Legal & Industry Updates - June 2023
SPECIAL EVENTS
Online Sensitization Program on the Prevention of Sexual Harassment at Workplace (POSH) Act, June 29, 2023
The team at Ivy Law participated in a webinar on the “Online Sensitization Program on the Prevention of Sexual Harassment at Workplace (POSH) Act” organised by LexPOSH. The key highlights of the webinar included discussion on the issue of creating a safe workplace environment for working women by ensuring that adequate standards are laid down to protect them from acts of sexual violence and harassment. The concept and definition of sexual harassment was postulated at length. Further, how a complaint can be filed by an aggrieved woman to the Internal Complaints Committee as well as matters of false or insufficient complaints were also addressed exhaustively.
LEGAL & INDUSTRY UPDATES
Companies (Accounts) Second Amendment Rules, 2023 (“Rules, 2023”) (source)
The Ministry of Corporate Affairs, on 2nd June, 2023, has notified Rules, 2023 to amend the Companies (Accounts) Rules, 2014 wherein a new proviso has been inserted under Rule 12 (Filing of financial statements and fees to be paid thereon) specifying that Form CSR-2 (Report on Corporate Social Responsibility) for Financial Year 2022-23 with the Registrar of Companies should be filed separately on or before 31st March, 2024, after filing FORM No. AOC-4 (Form for filing financial statement and other documents with the Registrar) or FORM No. AOC-4-NBFC (Ind AS) (Form for filing consolidated financial statements and other documents with the Registrar for NBFCs).
Reserve Bank of India (“RBI”) Issues Draft Cybersecurity Norms for Payment System Operators (“PSOs”) (source)
RBI, on 2nd June, 2023, has released draft master directions on cyber resilience and digital payment security controls for PSOs with the aim to cover governance mechanisms that identify, assess, monitor and manage cybersecurity risks. As per the directions, the PSO board would be given the responsibility of ensuring appropriate surveillance over information security risks such as cyber risk and cyber resilience. However, primary oversight would be delegated to a sub-committee of the board scheduled to meet a minimum of once every quarter. Further, PSO shall formulate a board approved information security policy to manage potential information security risks covering all applications and products concerning payment systems as well as management of risks that have materialized and the same shall be reviewed annually.
The Advertising Standards Council of India (“ASCI”) Releases New Guidelines for Online Deceptive Design Patterns in Advertising (source)
ASCI, on 13th June, 2023, has issued new standards for ‘Online Deceptive Design Patterns in Advertising’ with the aim to tackle the issue of dark patterns in online advertising and empower businesses, designers, and stakeholders to create user-centric experiences while promoting transparency, trust, and ethical standards in the digital landscape, thereby reducing the threat of disguised advertisements and predatory pricing. The guidelines require quoted prices in advertisements and electronic commerce (“e-commerce”) sites to indicate non-optional taxes, tariffs, fees and charges that apply to all the customers in order to make the pricing of various items and services on online platforms visible for consumers with the objective to avoid drip pricing wherein price elements are not provided upfront and the complete price is revealed later at the end of the purchasing process.
Startups Move Madras High Court (“HC”) for Google Billing Policy Relief (source)
Several startups have filed a petition with the Madras HC challenging Google's notice that requires them to adopt the company's mandatory billing system or face removal from the Play Store. They have asserted that Google is using threats to force startups to comply with its payment policy and therefore The Alliance of Digital India Foundation has filed a petition with the Competition Commission of India (“CCI”) against Google's policies. The startups are further concerned about being removed from the platform, as 90% of their business comes from Android, and further argued that the commission charged by Google is not sustainable for their companies. However, Google claims that its payment policy on Google Play is in compliance with the CCI directive and it also offers alternative options for developers to conduct their business on Android.
The Ministry of Law and Justice Forms Expert Panel to Reform Arbitration Law (source)
The Ministry of Law and Justice has to set up a 16-member expert committee to examine the working of arbitration law in India as well as recommending reforms in the Arbitration and Conciliation Act, 1996 (“A&C Act”). The primary motive behind setting up the committee is to minimize court intervention and make arbitration a party-driven, cost-effective and time-bound process with finality attached to the final award. It aims to evaluate and analyse the operation of the present arbitration ecosystem of the country, including the working of the A&C Act, highlighting its strengths, weaknesses and challenges vis-a-vis other important foreign jurisdictions.
Securities and Exchange Board of India (“SEBI”) May Ease Compliance for Private Equity (“PE”) and Venture Capital (“VC”) Funds (source)
SEBI is soon expected to conduct a comprehensive review of the existing compliance norms for PE and VC funds with the aim to simplify, ease and reduce the cost of compliance for these particular Alternate Investment Funds (“AIFs”) and to avoid any potential blow-ups in the AIF sector as they are a steady source of investment. However, SEBI has sought suggestions from the AIFs themselves on how to reduce the compliance burden, as it is believed that excessive regulations could cause numerous difficulties and thereby hamper the industry's growth.
SEBI Proposes Enhanced Disclosure Requirements for High Risk Foreign Portfolio Investments (“FPIs”) (source)
SEBI has proposed stricter disclosure norms for certain FPIs with the aim to bring in more transparency and trust wherein, FPIs with either an exposure of more than 50% towards a single group or with assets exceeding INR 25,000 crore would be considered ‘high risk’ and would be required to provide additional information such as full identification of ownership, economic interests and control rights to avail FPI registration. The norms intend to allow market regulators to identify granular ownership details on a full look-through basis without applying any materiality thresholds prescribed in the Prevention of Money Laundering Act, 2002 and to keep a check on investments from FPIs based in countries that share their border with India, as they can only invest through the government route.
SEBI Expected to Approve Reformation of Mutual Fund Fees and Implementation of Stricter Code of Conduct (source)
SEBI has proposed significant changes to the total expense ratio (“TER”) which is the annual fee that mutual funds collect from unit holders, resulting in a decline in the cost of investing in their schemes, and also a stricter code of conduct for the asset managers. SEBI has stated that mutual funds should make the TER uniform at the fund house level instead of the scheme level which means that all equity or debt schemes of a fund house should charge a TER based on the assets managed. Currently, each scheme is allowed to charge a separate TER based on the asset size. Mutual funds and intermediaries, such as distributors, however, asserted that the change could have potential impact on their business.
Central Government (“CG”) to Release New Draft Policy to Level E-Commerce Playing Field (source)
CG is on the verge of introducing a new draft policy for e-commerce sector under the Consumer Protection Act, 2019 with the aim to ensure a fair market for small traders and businessmen and to keep big players from taking unfair advantage of their size. The new policy and procedures would ensure that no items are sold directly or indirectly to merchants registered on the e-commerce site since they are used to flouting the Foreign Direct Investment (“FDI”) norms and indulging in predatory pricing. Further, FDI regulations also prohibit a firm from having equity involvement or control over its inventory by an e-commerce marketplace or its group companies in order to sell its items on the platform.
CG Bans 14 Fixed-Dose Combination Drugs Citing Health Risks (source)
CG has banned 14 fixed-dose drugs on the grounds that it posed a risk to consumer’s health and did not have any therapeutic justification. Though the banned drugs involved many combinations that are commonly used to treat cough and cold, however, under Section 26 (Purchaser of drug or cosmetic enabled to obtain test or analysis) of the Drugs and Cosmetics Act, 1940, the manufacturing of these drugs must be prohibited in public interest and therefore it was necessary and expedient to ban the sale and distribution of these drugs for human consumption.
NITI Aayog Working to Integrate Micro, Small and Medium Enterprises (“MSMEs”) With Supply Chains (source)
NITI Aayog is working on introducing a comprehensive policy for MSMEs that would provide easier credit, inclusive of loans without collateral and reductions in documentation in order to integrate with larger supply chains. The plan intends on identifying products in sectors benefitting under Production-Linked Incentive schemes that may be supplied by MSMEs through dedicated vendor programs and is further expected to address the pressing challenges pertaining to MSMEs with the formal sector including restriction of credit flow through collaterals, inflated credit rates and lack of capacity expansion bandwidth.
The Mumbai Bench of the Income Tax Appellate Tribunal (“ITAT”) Views Expenses For Community Development, Environment Health & Safety as Corporate Social Responsibility (“CSR”) Expenditure (source)
ITAT, on 17th June, 2023, has held that once the expenditure has been accepted for contributing to the development of the community or to enhance environmental health and safety, it cannot be held to have been incurred wholly and exclusively for the purpose of business in the year under consideration and therefore cannot be claimed as a business expense. The ITAT's decision suggested that even if a business incurs an expense that may indirectly benefit its operations or reputation by contributing to community development or environmental health and safety, it cannot be classified as an expense incurred wholly for the purpose of business and would instead be treated as a separate category of expense related to CSR.
Top Internet Companies Pens Dissent Note on the Internet and Mobile Association of India’s (“IAMAI”) Stand on Digital Competition Bill (“New Bill”) (source)
Various renowned Indian startups have written to the Committee on Digital Competition Law (“CDCL”) against the submission made by IAMAI on the New Bill wherein IAMAI argued against the need for a separate digital competition law. CDCL was established by the Ministry of Corporate Affairs to explore the necessity of a new digital competition law and to potentially draft the Digital Competition Act. The IAMAI asserted that the New Bill could impede innovation and competition in India, however, Indian startups are displeased with this stance and have accused IAMAI of promoting views that are against Indian interests and in favor of foreign big technology companies.
The Insurance Regulation and Development Authority of India (“IRDAI”) Considers Changes to Law to Enhance Insurance Penetration (source)
IRDAI is deliberating on introducing rule changes to enhance insurance penetration with the aim to encompass several key aspects, such as streamlining capital requirements, implementing composite registration, introducing one-time registration for intermediaries, enabling insurers to offer value-added services, and allowing the sale of additional financial products. As per IRDAI, with insurance penetration standing at less than 5 per cent in India with a population of over 140 crores, it highlights substantial growth potential for investors.
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.