Legal & Industry Updates - August 2020
SPECIAL EVENTS
Master Class on SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 & Compliances under Companies Act, 2013, August 18, 2020
The team at Ivy Law participated in a master class, conducted by PHD Chamber of Commerce and Industry on August 19, 2020. The master class gave insights on SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and regulations and compliances under the Companies Act, 2013. The session highlighted the impact of Covid-19 on compliances and the relaxations provided due to the same. Aspects pertaining to reporting and disclosures by companies were also emphasized.
LEGAL & INDUSTRY UPDATES
Indian Start-ups to be Eligible for Priority Sector Lending (source)
The Reserve Bank of India (“RBI”), as per the press release dated August 6, 2020 announced the application of Priority Sector Lending (“PSL”) status for start-ups, which will benefit start-ups that are facing challenges in availing low-priced debt from banks. The banks are required to set aside a specific portion of bank lending to sectors deemed important by the RBI. The PSL status was till now reserved for sectors such as micro, small and medium enterprises, agriculture, education, and housing.
RBI Blocks NBFC Plans of Mauritius-Funded Startups (source)
As reported by Economic Times, RBI is scrutinizing foreign direct investment in non-banking financial companies routed through private equity and venture capital funds domiciled in Mauritius, and has returned applications for Greenfield investments or acquisitions. The move follows recent geopolitical developments that have spurred tighter scrutiny on foreign capital from certain countries coming into local startups via tax havens like Mauritius, where most venture capital and private equity funds are registered. Second, money coming from funds registered in Mauritius, which are on the Financial Action Task Force grey list, are being seen as capital from a jurisdiction with weaker norms to counter money laundering.
Ministry of Electronics & Information Technology’s ‘New Data Center Policy’ (source)
As reported by the Indian Express, the Ministry of Electronics and Information Technology (“Meity”) is in the process of releasing a draft ‘New Data Centre Policy’ and will engage in consultations with key stakeholders, including ministries, departments and industry bodies for necessary feedback. As part of the policy framework, Meity is proposing to reduce the number of clearances required for setting up a data center. Further, Meity is likely to push for the usage of renewable energy, such as solar energy for day-to-day operations of the buildings which will house the data disks, as data centers consume substantial amount of power and there is little to no cross-subsidy available to them. Meity is also likely to propose, data centers to be considered as a part of urban or semi-urban infrastructure, in order to attract real estate investments. Cloud data centers are proposed to be on the lines of special economic zones, with the provision of aggregated infrastructure (land, water, and electricity) in terms of ease of doing business.
Social Security Schemes May Soon Cover Gig Workers (source)
As reported by the Economic Times, the Ministry of Labour and Employment is proposing to include gig workers (such as online platform workers) under the existing social security schemes of the government, which will make them eligible for pension and medical benefits. The inclusion in the existing social security schemes would benefit millions of gig workers associated with food delivery startups, driver-partners for cab service providers and other e-commerce retail giants. A dedicated gig worker fund will be set up under the existing schemes to provide the benefits. This move follows from the feedback of the standing committee on labour, which had pointed out towards universalization of social security norms and provision of a legal framework for integrated rights-based on social security in India. The bill, which had provided for a social security scheme for gig workers, is likely to be tabled in the Parliament soon after which the scheme will be notified.
Flipkart Launches Accelerator Program for Idea-Stage Start-ups (source)
As reported by Economic times, Flipkart has launched an accelerator program for idea-stage startups in the consumer internet technology space, to assist start-ups build market-ready solutions. Shortlisted startups will undergo a 16-week mentorship training and get an equity-free grant of $25,000. Some themes identified by the e-tailer for this program include design and make for India, innovation in digital commerce, technologies to empower the retail ecosystem, supply chain management, logistics, and deep tech applications. Startups applying for the accelerator program are required to be domiciled in India and should have a working prototype with early adoption metrics.
Insolvency and Bankruptcy Board of India (“IBBI”) (Liquidation Process) (Third Amendment) Regulations, 2020 (source)
The IBBI (Liquidation Process) (Third Amendment) Regulations, 2020, were notified by IBBI on August 5th, 2020. As per the amended regulations, a clarification is inserted after the table in Regulation 4(2)(b) (Liquidator’s Fee) of IBBI (Liquidation Process) Regulations, 2016 which clarifies that where a liquidator realizes any amount but does not distribute the same, the liquidator shall be entitled to a fee (as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation) corresponding to the amount realized by the liquidator. Likewise, where a liquidator distributes any amount, which is not realized by the liquidator, the liquidator shall be entitled to a fee corresponding to the amount distributed by the liquidator.
IBBI (Voluntary Liquidation Process) (Second Amendment) Regulations, 2020 (source)
The IBBI (Voluntary Liquidation Process) (Second Amendment) Regulations, 2020, were notified by IBBI on August 5th, 2020. As per the amended regulations, in IBBI (Voluntary Liquidation Process) Regulations, 2017, for Regulation 5 (Appointment of Liquidator), a new regulation is substituted which states that a corporate person (company) shall appoint an insolvency professional as a liquidator in the event of liquidation, and whenever required may replace the liquidator by appointing another insolvency professional as liquidator, by a resolution of members or partners, or contributories, as the case may be. Such resolution shall contain the terms and conditions of the appointment of the liquidator, including the remuneration payable to the liquidator. Further, the insolvency professional shall, within three days of his appointment as liquidator, intimate the board about such an appointment. As per the previous regulation, the intimation of appointment was not required.
IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2020 (source)
The IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2020 were notified by IBBI on August 7th, 2020. As per the amended regulations, in IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016:
In regulation 4A(2) (Choice of Authorised Representative), after clause (a), a new sub-clause (aa) is inserted which provides that the three insolvency professionals offered by the interim resolution for representation of creditors in a class, must be from the state or union territory, which has the highest number of creditors in the class as per records of the corporate debtor. Provided that where such State or Union Territory does not have adequate number of insolvency professionals, the insolvency professionals having addresses in a nearby State or Union Territory, as the case may be, shall be considered.
In regulation 16A(Authorised Representative), sub-regulation (9) is substituted by a new sub-regulation which provides that the authorized representative shall circulate the agenda to creditors in a class, and may seek their preliminary views on any item in the agenda to enable the authorized representative to effectively participate in the meeting of the committee. Further, such preliminary views shall not be considered as voting instructions by the creditors. In the previous regulation the agenda had to be open for voting instructions and preliminary views were not invited.
In regulation 39 (Approval of Resolution Plan), sub-regulation (3) is substituted by a new sub-regulation which provides that after evaluation of all resolution plans as per the evaluation matrix, the committee of creditors shall vote on all resolution plans simultaneously. The resolution plan, which receives the highest votes, but not less than sixty-six percent of voting share, shall be considered as approved. In the earlier regulation there was no requirement of voting on the resolution plans.
Integration of All Regional Offices of the Ministry of Environment, Forest and Climate Change (“MoEFCC) (source)
As per the press release issued by MoEFCC on August 18th, 2020 to achieve outcomes related to the mandates of MoEFCC in an improved, timely and effective manner, MoEFCC has approved the establishment of 19 integrated Regional Offices (“IROs”). These IROs will start functioning from October 1st, 2020. The head of each IRO will be called “Regional Officer” of MoEFCC. Each of the above 19 IROs shall work as an integrated regional unit of the MoEFCC in achieving the outcomes related to the mandate of MoEFCC.
RBI Releases Framework for Authorization of Pan-India Umbrella Entity for Retail Payments (source 1, source 2)
RBI on August 18th, 2020, released the ‘Framework for Authorization of Pan-India Umbrella Entity for Retail Payments’ (“Framework”). The RBI has opened an application window for companies wishing to set up an umbrella entity for owning and operating a Pan-India payments body similar to the National Payments Corporation of India (“NPCI”). The proposed entity, unlike NPCI, can be a for-profit entity as well with diversified shareholding with no single promoter allowed to hold more than 40% investment at the time of the application, with a stipulation reducing it to 25% within five years of operation. The proposed entity would be regulated by RBI and authorized under the Payment and Settlement Systems Act, 2007. The umbrella entity is required to have paid-up capital worth Rs 500 crore, of which 10% or Rs 50 crore is required to be contributed at the time of the application. A minimum net worth of Rs 300 crore is also required to be maintained at all times. NPCI, a ‘not-for-profit’ entity registered under Section 8 of the Companies Act, 2013 is owned by a consortium of leading public and private sector banks. It is directly responsible for the functioning of highly important digital payment channels such as Unified Payment Interface, National Automated Clearing House, National Financial Switch, and Intermediate Payment Service.
Single E-Compliance Window for Sharing Data between Different Regulators (source)
As reported by Economic Times, Ministry of Corporate Affairs (“MCA”) has initiated discussions with various regulators including RBI, Securities and Exchange Board of India , and the Department for Promotion of Industry and Internal Trade, on the possibility of creating a single platform or compliance forms with common data sources. The government is considering to develop a single online compliance framework to enable companies to comply with different regulatory requirements at one go. The objective of the proposed single platform is to integrate databases of the MCA and other regulatory bodies, to bring down duplication in filing and to reduce the scope to manipulate information being sent to different regulators to comply with different regulations or to avoid taxes. Companies at present have to make multiple filings. Different regulators have different requirements and formats for the submission of data. Once the common platform is in place, companies can file all their data in one place and regulators can get their data from one source.
CCI Dismisses Antitrust Complaint Against Whatsapp (source)
India’s antitrust watchdog Competition Commission of India has dismissed a case against Whatsapp, stating that the company has not abused its dominant position to expand in the country’s digital payments market. A case filed against Whatsapp in March, 2020 alleged that WhatsApp was bundling its digital payment facility - WhatsApp Pay - within its messaging app for which it already has a large user base. The case alleged WhatsApp was abusing its position by forcing its payments feature on to its existing users.
National Research Development Corporation & National Aerospace Laboratories to Incubate Aerospace Engineering Start-Ups (source)
As per the press release issued by the Ministry of Science and Technology on August 19th, 2020, National Research Development Corporation (“NRDC”) and Council of Scientific and industrial Research-National Aerospace Laboratories (“CSIR-NAL”) have joined hands to establish an Innovation cum Incubation Centre with external private funding to promote start-ups in the emerging area of aerospace technologies. Under this program, start-ups in the area of aerospace engineering will be incubated, mentored, and supported for product and prototype development and their validation. The partnership may pave a way for establishing Innovation cum Incubation Centres in other CSIR laboratories which are working in different thematic areas and will help to create employment opportunities.
Medical Stores Industry Body Objects to Amazon’s Entry into E-Pharmacies as “Illegal” (source)
As reported by Economic Times, Amazon India launched its pharmacy business in Bengaluru and is conducting pilots in other cities. Besides Amazon, Reliance Retail too is foraying in the rapidly-growing e-pharmacy segment through Smart Point outlets. Existing players in the category include Netmeds, 1mg, Medlife and PharmEasy. The medical stores industry entity ‘All India Organisation of Chemists and Druggists’ (AIOCD), which represents 8.5 lakh chemist and drug retailers in the country, has written to Amazon, the Prime Minister’s office and the Ministry of Health & Family Welfare, objecting to Amazon’s entry in the pharmacy business and alleged that the move could have “legal implications” on the e-commerce platform. The letter stated E-pharmacies are illegal and not recognized by the laws under the Drug & Cosmetics Act. The letter also stated that home deliveries cannot be undertaken by any online pharmacy and entities doing so are already facing contempt of court proceedings. The allegations of breach of existing rules especially those concerning sale of prescription drugs and requirements of licensed pharmacists have also been contended.
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.