Legal & Industry Updates - November 2020
SPECIAL EVENTS
Key Considerations while Selecting a Legal Entity for a Start Up, November 26, 2020
The team at Ivy Law participated in a webinar, conducted by Swadeshi Startup, focusing on the types of legal entities for setting up a startup. The webinar gave insights on the compliance requirements and their implications on different statutory entities. The panel emphasised on entities such as a proprietorship, partnership, LLP, and a company, in the context of liabilities, entity formation and winding up procedures.
LEGAL & INDUSTRY UPDATES
Re-Classification of Promoter/Promoter Group Entities (source)
As per a consultative paper issued by Securities and Exchange Board of India (“SEBI”) on November 23, 2020, the re-classification condition on shareholding, may be amended such that the promoter(s) seeking re-classification and persons related to the promoter(s) seeking re-classification shall not together, hold 15% or more of the total voting rights in a listed entity. SEBI has received feedback from market participants to review the threshold of 10% so that the persons who may have been promoters but are no longer in day-to-day control having shareholding of less than 15% may “opt-out” from being classified as “promoters”, without having to reduce their share-holding. It also stated that for such re-classification, the company can reduce the waiting period between passing the resolution in a board meeting and seeking permission from shareholders to one month from three months now. The proposal is open for suggestions till December 24, 2020.
Arbitration and Conciliation (Amendment) Ordinance, 2020 (source)
The Arbitration and Conciliation (Amendment) Ordinance, 2020 (“Ordinance”) is notified as of November 4, 2020. The Ordinance amends Section 36(3) (Enforcement of arbitral award) of the Arbitration and Conciliation Act, 1996. A proviso is inserted to provide that where the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award or the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge to the award. Further, Section 43J (Norms for accreditation of arbitrators), which specifies the norms of the arbitrators, has been substituted, to provide the qualifications, experience and norms for accreditation of arbitrators, as specified by the regulations.
Investor Grievance Redressal Mechanism Circular Issued by SEBI (source)
As per the circular issued by SEBI on November 6, 2020, stock exchanges are instructed to ensure that investor grievances are resolved within 15 working days after receiving such complaints. In case the complainant is not satisfied with the resolution, the same may be referred to the Investor Grievance Redressal Committee (“IGRC”) after recording the reasons in writing by the chief regulatory officer. Further, with regard to handling complaints by IGRC, SEBI has mandated that the committee will resolve the investor complaint through a conciliation process. For any dispute between the member and the client relating to or arising out of the transactions in Stock Exchange, which is of civil nature, the complainant/ member shall first refer the complaint to the IGRC and/ or to arbitration mechanism provided by the stock exchange before resorting to other remedies available under any other law. For the removal of doubts, it is clarified that the sole arbitrator or the panel of arbitrators, as the case may be, appointed under the stock exchange arbitration mechanism shall always be deemed to have the competence to rule on its jurisdiction. A complainant/member, who is not satisfied with the recommendation of the IGRC, shall avail the arbitration mechanism of the stock exchange for settlement of complaints within six months from the date of IGRC recommendation.
Discontinuation of Returns/Reports under Foreign Exchange Management Act, 1999 (source)
As notified by the Reserve Bank of India (RBI) on November 13, 2020, in order to improve ease of doing business and reduce the cost of compliance, the existing forms and reports prescribed under Foreign Exchange Management Act, 1999 (“FEMA”), were reviewed by RBI, and it has been decided to discontinue 17 returns/reports with immediate effect, namely Category-wise transaction where the amount exceeds USD 5000 per transaction; Category-wise, transaction-wise statement where the amount exceeds USD 25,000 per transaction; Statement of Purchase transactions of USD 10,000 and above (including transactions of their franchisees); Extension of Liaison Offices (LOs); Extension of Project Offices (POs); Daily inflow/outflow of foreign fund on account of investment by FPIs; Data relating to actual inflow/outflow of remittances on account of investments by Foreign Institutional Investors (FIIs) in the Indian Capital market; Reporting of Inflow/Outflow details in respect of Mutual Fund by Asset Management Companies; Market value of FII Investment in India on fortnightly basis; Market value of FII Investment in India on Monthly basis; FII holdings as percentage of floating stock; Form DRR for Issue / transfer of sponsored / unsponsored Depository Receipts; ADR/GDR Movement Report- two way fungibility; Repatriation of Sales proceeds of underlying shares represented by FCCBs/GDRs/ADRs; GDR/ADR underlying shares issued, re deposited and released monthly reporting and Monitoring of disinvestments by Overseas Corporate Bodies.
The Department of Industrial Policy & Promotion Sets Standard Operating Procedure (SOP) for Processing Foreign Direct Investment (FDI) Proposals (source)
As per the notification issued by the Department of Industrial Policy & Promotion (DIPP) on November 9, 2020, all proposals for foreign investment in sectors/activities requiring Government approval as per the Consolidated FDI Policy dated 15.10.2020 (“FDI Policy”) and Foreign Exchange Management (Non-Debt Instrument) Rules, 2019 dated 17.10.2019, (“FEM Non-Debt Rules”) will be filed online through the Foreign Investment Facilitation Portal (“FIFP”). The applicant will be required to submit the proposal for foreign investment in terms of the guidelines and requirements under the FDI Policy and SOP, for processing FDI proposals. The SOP for FDI proposals has detailed outlines for Online Filing of Applications; Competent Authorities for Approval of Foreign Investment; Procedure for Processing of Applications Seeking Approval for Foreign Investment; Time Limits for Submission of Various Documents; Monitoring & Review.
Draft Occupational Safety, Health and Working Conditions (Central) Rules, 2020 (“Draft OSH Rules”) (source)
The Ministry of Labour and Employment on November 19, 2020, notified the Draft OSH Rules. The Draft OSH Rules provide for the operationalisation of the provisions of the Occupational Safety, Health and Working Conditions Code, 2020 related to safety, health and working conditions of dock workers, building or other construction workers, and mines workers, among others (“Workers”). The Draft OSH Rules prescribe the issuance of an appointment letter in a format, providing for the designation, category of skill, wages, avenue for achieving higher wages or higher position to every employee of an establishment within three months of coming into force of the Draft OSH Rules. Annual health examination is to be conducted by the employer free of cost for every Worker, who has completed 45 years of age. An all-India single licence for a contractor supplying or engaging contract labour in more than one state for five years has been provided as against work order-based licensing at present. Further, under the Draft OSH Rules, safety committees have been made mandatory for every establishment employing 500 or more workers to provide an opportunity for the Workers to represent their concern on occupational safety and health matters.
Draft Rules Under the Code on Social Security, 2020 (“Draft CSS Rules”) (source)
The Ministry of Labour and Employment on November 13, 2020, has notified the Draft CSS Rules. The Draft CSS Rules are linked to provisions relating to Employees Provident Fund, Employees State Insurance, National Social Security Board for un-organised workers, gig workers and platform workers outlined in the Code on Social Security, 2020. Gratuity provisions for employees hired on a fixed term employment have been introduced. Single electronic registration of an establishment, including cancellation of the registration in case of closure of business activities is introduced. Provision for the manner of payment of contribution by the aggregators through self-assessment has also been prescribed.
Draft Data Centre Policy 2020 Assigns 'Infrastructure' Status to the Sector (source)
As per the draft released by the Ministry of Electronics & Information Technology (“MeitY”) on November 5 2020, the draft data centre policy is formulated to benefit the data centre park developers/data centre operators as well as the allied ecosystem of the data centre sector. The policy intends to ensure sustainable and trusted data centre capacity within the country. It provides infrastructure status to the data centre sector, at par with other sectors like railways, roadways, and power. It also provides a single-window, time-bound clearance system for all the approvals required to set up a data-centre park. Additionally, data centres will be declared as an essential service under “The Essential Services Maintenance Act, 1968, which means that there will be continuity of services even during times of calamities or crisis.
Over The Top (OTT) Platforms under Regulatory Framework (source)
The government has brought OTT platforms like Netflix, Amazon Prime Video and Disney+ Hotstar besides other online news and current affairs content providers, under the ambit of Ministry of Information and Broadcasting, giving it powers to regulate policies and rules for the digital space. So far, there was no law or autonomous body governing digital content in India. The decision came in less than a month after the Supreme Court sought the Centre's response on a PIL for regulating OTT platforms by an autonomous body.
Easing of FDI Rules for Border Nations (source)
As reported by Economic Times, India is considering to allow up to 26% FDI from countries with which it shares a land border, without government scrutiny in sectors that are on the automatic route. An inter-ministerial panel of secretaries is discussing various options and a decision is expected soon. The actual threshold may even be set at the prescribed 25% beneficial ownership limit in the Prevention of Money Laundering Act, which will deny such investors the power to block special resolutions under the provisions of the Companies Act, 2013.
Guidelines for Real-Money Gaming Advertising (source)
As per the press release issued by the Advertising Standards Council of India (ASCI) on November 24, 2020, ASCI has introduced guidelines to make real-money gaming advertising safer and more responsible. The guidelines have been developed to ensure that such advertising makes users aware about financial and other risks that are associated with playing online games with real money winnings. The guidelines will be effective from December 15, 2020. The guidelines restrict the depiction of a person under the age of 18 years to be engaged in playing online games for real money winnings. The gaming advertisement involving an element of financial risk or addiction is required to carry a disclaimer stating such nature of the game and that the users should play at their own risk. Additionally, the advertisements should not present ‘online gaming for real money winnings’ as an income opportunity or an alternative employment option.
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.