Legal & Industry Updates - August 2021
SPECIAL EVENTS
Webinar on ‘Corporate Governance Symposium: Series 2’ - ‘Effective Risk Management Committee’, August 26, 2021
The team at Ivy Law participated in a webinar on ‘Corporate Governance Symposium: Series 2’ organized by ASSOCHAM India. The discussion highlighted crucial topics pertaining to the importance of a risk management committee, its effectiveness, benefits, and it’s working. The strategic role of a risk management committee for an organization to ensure appropriate measures to achieve prudent balance between risk and reward in both ongoing and new business activities was also deliberated upon. The financial stress posed by the pandemic and its rippling effects on organizations, requiring organizations to rethink the management of
National Conference On ‘5-Years of IBC, 2016 and the Way Forward’, August 27, 2021
The team at Ivy Law participated in a session on ‘National Conference on 5-Years of IBC, 2016 and the Way Forward’ organized by the Confederation of Indian Industry. The key highlights of the session focused on the provisions of the Insolvency and Bankruptcy Code, 2016 and aspects pertaining to restructuring programmes post the aftermath of COVID-19. Smooth implementation of pre-packs for MSMEs, recent policy and judicial development towards IBC 2.0 were also emphasized on.
LEGAL & INDUSTRY UPDATES
The Insolvency and Bankruptcy Code (Amendment) Act, 2021 (source)
The Ministry of Law and Justice on August 12, 2021 notified the Insolvency and Bankruptcy Code (Amendment) Act, 2021 (“IBC Amendment Act”) to further amend the Insolvency and Bankruptcy Code, 2016. The IBC Amendment Act proposes a pre-packaged insolvency resolution mechanism (“Resolution Mechanism”) for micro, small and medium enterprises (MSME’s), which allows MSMEs to initiate pre-packaged insolvency for defaults up to Rs 1 crore. The Resolution Mechanism will allow the creditor and debtor to informally work on a resolution plan. Prior to applying for the Resolution Mechanism (i) approval of at least 66% of the unrelated financial creditors of the MSME’s is required; (ii) the MSME’s must provide the creditors with a base resolution plan; and (iii) a pre-pack application must be accompanied by the name of a resolution applicant as approved by at least 66% of the financial creditors. Further, a MSME opting for the Resolution Mechanism, should not be hit by Section 29A (Persons not eligible to be resolution applicant) of the Insolvency and Bankruptcy Code, 2016. Section 29A of the Insolvency and Bankruptcy Code, 2016 prohibits promoters of non-performing assets, willful defaulters and certain other classes of persons from submitting a resolution plan for a corporate debtor.
Limited Liability Partnership (Amendment) Act, 2021 (source)
The Ministry of Law and Justice on August 13, 2021, notified the Limited Liability Partnership (Amendment) Act, 2021 (“LLP Amendment Act”) to amend the Limited Liability Partnership Act, 2008 (“LLP Act”). Amongst the several amendments introduced by the LLP Amendment Act, some of the key amendments comprise of (i) the introduction of the concept of a ‘Small Limited Liability Partnership’ (SLLP). A SLLP will be categorized based on its turnover size and contributions by partners or proprietors, the contribution of which should not exceed twenty-five lakh rupees or such higher amount, not exceeding five crore rupees and the turnover of which, as per the statement of accounts and solvency for the immediately preceding financial year, does not exceed forty lakh rupees or such higher amount, not exceeding fifty crore rupees; (ii) de-criminalization of monetary penalties, by virtue of which certain monetary offences have been converted into civil defaults; (iii) establishment of special courts for the purpose of providing speedy trial of offences under the LLP Act; and (iv) reducing the residency requirement of a designated partner in India from eighty two days to twenty days.
The Companies (Appointment and Qualification of Directors) Amendment Rules, 2021 (source)
The Ministry of Corporate Affairs (MCA) on August 19, 2021 notified the Companies (Appointment and Qualification of Directors) Amendment Rules, 2021 (“Directors Amendment Rules”). The Director Amendment Rules amend the Companies (Appointment and Qualification of Directors) Rules, 2014. The Directors Amendment Rules provide that an individual shall not be required to pass the online proficiency self-assessment test if the said individual (i) is in the pay scale of director or equivalent or above in any ministry or department, of the central government or any state government, and has the experience of handling matters relating to (a) commerce, corporate affairs, finance, industry or public enterprises; or (b) the affairs related to government companies or statutory corporations set up under an act of parliament or any state act and carrying on commercial activities or (ii) who is or has been, for at least ten years (a) an advocate of a court; or (b) in practice as a chartered accountant; or (c) in practice as a cost accountant; or (d) in practice as a company secretary.
The Companies (Creation and Maintenance of Databank of Independent Directors) Second Amendment Rules, 2021 (source)
The MCA on August 19, 2021 notified the Companies (Creation and Maintenance of Databank of Independent Directors) Second Amendment Rules, 2021 (“ID Amendment Rules”). The ID Amendment Rules incorporate a new Rule 6 (Annual Report on the Capacity Building of Independent Director) and a new Schedule (Annual Report on Capacity Building of Independent Director) in the Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019. As per Rule 6 of the ID Amendment Rules, the ‘Indian Institute of Corporate Affairs (“Institute”), within sixty days from the end of every financial year is required to send an annual report to every individual whose name is included in the data bank and also to every company in which such individual is appointed as an independent director in the format provided in the Schedule stated above.
Frequently Asked Questions on Corporate Social Responsibility (source)
The MCA on August 25, 2021 has issued a series of Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR). The broad framework of CSR has been provided in Section 135 of the Companies Act, 2013 (“Act”) and Schedule VII of the Act and Companies (CSR Policy) Rules, 2014 (‘the CSR Rules’). Further, MCA has also issued clarifications including FAQs from time to time on various issues concerning CSR. A number of significant developments have taken place since then. The Ministry has notified the amendments to Section 135 of the Act as well in the CSR Rules on 22nd January 2021 with an aim to strengthen the CSR ecosystem, by improving disclosures and by simplifying compliances. In response to such amendments, the Ministry has received several references and representations from stakeholders seeking clarifications on the various issues related to CSR. A set of FAQs along with response of the Ministry is provided which covers aspects pertaining to (i) applicability of CSR; (ii) CSR frame work (composition and role of the CSR committee); (iii) CSR expenditure, (iv) CSR activities, (v) CSR implementation, (vi) meaning of ‘ongoing project’, (vii) treatment of unspent CSR amount, (viii) CSR enforcement, (ix) impact assessment, and (x) CSR reporting and disclosure.
Exemptions Granted to Foreign Companies under the Provisions of the Act (source)
MCA through a notification dated August 5, 2021 has exempted foreign companies and companies incorporated or to be incorporated outside India, whether the company has or has not established, or when formed may or may not establish, a place of business in India, insofar as the companies relate to the offering for subscription in the securities, requirements related to the prospectus, and all matters incidental thereto in the International Financial Services Centres, from the provision of sections 387 to 392 of the Act. Section 387 to 392 of the Act deals with dating of prospectus and provisions as to experts’ consent and allotment, the registration of prospectus, offer of India depository receipts and the punishment for contravention.
Public Comments on Draft Consumer Protection (E-Commerce) Rules (source)
As reported by Business Standard, the Ministry of Consumer Affairs is examining stakeholders' views on all provisions of the draft Consumer Protection (E-commerce) Rules, including definition of a 'related party'. Ban on fraudulent flash sales and mis-selling, and appointment of chief compliance officer/grievance redressal officer are among key amendments proposed to the Consumer Protection (E-commerce) Rules, 2020, on which the government had sought public comments by July 6. Later, acceding to the industry demands, the ministry extended the deadline to July 21 for stakeholders to send their views on the draft e-commerce rules.
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.