Legal & Industry Updates - May 2021
SPECIAL EVENTS
Webinar on Changing Dimensions of Right to Health Amid the Covid Crisis, May 22, 2021
The team at Ivy Law participated in a webinar on “Changing Dimensions of Right to Health Amid the Covid Crisis”, conducted by BW Legal World. The webinar highlighted the judiciary's nationwide efforts to ensure all necessary resources reach the public. The panel also discussed whether the right to health as enshrined by Article 21 of the Indian Constitution, stands compromised in the face of the pandemic and whether all communities have received equitable access to medical care. Emphasis was also laid on the possibility of introducing laws pertaining to a pandemic.
Webinar on Best Practices When Structuring Contracts, May 25, 2021
The team at Ivy Law participated in a webinar on "Best Practices When Structuring Contracts'', conducted by Manupatra. The webinar highlighted the relevant aspects of structuring a contract, in order to boost results with lower costs, obligations and increased efficiency. Adherence to best practises through different stages of structuring a contract were deliberated upon, which consisted of pre-contractual preparation with a clear objective, the attributes to be kept in mind while engaging with business partners or service providers, the importance of contract review and attention to detail, along with negotiation techniques. Aspects pertaining to contract management and the possibility of re-negotiating contracts was also discussed. Emphasis was laid on common mistakes that occur while drafting contracts. Important provisions such as force majeure, doctrine of frustration, business continuity plan and disaster recovery, which have come under focus as a fallout of the pandemic were also addressed.
LEGAL & INDUSTRY UPDATES
Ministry of Corporate Affairs Clarification on Offsetting the Excess CSR Spent for FY 2019-20 (source)
The Ministry of Corporate Affairs (MCA) on May 20, 2021 issued a clarification on offsetting the excess CSR spent for FY 2019-20. Keeping in view the spread of COVID-19 in India, an appeal was made to MDs/CEOs of top 1000 companies in terms of market capitalization, to contribute generously to “Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund” (PM CARES Fund). The appeal, stated that such contribution may, inter-alia, include the unspent CSR amount, if any, and an amount over and above the minimum prescribed CSR amount for FY 2019-20, which can later be offset against the CSR obligation arising in subsequent financial years. In pursuance to the said appeal, certain companies claimed to have contributed CSR funds to the ‘PM CARES Fund’ over and above their prescribed CSR amount for FY 2019-20. Several representations were received by MCA for setting off the excess CSR amount spent by the companies in FY 2019-20 by way of contribution to ‘PM CARES Fund' against the mandatory CSR obligation for FY 2020-21. The issues raised in the said representations have been examined by the MCA and accordingly, it is clarified that where a company has contributed any amount to ‘PM CARES Fund’ on 31.03.2020, which is over and above the minimum amount as prescribed under section 135(5) of the Companies Act, 2013 (“Act”) for FY 2019-20, and such excess amount or part thereof is offset against the requirement to spend under section 135(5) for FY 2020-21 in terms of the aforementioned appeal, then the same shall not be viewed as a violation subject to the conditions that: (i) the amount offset as such shall have factored the unspent CSR amount for previous financial years, if any; (ii) the Chief Financial Officer shall certify that the contribution to “PMCARES Fund” was indeed made on 31st March 2020 in pursuance of the appeal and the same shall also be so certified by the statutory auditor of the company; and (iii) the details of such contribution shall be disclosed separately in the Annual Report on CSR as well as in the Board’s Report for FY 2020-21 in terms of section 134 (3) (o) of the Act.
Clarification on Spending of CSR Funds for ‘Creating Health Infrastructure for COVID Care’, ‘Establishment of Medical Oxygen Generation and Storage Plants (source)
MCA on May 20, 2021 issued a clarification on spending of CSR funds for ‘creating health infrastructure for COVID care’, ‘establishment of medical oxygen generation and storage plants’ etc. In continuation to the MCA General Circular No. 10/2020 dated 23.03.2020, wherein it was clarified that spending of CSR funds for COVID-19 is an eligible CSR activity, it has been further clarified by MCA that spending of CSR funds for ‘creating health infrastructure for COVID care’, ‘establishment of medical oxygen generation and storage plants’, ‘manufacturing and supply of Oxygen concentrators, ventilators, cylinders and other medical equipment for countering COVID-19’ or similar such activities are eligible CSR activities under item nos. (i) and (xii) of Schedule VII of the Act relating to promotion of health care, including preventive health care, and, disaster management respectively.
Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021 (source)
SEBI vide a gazette notification dated May 5, 2021 notified the amended SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021 (“LODR Amendment Regulations 2021”). Regulation 21 (2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Original Regulations”), which specifies the formation of risk management committee, has been substituted by the LODR Amendment Regulations 2021, which states that the Risk Management Committee shall have a minimum three members with majority of them being members of the board of directors, including at least one independent director and in case of a listed entity having outstanding Special Voting Rights (SR) Equity Shares, at least two thirds of the Risk Management Committee shall comprise independent directors. Regulation 21 (3B) and (3C) are inserted by the LODR Amendment Regulations which state that the quorum for a meeting of the Risk Management Committee shall be either two members or one third of the members of the committee, whichever is higher, including at least one member of the board of directors in attendance and that the meetings of the risk management committee shall be conducted in such a manner that on a continuous basis not more than one hundred and eighty days shall elapse between any two consecutive meetings. Regulation 31A (3) (a) of the Original Regulations, which specifies the reclassification of the status of the promoter, has been substituted by the LODR Amendment Regulations 2021, which provides that the classification of status of a promoter to the public shall be permitted by the stock exchanges only upon satisfaction of an application for reclassification has been made by the listed entity to the stock exchanges within thirty days from the date of approval by shareholders in general meeting after ensuring that the following procedural requirements have been fulfilled.
SEBI Notifies Relaxed Rules for Listing Start-Ups (source 1, source 2)
SEBI has amended ICDR (Issue of Capital and Disclosure Requirements) Regulation and SAST (Substantial Acquisition of Shares and Takeovers) for listing on the Innovators Growth Platform (IGP). The regulator has reduced the period of holding of 25 per cent of pre-issue capital of the issuer company by eligible investors to one year from the current requirement of two years. The term 'Accredited Investor' for the purpose of IGP is renamed as 'Innovators Growth Platform Investors'. Such investors' pre-issue shareholding would be considered for the entire 25 percent of the pre-issue capital of the issuer company against the present limit of only 10 percent. On lines of provisions for the listing of companies on the main board, the issuer company on IGP would be allowed to allocate up to 60 per cent of the issue size on a discretionary basis prior to issue opening for subscription to eligible investors with a lock-in of 30 days on such shares. This is subject to the price of the specified securities offered to eligible investors, not to be lower than the price offered to other applicants and eligible investors who make an application of a value of at least Rs 50 lakh. Currently, the issuer company is not permitted to make discretionary allotment. Issuer companies that have issued superior voting rights (SR) equity shares to promoters and founders will be allowed to do listing under IGP framework as well. In addition, it has eased framework for companies seeking to migrate to the main board. Currently, for a company not satisfying the conditions of profitability, net assets, net worth among others for migration from IGP to main board requires a company to have 75 per cent of its capital held by QIBs as on the date of application for migration. This requirement has now been reduced to 50 per cent.
Competition Commission of India (CCI) Approves Internal Restructuring of IBM Corporation under Green Channel Route (source)
As reported by Economic Times, CCI has approved Kyndryl Holdings and Grand Ocean Managed Infrastructure Services proposal (notice) in relation to the internal restructuring of IBM Corporation under the green channel route. Green channel is an automatic approval system, whereby a combination is deemed to have been approved by CCI upon receiving the filing of notice for the combination by the concerned parties. IBM Corporation plans to spin off its global managed infrastructure services (MIS) business into a new public company, within the framework of an international corporate internal re-organization. Restructuring will be achieved by separation of the MIS business into newly incorporated companies Kyndryl Holding LLC and Grand Ocean Managed Infrastructure Services Private Limited, which are presently not engaged in any business activity and have been incorporated only to implement the proposed transaction.
Infosys to Expand, Deepen ESOP Pool to Retain Talent (source)
As reported by Economic Times, Infosys is in the middle of a second appraisal cycle for the calendar year, to expand its employee stock option (ESOP) programme to include more employees. The company has had the ESOP programme for several years and now it is looking to expand and deepen it to make sure everything is being done to support the employees. The purpose of the ESOP plan is to increase shareholder value by expanding employee ownership in order to incentivize, retain and attract key talent through performance-based stock grant programme.
On-Tap Term Liquidity Facility to Ease Access to Emergency Health Services (source)
As per the press release issued by the Reserve Bank of India (RBI) dated May 7, 2021, RBI is opening an on-tap liquidity window of Rupees 50,000 Crore with tenors of up to three years at the repo rate till March 31, 2022 to boost provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country. Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufacturers; importers; suppliers of vaccine and priority medical devices; hospitals; dispensaries; pathology labs and diagnostic centres; manufacturers and suppliers of oxygen and ventilators; importers of vaccines and COVID-related drugs; COVID-related logistics firms and patients for treatment. Banks are being incentivized for quick delivery of credit under the scheme through extension of priority sector lending (PSL) classification to such lending up to March 31, 2022.Under the scheme, banks are expected to create a COVID loan book. By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate.
RBI Set to put Onus on Banks and Non-Banking Financial Companies to Monitor Digital Lenders (source)
As reported, RBI may put the onus of monitoring digital lenders on banks and non-bank finance companies that work with such entities. The panel is likely to lay out strict governance and regulatory rules like mandatory disclosures on interest rates, rightful usage of android. RBI is currently in the process of reviewing the digital lending ecosystem after reports of malpractices surfaced last year. A report of a working group set up for this purpose is due shortly. The working group is considering a structure where the entities regulated by RBI will be held liable if third-party mobile applications flout lending norms. RBI may mandate frequent checks by regulated entities into the technology infrastructure and operations of intermediaries they sign up with to provide unsecured loans. In addition, digital lending apps will be required to transparently disclose interest rates being charged. It was reported that the working group’s recommendation may also include creation of a new self-regulatory organisation to help lenders better monitor digital lending applications. This entity may also be responsible for monitoring usage of data by the lending applications.
Ministry of Corporate Affairs has launched the MCA21 Version 3.0 (source)
MCA has launched the first phase of MCA21 V3.0 (third version). The second and final phase would be launched from October this year. The redesigning of MCA21, allows electronic filings of various documents under the Act. The portal is the key platform for companies to submit the required documents and filings. Besides, it provides public access to corporate information. MCA21 V3.0 consists of a revamped website, new email services for ministry officials as well as two new electronic modules for books and consultation.
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.