerned, will be weakened. The government has taken the stance that the private entities have not been allowed to exercise their stake as the options were not legal. It is being seen as the main reason behind the government opting for a prospective effect decision. It would have impacted private equity deals and other such structures which had used call and put options as a form of exit. Hence, these agreements will have to be redrafted to use an offer for sale (OFS) or any other mechanism as a form of exit and not exercise those options for existing deals. For deals in the future, these options are all set to become legal once the CCEA clears it. It should happen anytime in the next one to two weeks.