Legal & Industry Updates - November 2021
SPECIAL EVENTS
ICC India Arbitration Day, Virtual Conference, November 27, 2021
The team at Ivy Law participated in the “4th ICC India Arbitration Day” virtual conference organized by International Chamber of Commerce. The key highlights of the conference included discussion on institutions, technology and other essential stakeholders in an arbitration ecosystem, especially after the outbreak of the pandemic; and the effect of the recent amendment act on costs, timeline and conflicts included in the arbitration process. Emphasis was also given on building the image of India as a pro-arbitration country and the existing problems which are yet to be addressed.
Webinar on “Principles, Steps and Strategies in Negotiating Commercial Contracts”, November 18, 2021
The team at Ivy Law participated in a webinar on “Principles, Steps and Strategies in Negotiating Commercial Contracts”, organized by Lawctopus. The webinar primarily focussed on four segments, that is, setting up the context for contract negotiation; breaking down the negotiation into agendas for carrying it smoothly; the principles to be followed for staying on track during the negotiation process; and the different strategies that could be adopted for an effective negotiation. The session highlighted some of the very important practical nuances in the process of negotiating commercial contracts such as the approach of different parties in the negotiation process and how to build a win-win situation by not only keeping the interest of the client at sight but also understanding the situation and needs of the other party.
LEGAL & INDUSTRY UPDATES
Consultation Paper for the Review of Provisions Related to Preferential Issues Guidelines under Chapter V of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) (source)
SEBI has issued a discussion paper proposing changes in the framework of preferential issues on 26th November 2021. In the discussion paper, SEBI proposes to change the pricing formula, valuation methodology and lock-in requirements for preferential issue. As per the current framework, the price of each share is determined by the volume-weighted average price of weekly highs and lows for the last 26 weeks or 2 weeks, whichever is higher. As per the proposed framework, the price will be the highest amount between volume-weighted average price of 60 trading days or 10 trading days. The primary objective behind this proposal for amendment is to avoid the 26 weeks long period, which is too long considering the market volatility. The proposed change will not only be beneficial for the promoters but also for the existing investors to help the company at the time of need. Further, SEBI has also proposed that any change in control or allotment over 5% by way of preferential issue will require a valuation report from a registered valuer. Apart from this, such an allotment will also require a reasoned recommendation from a committee of independent directors. SEBI has also proposed to reduce the lock-in requirement in preferential issues from 3 years to 18 months, for promoters and for non- promoter group, it will be reduced from 1 year to 6 months. Other recommendations include allowing pledging of securities allotted under the route, and allowing issue for consideration other than cash, which includes shares swap.
Proposed Legal Framework for Cross-Border Insolvency under the Insolvency and Bankruptcy Code, 2016 (source)
The Ministry of Corporate Affairs (“MCA”) through a notice dated November 24, 2021 has invited public comments on the proposed legal framework for cross-border insolvency under the Insolvency and Bankruptcy Code, 2016 (“IBC Code”). The ‘Cross-border insolvency’ denotes circumstances in which an insolvent debtor has assets and/or creditors in more than one country. MCA has proposed to enact provisions on cross-border insolvency in line with Draft Part Z which provides that the model law applies to individuals as well as corporate persons. The model law suggests that businesses whose resolution is governed by a special law or whose insolvency significantly affects public interests may be exempt from the applicability of the cross-border insolvency law. It is proposed that financial service providers may be excluded from the applicability of cross-border insolvency provisions under Draft Part Z.
The Minerals (Other than Atomic and Hydro Carbons Energy Mineral) Concession Rules, 2021 (source)
The Ministry of Mines vide the Minerals (Other than Atomic and Hydrocarbons Energy Mineral) Concession (Fourth Amendment) Rules, 2021 (“Amendment Rules”) has amended the Minerals (Other than Atomic and Hydrocarbons Energy Mineral) Concession Rules, 2016, which will be effective from 2nd November 2021. As per the Amendment Rules, in any lease where mineral is used for captive purpose, the lessee may sell up to 50% of total produce in a financial year but must ensure that not less than 50% of the produce is used to meet the requirement of the end-use plant linked with the mine. This amendment will ensure better availability of the mineral in open market and will take away the burden of over pricing and production, eventually improving ease of doing business in the domestic mineral sector. As per the Amendment Rules, the lessee has to pay an additional amount to the state government as royalty, which will vary for different minerals. The penalty on late payment of penalty has been reduced to 12% from earlier 24%. The Amendment Rules further exempt the lessee from making payments to the state government, while transfer of mines.
The Mineral Conservation and Development (Amendment) Rules, 2021 (source)
The Ministry of Mines vide the Mineral Conservation and Development (Amendment) Rules, 2021 (“MCD Amendment Rules”), has amended the Mineral Conservation and Development Rules, 2017. MCD Amendment Rules require submission of digital images of mining areas by lessees. Lessees, who have annual excavation plan of one million tonne or more or having leased area of 50 hectare or more are required to submit drone survey images of leased area and up to 100 meters outside the lease boundary every year. Other lessees are required to submit high resolution satellite images. Further, to reduce compliance burden, the requirement of daily return by lessees have been omitted. The power to take actions against false, wrong, or incomplete information in the monthly or annual returns have been granted to the Indian Bureau of Mines, in addition to the state government. Penalty provisions have also been rationalized by reducing penalty for minor violations. For minor violations, penalty would only include fine, unlike the earlier scenario where imprisonment was also included as penalty for minor violations.
Central Government to Withdraw all Three Agricultural Laws in the Winter Session of Parliament (source)
The central government, on 19th November 2021, announced the repeal of the three farm laws against which farmers have been protesting. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, which creates an option to sell directly to the deregulated zones; the Essential Commodities (Amendment) Act, which removes stockholding limits on farm produce; and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services, which is aimed at creating a framework of contract farming, were enacted last year. The Central Government has decided to set up a committee of Central and State representatives along with agriculture scientists, economists and farmers to reform the sector.
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.