Legal & Industry Updates - April 2020
SPECIAL EVENTS
Ivy Law in Association with Startup Bazaar Conducted a Webinar on the Force Majeure Clause - Impact in COVID-19 Crisis, April 17, 2020
Kaveri Kumar, Founder and Head of Corporate Practice, Ivy Law, was the key note speaker at the webinar. The webinar focused on the unprecedented times of COVID-19 crisis and the importance of the Force Majeure clause. The key highlights of the webinar, were on analysing the importance of the Force Majeure Clause in business contracts, legal framework, reliefs claimed by an affected party, important contractual aspects and other relevant characteristics to keep in mind while invoking or responding to a Force Majeure event. The webinar was an interactive session, where several questions were answered by Kaveri, pertaining to the contractual provisions for invoking the Force Majeure clause, responding to Force Majeure notices, and the reliefs that can be sought by an affected party.
Webinar for Startup Enterprises, April 10, 2020
The team at Ivy Law participated in a webinar, conducted by Startup Bazaar. The webinar was an interactive session involving chartered accountants, lawyers and entrepreneurs. The key focus of the webinar was on the Government announcements related to Income Tax, Goods and Services Tax, Ministry of Corporate Affairs, Reserve Bank of India, Employees Provident Fund and Employees State Insurance.
Webinar on Covid-19: Arbitration, Mediation and Online Dispute Resolution (ODR) - Opportunities & Way Forward, April 24, 2020
The team at Ivy Law participated in a webinar, conducted by PHD Chamber of Commerce, focusing on the advancement towards ODR. ODR in India was not very widely used until the recent Covid-19 pandemic. The focus of the webinar was on the encouragement provided by courts in India, for encouraging judicial proceedings through video conferences and other online mediums.
LEGAL & INDUSTRY UPDATES
Review of Foreign Direct Investment (FDI) Policy for Curbing Opportunistic Takeovers/Acquisitions of Indian Companies due to the Current Covid-19 Pandemic
The Department for Promotion of Industry and Internal Trade, released Press Note 3 (2020 Series) on April 17, 2020 (“PN3”). As per PN3, the government amended para 3.1.1 of the extant FDI policy. Pursuant to the amendment (Para 3.1.1 (a) and (b)), an entity of a country which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, in the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview stated above, such subsequent change in beneficial ownership will also require Government approval.
Amendment to the Intermediary Guidelines under the Information Technology Act, 2000 (“Intermediary Guidelines”)
As reported, the government is in the final stages of notifying an amendment to the Intermediary Guidelines, which will make social media platforms in India, responsible for the content on their platforms. The Law Ministry has made minimal changes to the draft amendments finalised by the Ministry of Electronics and IT (“MeitY”) and the guidelines are awaiting final approval. Once the Intermediary Guidelines are notified, content being created on one social media platform and being circulated on the other will have to be monitored. Companies will have to ensure that if unlawful content is going viral on their platforms, others should also take steps to remove the same. As per the proposed Intermediary Guidelines, the new provisions will require social media apps to mandatorily trace the origin of content on their platforms on receiving a court order. Social media firms will also have to disallow anonymous posting of content, with users having to verify themselves through their mobile numbers.
Ministry of Corporate Affairs (“MCA”) issues Covid-19 Related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)
The MCA vide General Circular No. 15 /2020, dated April 10, 2020 issued FAQs to clarify the eligibility of CSR expenditure related to COVID-19 activities. The expenditures/contributions addressed in the FAQs are (i) contributions made to ‘PM CARES Fund’, (ii) contributions made to ‘Chief Minister’s Relief Funds’ or ‘State Relief Fund; (iii) contributions made to State Disaster Management Authority; (iv) spending CSR funds for Covid-19 related activities under items nos. (i) and (xii) of Schedule VII of the Companies Act, 2013 (“Act”), relating to promotion of health care including preventive health care and sanitation, and disaster management; (v) adjustment of payment of salary/wages to employees and workers, including contract labour, during the lockdown period, payment of wages made to casual /daily wage workers and payment of exgratia to temporary /casual /daily wage workers.
Relaxations Provided by MCA in View of Covid-19 Outbreak (source 1 source 2)
MCA has issued several circulars in the month of April, 2020 undertaking various measures to provide relaxations to companies, to help them remain compliant during such period. The broad measures undertaken are (i) Extra-Ordinary General Meeting (“EGM’s”) (which are unavoidable on or before 30 June, 2020), can be conducted through video conferencing or other audio-visual means as per the prescribed procedures; and (ii) notices to members for EGM’s can be issued only by electronic means, while ensuring that companies facilitate registration of email addresses of the members who have not done so and make suitable disclosure in this regard at the time of issue of public notice in the newspapers.
Holding of Annual General Meetings by Companies Whose Financial Year has Ended on 31st December, 2019
The MCA through General Circular No. 18/2020, dated April 21, 2020, has issued a clarification stating that if the companies whose financial year (other than first financial year) has ended on 31st December, 2019, hold their AGM for such financial year within a period of nine months from the closure of the financial year (i.e. by 30th September, 2020), the same shall not be viewed as a violation. As per the Act, a company is required hold its AGM within a period of six months (nine months in case of first AGM) from the closure of the financial year and not later than a period of 15 months from the date of last AGM, which requirement is relaxed now.
Government to Promulgate an Ordinance to Suspend IBC Provisions, up to 1 Year that Trigger Fresh Insolvency Proceedings
As reported, the government has decided to amend the insolvency law to suspend up to one-year, provisions that trigger insolvency proceedings against defaulters. An ordinance would be promulgated to suspend three sections of IBC for up to one year. Section 7, 9 and 10 of the IBC would be suspended for six months and the suspension time can be extended up to one year. Section 7 and 9 pertain to initiation of corporate insolvency proceedings by a financial creditor and an operational creditor, respectively. Section 10 relates to filing an application for insolvency resolution by a corporate. The latest decision by the government provides more leeway for corporate borrowers in repaying their loans. As per existing norms, if a payment default exceeds 90 days, then the lender concerned has to refer the account for resolution under IBC or any other mechanism permitted by the Reserve Bank of India.
Government Extends the Period for the Expiry of Names Reserved by Companies for Incorporation
MCA in an undated notification in April, extended the period for the expiry of names reserved by companies for incorporation. The notification extends the filing period of the statutory forms for (i) names reserved for 20 days for new company incorporation, SPICe+ Part B is required to be filed within 20 days of name reservation, however now names expiring any day between 15th March 2020 to 3rd May would be extended by 20 days beyond 3rd May 2020 ; (ii) names reserved for 60 days for change of name of company, INC-24 is required to be filed within 60 days of name reservation; however, now names expiring any day between 15th March 2020 to 3rd May would be extended by 20 days beyond 3rd May 2020; (iii) names reserved for 90 days for new LLP incorporation/change of name, FiLLiP/Form 5 is required to be filed within 90 days of name reservation; however now names expiring any day between 15th March 2020 to 3rd May would be extended by 20 days beyond 3rd May 2020.
Reliance Jio and Facebook to Expand Local Level E-commerce (source 1, source 2)
As reported, Reliance Jio and Facebook will partner, to use WhatsApp for delivering goods from local neighbourhood stores to consumers. Facebook has announced an investment of $5.7 billion (Rs 43,574 crore) to buy a 9.99% stake in Reliance’s telecom arm Jio, in order to expand its presence in its largest market in terms of subscriber base. Facebook’s investment in Jio will require the approval of the antitrust watchdog Competition Commission of India (“CCI”), which will assess if the partnership will adversely impact the market. It is deliberated that the massive data that the two companies will jointly hold, both trade as well as consumer would be under the eye of CCI. At present, it is not clear whether CCI has the powers to look at data accumulation and aggregation, as it is a task that will be handed over to the proposed Data Protection Authority.
Retailers Invoke ‘Act of God’ Clause in Rental Contracts to not Pay Rent
As reported, PVR Cinemas, a multiplex chain with more than 870 screens, has decided to inform malls and landlords that they would be invoking the ‘Force Majeure’ clause in their rental contract to not pay rent for the entire period of the lockdown across the country. PVR does not own properties and all of its screens operate on rent. There have been no operations during the lockdown and it is contemplated that it will only be until May 15, 2020, for retail space and mall’s operations to normalise. One of India’s top retailers, Reliance Retail too may invoke the same clause to not pay rent.
CCI Approves Joint Venture Between Adani Green Energy Limited (“Adani”) and Total S.A. (“TSA”) in Power Generation Through Solar Energy in India
As per the press release issued by the Press Information Bureau, dated April 1, 2020, CCI has approved the formation of a joint venture (“JV”), between Adani and TSA, in the business of power generation through solar energy in India. The proposed JV envisages Adani transferring certain of its subsidiaries to a newly incorporated JV company. Subsequently, TSA would directly or indirectly acquire 50% of the equity share capital of the JV. TSA is the ultimate parent entity of the Total Group. Total Group is an international integrated energy producer with operations in every sector of the oil and gas industry. Total Group is also involved in renewable energy and power generation sectors in India.
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.