Legal & Industry Updates - November 2019
SPECIAL EVENTS
Workshop Conducted by Ivy Law on ‘Gender Sensitivity Law & Policy’, November 26, 2019
Kaveri Kumar, Founder and Head Corporate Practice was the keynote speaker at a workshop conducted by Ivy Law on 'Gender Sensitivity Law and Policy' for Power Finance Corporation Limited. Some of the key points covered in the workshop were relevance of gender sensitivity and equality in today's times at the workplace, overview of the laws in India and in other foreign jurisdictions on gender equality, recent and prospective legislative changes and policy initiatives introduced in India and the role of the management in addressing the issue of gender sensitivity and equality at the workplace.
National Conference on Resolving Insolvency in India, November 11, 2019
Rita Kumar, Principal Advisor Alternate Dispute Resolution, Regulatory & Compliance and Parina Tyagi, Associate, participated in a conference on 'Resolving Insolvency in India' organized by the Confederation of Indian Industry. Some of the key focus points of the conference were India's ranking in the World Bank's Doing Business Report, analyses of Insolvency & Bankruptcy Code (Amendment) Bill, 2019, need for a specialised regime for distress of financial institutions and identification of the role of intermediaries in the insolvency process.
LEGAL & INDUSTRY UPDATES
Draft Education Policy May Allow Board Examination Twice a Year
As reported, the final draft of the new National Education Policy, 2019 ("New Policy") issued by the Ministry of Human Resource Development and once approved by the Central Government ("CG"), may allow a candidate to take board exams twice a year from 2022. The New Policy requires a high quality common modular entrance exam, multiple times a year for undergraduate examinations in higher education institutions. The New Policy also aims at changing the present school system from one that primarily assesses memorization skills to one that is more competency-based.
Issue of Sweat Equity by Startups & Extension in Regulatory Filings
As reported, the Ministry of Corporate Affairs (“MCA”) is proposing to issue a notification to allow startups to issue sweat equity on 50% of their paid-up capital and also extend the period of exemptions from regulatory filings up to 10 years instead of 5 years. Further, the proposed notification also proposes to exempt start-ups for 10 years from a provision that bars private companies to raise deposits over 100% of their paid-up share capital. The main aim of the intended notification is to enable startups to grow their business at reduced costs.
The Consumer Protection (E-Commerce) Rules, 2019 ("e-Commerce Rules")
The Ministry of Consumer Affairs, Food and Public Distribution, on 11th November, 2019, issued the revised e-Commerce Rules under the Consumer Protection Act, 1986. The e-Commerce Rules expressly state that e-commerce companies cannot influence prices of products being sold on their platform and must adhere to fair trade practices. The proposed framework requires e-commerce companies to be more transparent and accountable towards customers. Other key provisions of the e-Commerce Rules include prohibiting e-commerce companies to falsely represent themselves as consumers and post reviews, misrepresent or exaggerate the quality or the features of goods and services and to furnish details about sellers, including identity of their business, legal name, principal geographic address, name of the website, the products they sell, and how they can be contacted by customers. Further, the inclusion of online travel and accommodation providers is also proposed to be included in the e-Commerce Rules, to ensure timely booking cancellations, refunds, and standard convenience charges, thereby protecting consumer interest.
The Department for Promotion of Industry & Internal Trade ("DPIIT") Proposes a Regulatory Authority to Settle E-commerce Disputes
As reported, DPIIT is examining the viability of introducing a policy on setting-up a regulatory authority to settle e-commerce related disputes. The proposal to introduce the policy is being considered by GoI upon consistently receiving complaints from small traders alleging predatory pricing and deep discounting by e-commerce giants. The policy is expected to address data protection and privacy issues relating to the data generated by e-commerce giants.
MCA Introduces Online Portal ‘MCA - Compliance Monitoring System’ (“CMS”)’
MCA, on 4th November, 2019, has launched an online portal known as MCA-CMS to enhance corporate governance levels and transparency. The intent of the online portal is to issue show cause notices to companies in-default and allow companies to submit replies through the same portal electronically thereby ensuring regular enforcement of compliance requirements under Companies Act, 2013 ("Companies Act"). MCA-CMS will also scrutinize and prevent incorporation of shell companies.
GoI Announces INR 25,000 Crores Towards Stalled Housing Projects
GoI, on 6th November, 2019, has announced a plan to set up an alternative fund investment (“AIF”) for an amount of INR 25,000 crores, in order to revive 1,600 stalled housing projects. While GoI will invest INR 10,000 crores in the AIF, the remaining INR 15,000 crores will be provided by State Bank of India and Life Insurance Corporation of India. GoI, through AIF, will release funds in tranches via an escrow account depending on the completion of the approved phase. The funds will be used to complete the projects that either have been declared as non-performing assets or its lender has been dragged into insolvency proceedings by the stakeholders.
Indian Institute of Corporate Affairs (“IICA”) to Conduct Examination for Appointment of Independent Directors (“IDs”)
As reported, MCA has decided to conduct examination for the appointment of IDs wherein IICA will hold the examination and the candidate is required to score a minimum 60%, in order to qualify the exam. The exam will be conducted in line with the amended Companies Act (Appointment and Qualification of Director) Fifth Amendment Rules, 2019, Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019 and Companies (Accounts) Amendment Rules, 2019 which will come into effect in December, 2019. Pursuant to the amendment, GoI will also maintain an online databank of professionals qualifying the test that can be used by companies looking to expand their board or making fresh appointments. The main aim to conduct the examination is to curb fraudulent appointments in terms of eligibility and credibility of IDs.
Insolvency & Bankruptcy (Insolvency & Liquidation Proceedings of Financial Service Providers & Application to Adjudicating Authority) Rules, 2019 ("IBC Financial Service Provider Rules")
The MCA, on 15th November, 2019, notified the IBC Financial Service Provider Rules to provide a generic framework for insolvency and liquidation proceedings of systemically important Financial Service Providers ("FSPs") other than banks. The IBC Financial Service Provider Rules shall apply to such FSPs, or categories of FSPs, as will be notified by the GoI under section 227 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), for the purpose of their insolvency and liquidation proceedings. Earlier, FSPs were not ordinarily covered under the IBC.
Vodafone Idea Limited’s ("VIL") Drop in Business Operations
As reported, Vodafone Group ("Vodafone") described the status of its joint venture in India (VIL) with the Aditya Birla Group as “critical” in the wake of a Supreme Court ("SC") order on adjusted gross revenue that left the telecom company facing thousands of crores in additional statutory dues. Vodafone affirmed that it will no longer infuse any further equity into VIL, having written down the value of its joint venture with the Aditya Birla Group to zero after the SC ruling. Crucially impacted by a three-year price war since the entry of Reliance Jio Infocomm Limited in late 2016, Vodafone India was forced to merge with Idea Cellular Limited. despite which VIL reported quarterly losses of nearly INR 5,000 crore under continuing price competition, in spite of a recent INR 25,000 crore equity infusion by both parent entities via rights issue.
Union Cabinet Approves Proposal for Mitigating Financial Stress Faced by Telecom Services Sector ("TSS")
The Union Cabinet, on 20th November, 2019, approved the proposal for mitigating financial stress being faced by the TSS. Pursuant to the proposal, the Department of Telecommunication will give an option to the Telecom Service Providers ("TSPs") to defer the payment of the spectrum auction installments due for 2020-21 and 2021-22, either for one or both years. These deferred amounts will be spread equally in the remaining installments to be paid by TSPs. However, the interest, as stipulated while auctioning the concerned spectrum will be charged so that net present value is protected. The main aim is to ease the cash outflow of the stressed TSPs and facilitate payment of statutory liabilities and interest on bank loans.
The Insolvency & Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 ("Insolvency Rules") & the Insolvency & Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 ("Bankruptcy Rules")
The MCA, on 20th November, 2019 notified the Insolvency Rules and the Bankruptcy Rules.
Insolvency Rules - These rules specify the details of the insolvency resolution process for Personal Guarantors ("PGs") of Corporate Debtors ("CDs") and includes:
Eligibility to act as a resolution professional for an insolvency resolution process for PGs of CDs.
Manner of receipt and verification of claims of creditors.
Manner of preparation of list of creditors, holding the meetings of the creditors and voting in the meeting.
Contents of the repayment plan. and
Procedure of filing of application for issuance of discharge order, etc.
Bankruptcy Rules - These rules specify the details of the bankruptcy process for PGs of CDs and includes:
Eligibility to act as a bankruptcy trustee for the bankruptcy process for PGs of CDs.
Manner of preparation of reports and timelines for submission by the bankruptcy trustee.
Manner of collating claims and formation of committee of creditors, holding meetings of the committee and voting in the meeting.
Manner of realisation of assets of the bankrupt and its distribution, etc.
India May Soon Have its Own Personal Data Protection Law
As reported, the Ministry of Electronics and Information Technology has stated that the CG plans to introduce the Personal Data Protection Bill, 2019 in the upcoming winter session of the Parliament after public consultations. The draft bill was released last year and was immediately opposed by several global technology companies. Their contention was that it would affect their business in the country apart from driving cost of operations.
Amendment to the Companies (Meetings of Board & its Powers) Amendment Rules, 2014 ("Board Rules")
The MCA, on 18th November, 2019, has notified the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2019 (“Amended Board Rules”) to amend Rule 15 of the Board Rules. The Amended Board Rules provide a new threshold limit for contracts or arrangements entered into with a related party under section 188 of the Companies Act, subject to the prior approval of the members of a company by an ordinary resolution. Following are the amendments made in the limits:
Sale, purchase or supply of any goods or materials directly or through appointment of agent amounting to 10% or more of the turnover of the company. Prior to the amendment, the limit was 10% or more of the turnover of the company or INR 100 crore (whichever is lower).
Selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agent amounting to 10% or more of net worth of the company. Prior to the amendment, the limit was 10% or more of net worth of the company or INR 100 crore (whichever is lower).
Leasing of property of any kind amounting to 10% or more of the turnover of the company or INR 100 crore (whichever is lower). Prior to the amendment, the limit was 10% or more of the net worth of the company or 10% or more of turnover of the company or INR 100 crore (whichever is lower).
Availing or rendering of any services directly or through appointment of an agent amounting to 10% or more of the turnover of the company. Prior to the amendment, the limit was 10% or more of the turnover of the company or INR 50 crore (whichever is lower).
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.