Legal & Industry Updates - November 2023
SPECIAL EVENTS
Right to Information, November 18, 2023
The team at Ivy Law participated in a webinar on “Right to Information” organized by MLD Foundation. The dialogue was wide ranging, covering several aspects of the Right to Information Act, 2005 (“RTI Act”) including the rights and benefits bestowed upon the citizens of India under the RTI Act and how it has been hailed as a landmark legislation that has promoted transparency and accountability in the government sector. The webinar stressed on why and how to raise awareness of the RTI Act and empower people to use it in a more productive manner. The steps that need to be taken care of while filing a Right to Information request was alsdiscussed at length.
LEGAL & INDUSTRY UPDATES
Rule Allowing Indian Companies to List Overseas to Come into Force from 30th October, 2023 (source)
The Ministry of Corporate Affairs (“MCA”) has issued a notification appointing 30th October, 2023 as the effective date for the implementation of the provisions of Section 5 (Exemption from certain provisions for issue of securities of public company for listing in foreign jurisdictions) of the Companies (Amendment) Act, 2020, wherein certain classes of public companies are now allowed to issue specific class of securities for the purpose of listing on permitted stock exchanges in permissible foreign jurisdictions, thereby promoting versatility for such public companies and attracting international investors, while also avoiding currency conversion costs, improving corporate ethics, and assisting startups in their formation. MCA, however, is still to notify the class of securities, which the public companies would be allowed to issue, along with the foreign jurisdictions and the class of public companies.
MCA Calls for Regular General Meetings of Companies (source)
Amid a surge in company incorporations at a record pace, MCA has issued guidelines for companies, urging them to organize general meetings regularly, as these meetings provide a platform for shareholders to question management decisions, thereby reducing corporate frauds and financial risks. Further, general meetings assist companies in fulfilling their responsibility of communicating true and accurate information about their performances to members and also provide a grievance redressal platform for the shareholders. It is therefore mandatory for companies to hold Annual General Meeting of members under the Companies Act, 2013. Additionally, MCA has also asked companies to file their financial statements and annual returns on time to avoid additional fees.
MCA Fines Four Companies for Failing to Hire Female Directors on Time (source)
MCA has imposed penalties on four companies in two months for their failure to appoint female directors within the stipulated time frames under Rule 3 (Woman director on the Board) of the Companies (Appointment and Qualification of Directors) Rules, 2014, wherein all listed firms and large public limited companies with paid-up capital of INR 100 crore or more or minimum annual turnover of INR 300 crore must appoint at least one woman to their boards. Further, Section 149 (Company to have Board of Directors) of the Companies Act, 2013 also mandates the appointment of female directors in such categories of companies. This development sheds light on the Central Government's emphasis on having more female leaders in company boardrooms so that there is no special treatment towards any particular gender.
The Ministry of Electronics and Information Technology (“MeitY”) Urges Social Media Platforms to Take Down Any Misleading Information within 36 Hours (source)
MeitY has issued an advisory to major social media companies directing them to take stringent action against any content that violates the rules & regulations in place within the timeframe of thirty-six hours as stipulated in the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”), with the aim to ensure that due diligence is exercised and reasonable efforts are made to identify misinformation. Further, MeitY asserted that since safety and trust of online users is their foremost priority, any failure to comply with the same would attract penalty under rule 7 (Non-observance of Rules) of IT Rules and could render the organisation liable to losing protection under section 79(1) (Exemption from liability of intermediary in certain cases) of Information Technology Act, 2000.
The Reserve Bank of India (“RBI”) Issues Norms to Regulate Cross-Border Payments Platforms (source)
With the escalating cross-border payments, RBI has issued guidelines to directly regulate the Indian digital payment ecosystem along with its players, with the objective to help harmonise regulations across the entire payment stacks. As per the notification, all entities processing cross-border transactions for the import and export of goods and services in online mode would come under RBI’s direct regulation and be clubbed under ‘Payment Aggregator-Cross Border’ class. Further, RBI has laid down a host of requirements for applicants seeking cross-border payment licenses including setting a minimum net-worth threshold of INR 15 crore at the time of submitting the application. Also, startups and other non-banks already offering such services would be mandated to register themselves with the Financial Intelligence Unit-India.
Financial Technology (“Fintech”) Lenders May Face Heat After RBI Tightens Norms for Unsecured Lending (source)
RBI, 16th November, 2023, issued a directive requiring lending institutions to increase their risk weightage or the amount of capital to be set aside against unsecured loans disbursed by them, with the aim to curb lenders who may have followed lenient practices in loan appraisal. However, the Fintech players who use technology platforms to generate leads and provide unsecured personal loans, consumer durable loans, and credit cards could face the heat as they would now be required to increase their risk weightages against such loans to 125% from 100% presently. Further, Fintech firms that draw their capital from Non-Banking Financial Companies would now see a sharp uptick in the cost of funds due to the new regulations.
India & United States of America (“USA”) Sign Memorandum of Understanding (“MoU”) for Greater Cooperation Among Startups to Promote Innovation (source)
India and USA have signed a MoU to promote innovation ecosystem through increasing cooperation among startups, addressing regulatory issues to cooperation, and sharing information in line with best practices for startup fundraising, thereby promoting innovation and job growth. The dialogue is a cooperative undertaking at ministerial level between India and USA with the aim to deepen ties between business communities and encompass regular government-to-government meetings to be held in conjunction with private sector meetings which would facilitate trade and maximize investment opportunities.
Supreme Court (“SC”) Refuses Plea to Make its Sexual Harassment Regulations Gender-Neutral (source)
In a significant legal development, SC has refused to entertain a plea seeking amendments in Gender Sensitization and Sexual Harassment of Women at the Supreme Court of India (Prevention, Prohibition and Redressal) Regulations, 2013 (“SC POSH”) for forging the same to be gender neutral. The amendments were sought in view to bring the constitutional rights of other persons such as lesbian, gay, bisexual, transgender, intersex, queer/questioning, asexual persons under the umbrella of these regulations. However, SC opined that it would be inappropriate to direct the aforesaid amendments to be made to SC POSH as otherwise the whole purpose and object of SC POSH would be diluted and denuded of its effect.
SC Denies Insolvency and Bankruptcy Code, 2016 (“IBC”) Relief to Personal Guarantors (source)
SC, on 9th November, 2023, upheld the constitutionality of the provisions of IBC relating to personal guarantors' insolvency resolution wherein it held that section 95 to 100 of IBC cannot be deemed unconstitutional because they do not give personal guarantors a chance to be heard before creditors’ insolvency petitions are admitted against them and the moratorium is automatically imposed upon them at the time the insolvency petition is filed. The petitioner called for incorporating principles of natural justice, however, the respondent argued that the timing of applying natural justice principles was crucial and further stressed the need for time-bound processes in the IBC to address financial issues.
Rajasthan High Court: Surrogate Mothers Also Have the Right to Maternity Leave (source)
Rajasthan High Court, on 8th November 2023, has affirmed that a natural biological mother, and a mother who has begotten a child through surrogacy cannot be differentiated for the purpose of granting maternity leave. The denial of maternity leave to surrogate mothers would violate their right to life under Article 21 (Right to Life) of the Constitution of India which includes the right to motherhood and the right of every child to full development. Further, it was also recommended that the Central as well as Rajasthan government should consider bringing in a legislation for providing maternity leaves to surrogate mothers as the existing laws do not provide for the same.
Indian Healthcare Firms to Generate $37 Billion in Revenue by 2030 (source)
The Indian digital health market is estimated to expand to $37 billion by 2030, as per various reliable reports. The sector is further driven by rapid digitisation, the proliferation of innovative health technology platforms, partnerships between startups and established companies, and favourable funding environments for viable business models, supported by government initiatives. Further, as the healthcare landscape is evolving, there is enhanced collaboration between established healthcare providers and digital-native startups, with the aim to provide more efficient healthcare solutions tailored to meet the evolving needs of customers.
The All India Organization of Chemists and Druggists (“AIOCD”) Urges Drugmakers to Not Advertise on Electronic-Pharmacy (“E-Pharmacy”) Platforms (source)
AIOCD has urged pharmaceutical companies to refrain from advertising their products on e-pharmacy platforms, alleging that some of the online medicines sellers are operating illegally and practicing predatory pricing. They are of the view that these e-pharmacy platforms are operating in violation of the Drugs and Cosmetics Act, 1940 and Drugs and Cosmetics Rules, 1945 and therefore have been alerted regarding issuance of show cause notice by Drugs Controller General of India.
Companies Seek Cyber Insurance on Data Laws, Digitisation (source)
While digitalization and data coverage are flooding the corporate landscape, cyberattacks and frauds are also increasing, and therefore companies are opting for cyber insurance with the aim to mitigate risk in digitization and data laws. At present, the market for cyber insurance is valued at USD 50-60 million and is expected to grow furthermore in the next three years. However, since cyber insurance is an expensive & not a very conducive attribute, the rising cases of cyber-attacks, frauds & scams requires the Indian cyber insurance market to mature & develop schemes with more optimum coverage.
Local Investors Observe Opening in Fintech Infrastructure Players Offering Banking-as-a-Service (source)
As overall investments in domestic Fintech startup see a slump, a new category of companies providing financial infrastructure is attracting local investors wherein these companies are providing the necessary technology stack, which is helping banks further digitize their processes, expedite the launch of newer financial products, while also helping Fintechs partner with these institutions. The sudden spike in interest is attributable to a large addressable market as bank haul for credit card programs and Application Programming Interface management solutions along with better predictability of outcomes. On the other hand, it is imperative for these Fintech players to work with large banks as investors assess them for the moat created.
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.