Legal & Industry Updates - July 2023
SPECIAL EVENTS
Webinar on Structuring Private Business Acquisitions, 28th July, 2023
The team at Ivy Law participated in a webinar on “Structuring Private Business Acquisitions” organized by Khaitan & Co. The discussion was wide-ranging, covering various aspects of business acquisitions and transaction structures including the need, benefits and regulatory framework required when structuring acquisitions as well as successor liabilities, and the importance of indemnity-friendly transactions to ensure clarity and buyer protection. The webinar emphasized on the significance of cultural alignment when integrating newly acquired businesses, as well as the role of cash and equity in retaining key personnel from the acquired company. The necessity of conducting due diligence, particularly on the regulatory approval process, and the importance of focusing on minute details during the acquisition process were also deliberated upon exhaustively.
LEGAL & INDUSTRY UPDATES
Union Cabinet Approves Draft Digital Personal Data Protection Bill, 2022 (“DPDP Bill”) (source)
The Union Cabinet, on 5th July, 2023, has approved the DPDP Bill and the same is likely to be introduced in the upcoming session of Parliament. Six years after the Supreme Court declared privacy as a fundamental right, DPDP Bill is expected to become India’s core data governance framework, with the aim to safeguard data privacy and data protection in India. Further, there is a provision to form a Data Protection Board to monitor the provisions and impose fines of up to INR 250 crore on the organizations found to be in breach. Further, individuals would gain the right to question private companies and governments about their data collection, processing, and storage practices. The DPDP Bill would also include provisions for alternate dispute resolution to expedite complaint settlements.
Professionals Registered on MCA21 Portal to Have a Single Identity Document (“ID”) (source)
The Ministry of Corporate Affairs (“MCA”), on 12th July, 2023, has issued a circular wherein all the professionals namely company secretary, chartered accountant and cost accountant, who have multiple IDs, need to get approval from their respective apex institutes for deactivating the IDs so that there is only one ID for one user. Central Government (“CG”) has already initiated the process of deactivating multiple IDs on the MCA21 portal, which is the platform for submission of statutory filings under Limited Liability Partnership and company laws. The move comes as Version 3 (“V3”) of the portal becomes functional wherein V3 restricts IDs to one per person in a move to provide clarity regarding who is submitting the filing.
Stakeholders Urge MCA for an Open Discussion on Digital Competition Bill (“the Bill”) (source)
Stakeholders have requested MCA for a more transparent and open consultation around the proposed Bill, while considering its impact on end-consumers and small businesses. As the Bill reaches its final stages of drafting by the Committee on Digital Competition Law, stakeholders are concerned that it would impact a wide range of subjects, such as digital inclusivity, user experience, data protection & security, foreign investment, and cost of doing digital business for Micro, Small and Medium Enterprises, among others, and therefore, have urged MCA to hold an "open consultative public engagement process" while drafting the Bill.
MCA and Ministry of Electronics and Information Technology (“MeitY”) Demarcate Respective Roles to Regulate Digital Intermediaries (source)
There has been a frequent turf war between MCA and MeitY over regulation of the digital markets, with both having jurisdiction because the sector involves both technology matters as well as competition issues. Therefore, in a meeting held between officials of MeitY and MCA regarding Systematically Important Digital Intermediaries, it has been held that MCA would be the nodal ministry to look into all the competition issues in the digital market whereas MeitY would look into sector-specific & technical issues. It was observed that clarity of roles is critical as it comes at a time when CG is working towards introducing several pieces of legislations including Digital India Act and Digital Competition law for regulating various facets of the booming digital market in India.
The Reserve Bank of India (“RBI”) Launches the Centralised Information Management System (“CIMS”) for Enhanced Data Management (source)
RBI, on 30th June, 2023, has introduced CIMS which aims to serve as the next-generation data warehouse while managing humongous data and serving as a platform for the carrying out of data and text mining as well as advanced statistical analysis that would connect corporate, fiscal, financial and external sectors. CIMS would not only improve supervision and monitoring across multiple domains, but would also allow for dissemination of data for the availability to the public. Commercial banks as well as Urban Cooperative Banks and Non-Banking Financial Companies would now have to report to CIMS directly.
The Securities and Exchange Board of India’s (“SEBI”) New Environmental, Social and Governance (“ESG”) Regulations Pose Challenges for Top Entities (source)
SEBI, on 12th July, 2023, has approved a framework for ESG disclosures and assurance requirements for value chains of the top listed entities. A value chain encompasses upstream and downstream activities involved in the operations of an entity and its inclusion in the ESG disclosure framework would provide a holistic view of an entity’s ESG impact. While the mandate has galvanised the market into improving the transparency of ESG disclosures, however, listed entities are likely to face challenges in effective implementation of the framework and compliance with the same as the entities would now be required to obtain reasonable assurances on all nine indicators of Business Responsibility and Sustainability Report, a framework prepared by the ESG Advisory Committee based on National Guidelines of Responsible Business Guidelines.
SEBI Orders Promoters to Disclose Family Arrangements Potentially Affecting Management Control of Listed Entities (source)
SEBI, on 13th July, 2023 has notified that the promoters of listed entities must disclose family arrangements or agreements that could have a direct impact on the management control of the company, with the aim to ensure the legality of deals, bring transparency to the market and prevent any potential misuse of power within listed entities. Previously undisclosed agreements would now have to be declared through gazette notifications, providing an avenue for key shareholders to disclose any secret pacts. Further, the regulation covers existing as well as prospective agreements, and all shareholders, promoter entities, and key managerial personnel involved in agreements impacting management control must be disclosed to the stock exchanges.
SEBI Pulls Up Investment Banks Over Inadequate Disclosures in Initial Public Offering (“IPO”) Documents (source)
SEBI has pulled up investment banks for failing to provide sufficient disclosures in IPO documents regarding promoters' family members who do not wish to be identified as part of the promoter group. In response to this issue, SEBI had previously issued an advisory, instructing investment banks to furnish either an affidavit or a Memorandum of Understanding from such family members, clearly stating that they do not want to be classified as part of the promoter group, failing which, the companies would be required to identify such family members as part of the promoter group and make the necessary disclosures in the draft red herring prospectus. SEBI has further cautioned merchant banks not to relax mandatory disclosures without formal communication from SEBI.
The Ministry of Commerce and Industry (“Commerce Ministry”) to Introduce New Foreign Trade Policy (“FTP”) (source)
The Commerce Ministry is actively working on releasing the latest five-year FTP before September 2023, which would include the Districts as Export Hubs scheme (“Hubs Scheme”), with the aim to promote exports and generate employment opportunities at the grassroots level. Initially, the Directorate General of Foreign Trade would adopt a "challenge route" method to select those districts that have products with significant export potential, allowing states and districts to compete for financial incentives under the Hubs Scheme. Further, the Hubs Scheme would be a centrally-sponsored, with 60% of the total cost funded by CG and the remaining by the state governments.
Startups to Receive Airfare Support for Export Promotions (source)
Under the Market Access Initiatives Scheme, startups and new exporters are now eligible for airfare reimbursement to participate in international events, while the cap for existing exporters has been raised by 20%. The aim is to offer financial support for initiatives aimed at promoting exports and would further encourage the new entrepreneurs to enter the exports field. Airfare reimbursements would also be available to hosts of overseas buyers for meetings held in India. These incentives are a part of India’s goal to increase mega trade fairs, increase both local and foreign exhibitions and achieve an overall increase in the export of goods.
CG Working on Comprehensive Cybersecurity Bill to Strengthen Online Safety and Tackle Cybercrime (source)
CG is on the verge of developing a comprehensive cybersecurity bill to address various aspects of online safety and establish clear guidelines for cyber fraud. This proposed legislation, either as a supplement or part of the Digital India Bill, aims to provide a contemporary legal framework to combat 21st-century cybercrime, which has been primarily dealt with by the outdated 19th-century British-era laws. The new bill is expected to define penal provisions for cyber breaches and identify cybercriminals under specific provisions, while also incorporating objective parameters to supplement existing penal provisions derived from the Indian Penal Code, 1860.
Parliamentary Panel Questions Leading E-commerce Firms on User Data Security (source)
The Parliamentary Standing Committee on Finance have addressed concerns with reputed e-commerce companies, inquiring about the steps taken by these companies to ensure the security of customer data. Additionally, the committee sought information on how the companies monitor data breaches and their compensation policies for affected customers. Further, various renowned banks have also shared insights with the Standing Committee with respect to the protective measures that they have implemented to safeguard customer data against cyberattacks as the number of cyberattacks rise phenomenally.
The Association of Indian Medical Device Industry (“AiMed”) Urges to Recall Draft of New Drugs, Medical Devices, and Cosmetics Bill, 2022 (“D&C Bill”) (source)
As CG equips itself to introduce the new D&C Bill with the aim to replace the 83-year-old Drugs and Cosmetics Act, 1940, AiMed, on the other hand, has raised concerns over the lack of consultations and is thereby urging CG to recall the draft D&C Bill. AiMed has claimed that major stakeholders were not involved in the drafting process and further emphasized the need for separate laws to regulate drugs and medical devices, citing the significant differences between the two products. Though CG had established a committee to frame new laws for medicines, medical devices, and cosmetics to replace the existing Drugs and Cosmetics Act, 1940, however, at present, there is no distinction between the regulatory treatment of drugs and medical devices.
Telecom Regulatory Authority of India's (“TRAI”) Over-the-Top (“OTT”) Regulation Proposal Raises Privacy and Encryption Concerns (source)
TRAI’s recent proposal to regulate OTT communication services has sparked a nationwide debate as the technology policy experts assert that these OTT services could face overregulation and potential threat to encryption. Currently, OTT services are regulated under the Information Technology Act, 2000, which would soon be replaced by the Digital India Bill, adding complexity to the regulatory landscape and therefore the introduction of TRAI as an additional regulator could complicate matters since the requirement for telecom licenses may impact the architecture of these services and potentially lead to the breaking of end-to-end encryption. Further, the privacy advocates also argue that the OTT services should be kept outside the jurisdiction of TRAI to protect the privacy, safety, and security of citizens.
Renowned Indian Multinational Steel Making Company Sacks 38 Employees for Breaching Company’s “Code of Conduct” (source)
A Renowned Indian Multinational Steel Making Company sacked a total of 38 employees on the grounds of breach of the company’s code of conduct including exercising unacceptable practices bordering on ethical issues and for sexual misconduct. The action taken by the company was based on the 875 complaints received regarding misuse of authority, and conflict of interest and contract. Further, the company believed that upholding the highest value and having a zero-tolerance policy would create an open environment that would encourage the employees to address their grievances in a more secure manner.
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.