Legal & Industry Updates - October 2021
SPECIAL EVENTS
Conference on Digital Privacy and Data Protection, October 6-7, 2021
The team at Ivy Law participated in a two-day inaugural edition conference on “Digital Privacy and Data Protection” organised by MediaNama. The key highlights of the conference were upon the usage of personal data by tech firms through invasion of privacy; repercussions of internet and digital liberalisation; global trends in data protection legislations; and advocacy of digital privacy norms among others. The conference also focused on deep-rooted unethical data-mining practices and the need for a strong legal as well as a technical safeguard mechanism for protection of privacy of individuals. Deliberations were also made on suggested reforms in various global data protection and privacy legislations and treaties.
Symposium on ‘Corporate Governance - Series 3: Effective Nomination and Remuneration Committee’, October 21, 2021
The team at Ivy Law participated in Series 3 of Online Corporate Governance Symposium on Effective Nomination and Remuneration Committee organised by ASSOCHAM, India. The key highlights of the discussion were on the role of the board of directors (BoD) and members of audit committees in corporate governance, the need for strengthening the Nomination and Remuneration Committees (NRC), as well as placing the NRC among the central and key committees of a company. The composition of the BoD and audit committee were also deliberated upon as a crucial factor for internal governance. Relevant regulations regarding the composition of internal committees of listed companies, specifically pertaining to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 were also analysed.
LEGAL & INDUSTRY UPDATES
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021 (source)
The Insolvency and Bankruptcy Board of India, on 30th September 2021 notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021 to amend Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Principal Regulations”). The amendment inserted a new sub-regulation 4A in regulation 36A of the Principal Regulations stipulating that any modification in the invitation for expression of interest can be made in the manner as the initial invitation for expression of interest was made and any such modification shall not be made more than once. Another key amendment is made by substituting sub-regulation 1A under regulation 39 of the Principal Regulations pursuant to which the resolution professional may, if envisaged in the request for resolution plan- (allow modification of the resolution plan received), but not more than once; or use a challenge mechanism to enable resolution applicants to improve their plans.
Government Approves Air India Disinvestment - Tatasons’ SPV Talace Pvt Ltd Wins Bid for Air India (https://pib.gov.in/PressReleasePage.aspx?PRID=1762146)
The Cabinet Committee on Economic Affairs, empowered Air India Specific Alternative Mechanism to approve the highest price bid of M/s Talace Pvt Ltd, a wholly owned subsidiary of M/s Tata Sons Pvt. Ltd for the sale of 100% equity shareholding of Government of India in Air India along with equity shareholding of Air India in Air India Express (AIXL) and AISATS (joint venture between Air India Limited and SATS Limited). The winning bid was for Rs 18,000 crore as Enterprise Value consideration for Air India (AI, 100% shares of AI along with AI’s shareholding in AIXL and AISATS). The transaction does not include non-core assets including land and building, valued at Rs 14,718 crore, which are to be transferred to GoI’s Air India Asset Holding Limited. The next step will be to issue the Letter of Intent and then sign the Share Purchase Agreement following which, the conditions precedent would need to be satisfied by the successful bidder, the company and Government. It is expected that the transaction will be completed by December 2021.
Amendment in Voice Mail / Audiotext / UMS License Agreement for Rationalisation of Bank Guarantees (source)
The Ministry of Communication, Department of Telecommunications, through a notification dated October 8th, 2021 amended Bank Guarantee clause pertaining to Performance Bank Guarantee (PBG). The amendment states that the licensee shall submit a PBG from any scheduled bank or public financial institution authorised to issue bank guarantees, in a prescribed format for an amount of Rs Sixty Thousand before signing the License Agreement. The PBG would now serve the purpose of covering for the violation of license conditions as well as ensuring the performance under the license agreement including compliance of instructions issued by licensor from time to time. The amendment also changed the validity of the PBGs, which now shall be maintained and kept valid by the license during entire currency of the license agreement. The amendment further provides that the licensor may raise the value of PBGs whenever any demand is raised for non-compliance of terms and conditions of License to the extent it remains unscrutinised by existing PBGs.
International Financial Services Centres Authority (Registration of Insurance Business) Regulations, 2021 (source)
International Financial Services Centres Authority (IFSCA) on October 18th, 2021 notified International Financial Services Centres Authority (Registration of Insurance Business) Regulations, 2021. The objective of the regulations is to put in place the process of registration and operations of insurer and reinsurer in an International Financial Services Centre under regulatory purview of the International Financial Services Centres Authority Act, 2019. The regulation, among others, provides provisions for the registration of insurance business and rules for regulatory and governance functions. The regulation defines the eligibility criterion for registration of Indian or foreign insurer or re-insurer, key requirements which include registration and licensing of business under regulatory authorities, track record of the insurer in respect to regulatory and supervisory compliance, grant of no objection certificate by appropriate authorities, among others. The regulation also defines, under Chapter IV (Permissible Activities), the class of businesses to be undertaken by International Financial Service Centre Insurance Office subject to specified conditions.
Reserve Bank of India Imposes Monetary Penalty on two Payment System Operators (source)
The Reserve Bank of India (RBI), in a press release dated October 20th, 2021, announced that, by an order dated October 01, 2021, RBI imposed a monetary penalty of ₹1 crore on Paytm Payments Bank Limited (PPBL), for an offence committed of the nature referred to in Section 26 (2) (Penalties) of Payment and Settlement Systems Act, 2007 (“PSS Act”). On examination of PPBL’s application for issue of final Certificate of Authorisation, it was observed by RBI that PPBL had submitted information which did not reflect the factual position. As this was an offence of the nature referred to in Section 26 (2) of the PSS Act, a notice was issued to PPBL. After reviewing the written responses and oral submissions made during the personal hearing, RBI determined that the aforementioned charge was substantiated and warranted the imposition of a monetary penalty. Further, a Compounding Order dated October 07, 2021 was also issued to Western Union Financial Services Inc (WUFSI), a money transfer service cross-border in-bound service (customer to customer only) operator, imposing a penalty of ₹27,78,750 for non-compliance with certain provisions of the directions contained in the Master Direction on Money Transfer Service Scheme dated February 22, 2017. The imposition of penalties was based on the deficiencies in regulatory compliance and were not intended to pronounce upon the validity of any transaction or agreement entered into by the entities with their customers.
Scale Based Regulatory Framework for Non-Banking Financial Companies (source)
RBI notified Scale Based Regulation (SBR), a revised regulatory framework for Non-Banking Financial Companies (NBFCs) on 22nd October 2021. The SBR divided NBFCs in four different tiers referred as “layers” based on the scale of the NBFCs namely Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL). Various factors like acceptance of deposits, undertaking of certain operations and activities by the NBFC and the asset size of the NBFC are considered for determination of the level or layer of the NBFCs. Key revisions made under SBR include requirement of going through internal assessment of need of capital, commensurate with risks in their business by NBFC-ML and NBFC-UL. This internal assessment shall be done on similar lines as Internal Capital Adequacy Assessment Process (ICAAP) prescribed for pillar-2 commercial banks. Another regulatory change notified under SBR is the merger of prescribed extant credit concentration limits separately for lending and investments for NBFC-ML and NBFC-UL. The revised single exposure limit is 25% for single borrower/party and 40% for single group of borrowers/parties. Various internal governance regulations for separate layers of NBFC are also introduced under SBR including constitution of Risk Management Committee in NBFC-BL and appointment of Chief Compliance Officer in NBFC-ML and NBFC-UL.
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.