Legal & Industry Updates - February 2019
The Companies (Significant Beneficial Owners) Amendment Rules, 2019 ("SBO Rules")
The Ministry of Corporate Affairs (MCA), on 8th February, 2019 has notified the amendments to the Companies Act, 2013 ("Act"), putting in place a more clear and precise regulatory framework that would help identify entities controlled from outside India, thereby seeking to lift the corporate veil. Major reforms undertaken by the SBO Rules are:
Rule 2A (Duty of the reporting company) - every reporting company (a company incorporated under the Act, which is required to comply with the requirements of Section 90 {Investigation of beneficial ownership of shares in certain cases} of the Act) shall take necessary steps to find out the significant beneficial owner (a person having beneficial interest in a share but whose name is not entered in the register of members of a company as the holder of that share) and make him file a declaration.
Rule 8 (Non applicability) - SBO Rules shall not apply, to the extent the share of the reporting company is held by:
the authority constituted under Investor Education and Protection Fund and its holding reporting company
the Central Government, State Government or any local Authority
a reporting company, body corporate, or an entity, controlled wholly or partly by the Central Government or by any State Government or Governments
New revised E- forms have been introduced namely Form No. BEN-1 (Declaration by the beneficial owner who holds or acquires significant beneficial ownership in shares), Form No. BEN-2 (Return to the Registrar in respect of declaration u/s 90), Form No. BEN-3 (Register of beneficial owners holding significant beneficial interest) and Form No. BEN-4 (Notice seeking information about significant beneficial owners).
Amendment to The Mines Act, 1952 (“Mines Act”)
The Ministry of Labour, on 5th February, 2019 has notified amendments to Section 46 (Employment of Women) of the Mines Act which aims to lift the time bar on the employment of women in mines across India. Previously, the Mines Act prohibited the employment of any woman in any part of a mine which is below-ground and on ground, except between 6 a.m. and 7 p.m. To oppose the same, several women employees’ groups requested the government that women should be provided equal employment opportunity for working in mines. The government, considering the plea has notified the following amendments to the Mines Act:
In case of women employed in any mine above ground, the owner of the mine may deploy women between 7 p.m. and 6 a.m. whereas in case of women employed in any mine below ground, the owner may deploy women between 6 a.m. and 7 p.m. in technical, supervisory and managerial work.
The deployment of women shall be in a group of not less than three and after obtaining the written consent of each of the concerned woman employee. They shall also be provided with adequate facilities and safeguards regarding occupational safety, security and health.
Relaxation for non-residents from the requirement of furnishing Permanent Account Number (PAN) card for transfer of equity shares in listed entities
Securities and Exchange Board of India (SEBI), on 11th February, 2019, has done away with the requirement of furnishing a copy of PAN card for transfer of equity shares held by investors who are Non- Resident Indians (NRIs), Overseas Citizens of India (OCIs), Persons of Indian Origin (PIOs) and foreign nationals in listed entities. The relaxation will only be available to non-commercial transactions, i.e. transfer by way of gift among immediate relatives (spouse, parent, brother, sister or child of such person). The non-resident will have to provide a copy of an alternate valid document to ascertain identity as well as the non-resident status.
Norms for Start-ups Revised
The MCA, on 19th February, 2019, has issued a notification revising the definition of startup for taxation purposes. Some of the major changes include the following:
An entity (private limited company, LLP, or a registered partnership firm) shall be considered a startup for up to a period of 10 years from the date of incorporation/ registration. Earlier, it was seven years. Also, the turnover limit has been increased from the existing Rs 25 crore to Rs 100 crore.
The limit of aggregate amount of share capital and share premium of the startup after issue of shares has been increased to Rs 25 crore from the existing Rs 10 crore.
The earlier requirement of approval from Inter-Ministerial Board and then from the Central Board of Direct Taxes (CBDT) in 45 days has now been replaced with a simple declaration in Form 2 (Declaration by a Startup for exemption under Section 56(2)(viib) of the Income Tax Act, 1961).
Unregulated Deposit Schemes Ordinance, 2019 (“Deposit Ordinance”)
The Union Cabinet, on 19th February, 2019 has approved the promulgation of the Deposit Ordinance with regard to protecting gullible investors from ponzi schemes. The benefits of the proposed Deposit Ordinance are:
It will immediately tackle the menace of illicit deposit taking activities in the country launched by rapacious operators, which at present are exploiting regulatory gaps and lack of strict administrative measures to dupe poor and innocent people of their hard-earned savings.
It will altogether ban unregulated deposit taking schemes, and will have adequate provisions for punishment and disgorgement / repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
Draft National e-Commerce Policy mandates foreign e-tailers to have registered entity in India (“Draft E-commerce Policy”)
The Department for Promotion of Industry and Internal Trade on 23rd February, 2019, has introduced the Draft E-commerce Policy which provides that all foreign e-commerce sites/portals operating in India are required to have a registered business entity in India as the importer on record or as the entity through which all sales in India are transacted. Moreover, all data collected by e-tailers in India and stored abroad should not be made available to other business entities outside the country, for any purpose, even with customer consent. The Draft Policy has also acknowledged the misuse of the “gifting” route, and has proposed that all such parcels shall be banned, with the exception of life-saving drugs.
Disclaimer: The updates provided in this document is not a legal opinion and does not claim to capture all legal developments related to the subject matter stated herein. It is advisable to seek legal advice for accurate applicability, prior to relying on the updates for any legal matter.