Legal & Industry Updates - December 2020
SPECIAL EVENTS
Knowledge Session Conducted by Ivy Law on Employment Compliances for Non-Banking Financial Companies (NBFC), December 10, 2020
Ivy Law conducted a knowledge session on Employment Compliances for a NBFC. Kaveri Kumar, Founder and Head of Corporate Practice, Ivy Law was the keynote speaker and focused on the various employment codes and the compliance obligations under provisions of the said codes and draft rules. The highlight of the session was also on the transition of the employers from the previous regulatory regime to the compliances required under the new labour codes.
Knowledge Session on IPR and Start-ups – The Know-How, December 12, 2020
The team at Ivy Law participated in a session organized by the Committee for Development of International Trade, Services and WTO of ICAI on “IPR and Start-ups: The Know How”. The key highlights of the session were analysing the relevant provisions of the intellectual property laws in India and the proprietary protections provided to a start-up to safeguard its interest. Aspects pertaining to licensing of intellectual property and how IPR can accelerate a business in its growth were also deliberated on.
LEGAL & INDUSTRY UPDATES
Draft Companies Compromises, Arrangement and Amalgamations (Second Amendment) Rules 2020 (“Draft CAA Amendment Rules”) (source)
The Ministry of Corporate Affairs (MCA) on December 17, 2020, has published the Draft CAA Amendment Rules. The definition of "Corporate Action" is introduced by the Draft CAA Amendment Rules. Corporate Action is defined to mean any action taken by the company relating to transfer of shares and all the benefits accruing on such shares namely, bonus shares, split, consolidation, fraction shares and right issue to the acquirer. Further, a new Rule 26A (Purchase of Minority Shareholding held in Demat Form) is introduced which stipulates the procedures for purchasing minority shareholding in Demat form.
Draft Companies Appointment and Qualification of Directors (Fifth Amendment) Rules 2020 (“Draft Directors Amendment Rules”) (source)
The MCA on December 18, 2020, has published the Draft Directors Amendment Rules. As per the Draft Directors Amendment Rules (i) a person who has been appointed as an independent director or who intends to get appointed as an independent director in a company is required to pass an online proficiency self-assessment test conducted by the Indian Institute of Corporate Affairs within a period of two years from the date of inclusion of his/her name in the data bank, failing which, his/her name shall stand removed from the data bank of the institute. Presently, only a one-year time period was provided to pass the online proficiency self-assessment test; (ii) an individual who has obtained a score of not less than fifty percent in aggregate in the online proficiency self-assessment test shall be deemed to have passed such test. As of now, a minimum of sixty percent in aggregate was required to pass the test; and (iii) an individual shall not be required to pass the online proficiency self-assessment test when he/she has served for a total period of not less than three years in the prescribed entities as stipulated in the Draft Directors Amendment Rules.
Electricity (Rights of Consumers) Rules, 2020 (“Electricity Consumer Rules”) (source)
As per a press release issued by the Ministry of Power, the union government has laid down the Electricity Consumers Rules. The Electricity Consumer Rules strengthen consumer rights in the power sector. These rules are also an important step towards furthering the ease of doing business across the country. Implementation of these rules ensures that new electricity connections, refunds and other services are given in a time bound manner. Willful disregard to consumer rights will result in levying penalties on service providers. The key areas covered by the Electricity Consumer Rules are (a) rights of consumers and obligations of distribution licensees; (b) release of new connection and modification in existing connection; (c) metering arrangement; (d) billing and payment; (e) disconnection and reconnection; (f) reliability of supply; (g) consumer as prosumer; (h) standards of performance of licensee; (i) compensation mechanism; (j) call centre for consumer services; and (k) grievance redressal mechanism.
Proposed Amendments to the Information Technology Act, 2000 (“IT Act”) for Safeguarding Women (source)
As reported by Economic Times, suggestions have been made to amend the IT Act by introducing a new cyber security law in order to keep up with the crimes against women on the internet, especially social media. The step comes at a time when the Ministry of Electronics and IT (MeitY) is working on revamping the IT Act to stay on top of the various technological advances in social media, e-commerce, cybercrime and digital payments space. Deliberations were made on whether the Indecent Representation of Women's Act, IT Act and other prevailing laws were sufficient in tackling cybercrimes against women. The ambit of the Personal Data Protection Bill, was also taken into consideration which is currently before Parliament. Proposals are made to amend the IT Act, and to provide special protection of women data in the Personal Data Protection Bill and bringing in a new cyber security law. Section 67, 67A and 67B of the IT Act are not considered adequate and don’t specifically cover protections provided to women. Section 67, 67A and 67B of the IT Act deal with electronic transmission of “obscene” and “sexually explicit” material, and children engaged in such acts.
Tourism Sector and Bridge Fund from the Government (source)
As reported, the Federations of Associations in Indian Tourism and Hospitality (FAITH) has urged the government to set up a targeted tourism transition corpus. Till the vaccine is deployed, FAITH has thus requested for the bridge fund to enable tourism travel and hospitality companies to draw down from this corpus set up by the Ministry of Finance for Indian tourism on a direct benefit transfer basis on an interest-free which they can utilise to repay their salaries and operating costs. This drawdown by the tourism enterprises may be adjustable over 5 years against their GST & income tax liabilities. This bridge funding to tourism on an interest free will open up a path to recovery led through a stable tourism supply and will set in motion a virtuous cycle enabling tourism travel & hospitality companies to keep their business and jobs alive and to be ready for the tourism demand as it begins reviving across international, leisure and corporate markets. The Government will lose just the time value of money but will benefit from tax-based growth emerging from this revival.
Income Tax (IT) Department to Check Transfer Pricing Violations by Startups (source)
As reported by Economic Times, several Indian startups are under the IT department’s radar on account of transfer pricing violations. It has been observed by the IT department that certain startups have flipped their structures to hold their assets, shareholding, and in some cases even intellectual property outside India. Multiple startups, in the last few years, have created foreign companies for holding their Indian businesses. The IT department is looking into the matter, whether the said structures could lead to any transfer pricing violations. In most cases, Indian entities operate like agents or intermediaries and pay tax only on part of the payment.
Regulatory Challenges for Real-Money Gaming Companies (source)
As reported by Economic Times, online real-money gaming startups in the rummy, poker, and fantasy space are facing an increasingly challenging regulatory landscape, with Indian states banning or shutting down their operations on concerns over gambling addiction and income loss. Tamil Nadu is the third Indian state to ban online real-money games, after Telangana and Andhra Pradesh, and Karnataka is considering a similar move. Gaming in India is regulated by laws made by the states, the laws permit games of skill and consider games of chance gambling, each state can decide which games are considered games of skill and which are considered games of chance. The existence of contradictory regulations across India has created confusion amongst companies and investors, with the need of the hour being having a consistent regulatory framework.
Guiding Principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms in India (source)
As reported by Economic Times, Niti Aayog's proposed draft guiding principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms (“Guiding Principles”) in India will offer the required impetus to "responsible growth" of online fantasy sports industry in India. The Guiding Principles will also provide equal opportunities for all operators while protecting consumer interests and curbing any possible malpractices. Niti Aayog has pitched for setting up a single self-regulatory organisation for the online fantasy sports industry to be governed by the independent oversight board and has also suggested restricting online fantasy games to users of 18 years and above. As per Niti Aayog's draft Guiding Principles, the extant legal ambiguity and differential treatment faced by fantasy sports games across Indian states are deliberated to be addressed through the creation of a uniform national-level safe-harbour for fantasy sports games. The Guiding Principles will enable the implementation of a single national policy on fantasy sports and bring clarity to regulators, operators and consumers alike.
Cabinet Approves Revision in Guidelines for Providing Direct to Home (DTH) Services in India (source)
As per a press release issued by the Press Information Bureau, the Cabinet has approved the proposal for revision of the guidelines for obtaining license for providing Direct-To-Home (DTH) broadcasting service in India. The salient features of the decision are (i) license for the DTH will be issued for a period of 20 years in place of the present 10 years. Further the period of license may be renewed by 10 years at a time, (ii) license fee has been revised from 10% of GR to 8% of AGR. AGR will be calculated by deduction of GST from GR; (iii) license fee will be collected on quarterly basis in lieu of presently annual basis; (iv) DTH operators shall be permitted to operate to a maximum of 5% of its total channel carrying capacity as permitted platform channels. A one-time non-refundable registration fee of Rs.10,000 per PS channel shall be charged from a DTH operator; (v) Sharing of infrastructure between DTH operators. DTH operators, willing to share DTH platform and transport stream of TV channels, on voluntary basis, will be allowed. Distributors of TV channels will be permitted to share the common hardware for their Subscriber Management System (SMS) and Conditional Access System (CAS) applications; (vi) the cap of 49% FDl in the existing DTH guidelines will be aligned with the extant Government (DPIIT's) policy on FDl as amended from time to time.
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.