Legal & Industry Updates - September 2023
SPECIAL EVENTS
Understanding Corporate Jurisprudence: The What and Why on Corporate Law, September 03, 2023
The team at Ivy Law participated in a webinar on “Understanding Corporate Jurisprudence: The What and Why on Corporate Law” organized by Law Audience. The key highlights of the webinar included a thorough overview of the crucial role that companies play in society and covered a variety of subjects, including market dynamics, contract law, sustainability, and agency relationships. Discussions were held with regard to the concept of sustainable companies highlighting the importance of prioritizing environmental and social responsibility. The webinar further emphasized on the concept of markets as places where buyers and sellers converge and the importance of a large number of participants in efficient markets. The principal-agent relationship in company management was also deliberated upon.
Mediation in India in the Context of Newly Passed Mediation Bill 2023, September 23, 2023
The team at Ivy Law participated in a webinar on “Mediation in India in the context of Newly Passed Mediation Bill 2023” organized by Bharata Mata School of Legal Studies. The discussion was wide-ranging, covering various aspects of mediation including its importance, steps for mediation process, and the role of parties, among others. The webinar emphasized on how the Mediation Act, 2023, which received the President of India’s assent on 15th September, 2023, aims to foster a link between the mediation and the arbitration of commercial disputes, thus reducing the burden on Indian courts. All the 65 sections and rules of the Mediation Act, 2023 were also deliberated upon exhaustively.
LEGAL & INDUSTRY UPDATES
Competition Commission of India (“CCI”) Seeks to Widen Scope of Computing Mergers & Acquisitions (“M&A”) Deal Portfolio (source)
CCI, on 11th September, 2023, has introduced the draft CCI (Combinations) Regulations, 2023, with the aim to expand the definition of deal value for significant M&A transactions, suggesting that it should encompass "every valuable consideration, whether direct or indirect, immediate or deferred, cash or otherwise." This proposed change is expected to affect M&A deals in various sectors, including technology, infrastructure, and healthcare, and would include not only the shares or assets being acquired, but also the consideration for contractual rights, such as non-compete agreements, licensing of intellectual property rights, and technology assistance. Additionally, the concept of "inter-connected transactions" was also introduced. The draft norms were introduced following the recent amendments to the Competition Act, 2002, which specified a deal value threshold of INR 2,000 crore beyond which the approval of CCI is mandatory.
Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2023 („IPA Regulations, 2023“) and Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Second Amendment) Regulations, 2023 (“IP Regulations, 2023”) (source)
The Insolvency and Bankruptcy Board of India (“IBBI“), on 18th September, 2023, has notified the IPA Regulations, 2023 and the IP Regulations, 2023, with the aim to simplify enrolment and registration processes while ensuring a streamlined approach to exit procedures and associated compliance obligations. They key highlights of the amendments are:
Introduction of a unified enrolment and registration application form to enable submission of common application form for both enrolment and registration processes.
Introduction of timeline of sixty days for approval of unified application by the insolvency professional agency (“IPA”) and of thirty days forwarding the unified application to the IBBI.
Additional requirements introduced for the IPA while accepting application for surrender of professional membership or expelling the professional member including compliance in payment of fee to IBBI or disciplinary order issued by the IPA or IBBI, among others.
Reduction of timelines for approval of unified application for registration.
Introduction of requirement to furnish intimation to IBBI by the IPA in case of acceptance of application for surrender of professional membership, expulsion of professional member, demise of an individual or winding up or dissolution of a company, limited liability partnership or registered partnership firm, who are registered as Insolvency Professionals (“IPs”).
Introduction of provision for surrender of certificate of registration by the IP to IBBI.
The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 (“IRP Regulations, 2023”) (source)
IBBI, on 18th September, 2023, has notified the IRP Regulations, 2023, with the aim to expedite the debt resolution process for companies, reduce litigation and provide more clarity on the roles of the involved parties. The key highlights of the amendments are:
Codifying the process by which records of a company's assets can be taken over, extending this authority beyond just promoters and managers. In cases where relevant records are not handed over voluntarily, bankruptcy resolution professional has the option to approach a tribunal for enforcement.
Specifying the required steps for initiating a corporate debt resolution process, mandating the provisions of detailed information about the debt, including the date of default and acknowledgment of debt.
Addressing delays in the submission of claims by creditors by setting a time limit for submitting claims. Creditors must now submit their claims either before the date of issuance of a resolution plan or within 90 days from the insolvency commencement date, whichever is earlier.
The Reserve Bank of India (“RBI”) Urges Financial Technology (“Fintech”) Companies to Set Up Self-Regulatory Mechanisms (source)
RBI is imploring Indian Fintechs to prioritize responsible development and customer protection for the future by establishing a self-regulatory organization (“SRO”) within the Fintech sector and setting up guidelines and safeguards. As per the RBI, Fintechs should consider three key points:
Customer Centricity: Fintech companies should ensure that their products protect customer interests. Solutions should not only meet customer needs but also align with sustainable business objectives.
Governance: Fintechs need to heavily invest in corporate governance measures, emphasizing effective oversight, ethical conduct, and risk management.
Self-Regulation: To promote adherence to best practices within the industry, there needs to be an SRO and the RBI would be open to engaging with such an SRO to ensure regulatory compliance.
RBI Utilizes Foreign Exchange Swaps to Tackle Liquidity, Inflation (source)
RBI has resumed large-scale transactions in the forwards segment of the foreign exchange market with the aim to manage surplus liquidity in the banking system and further address inflation risks. Multiple tranches of short-term 'sell-buy' swaps have been conducted and measures are being taken to reduce surplus liquidity within the banking system, as an excess of funds in the hands of lender can contribute to inflationary pressures. The RBI’s objective is to manage liquidity effectively without disrupting smooth flow of credit in the economy and thereby focusing more on INR liquidity.
Securities and Exchange Board of India (“SEBI”) Urge Alternate Investment Funds (“AIFs”) to Frame Governance Code (source)
SEBI is pushing for a governance code for Indian private equity, venture capital, and angel funds, with the aim to ensure discipline and prevent potential misconduct within the rapidly growing AIFs. The proposed code may involve AIFs periodically providing self-declarations to an industry body, committing to rule compliance during license renewals, and addressing conflicts of interest. The Indian Venture and Alternate Capital Association could play a role in overseeing and enforcing the said code. SEBI’s efforts align with global regulatory trends, including the recent overhaul of private fund disclosure requirements by the United States Securities & Exchange Commission.
SEBI to Curb Financial Influencers (“Finfluencers”) to Help Investors Get Accurate, Unbiased Information (source)
SEBI is on the verge to regulate Finfluencers who disseminate financial information on social media platforms by charging substantial fees, ranging from INR 10,000 to INR 7.5 lakh for a single social media post, thereby making it imperative to introduce regulatory oversight. SEBI’s proposed measure aims to ensure accurate and unbiased financial information to investors, maintain authenticity, and reduce fraudulent activities. Under the proposed framework, Finfluencers would be required to register with SEBI and adhere to specific guidelines, and all the unregistered Finfluencers may face restrictions from partnering with mutual funds and stockbrokers for promotional activities. This primary objective of this move is to address concerns about unregulated Finfluencers potentially providing biased or misleading advice, given their commission-based models.
Central Government (“CG”) Contemplate Graded Timeline for Data Law Enforcement Under Digital Personal Data Protection Law (“DPDP Law”) (source)
CG is considering implementing a graded timeline for enforcing rules under the DPDP Law involving shorter implementation periods for larger companies like Meta and Google, while allowing more time for startups, micro, small, and medium enterprises, as well as central and state government departments to comply with the regulations as they have requested additional time to adapt to the changes required by the DPDP Law. The establishment of a Data Protection Board and the formulation of other rules would follow once the timeline is clarified. Further, CG has finalized approximately 21 rules under the DPDP Law, which received assent from the President of India earlier this year, and will soon begin consultations with stakeholders, notifying these rules along with operational guidelines.
CG Initiates Comprehensive Action Plan to Boost Investment in Startup Sector (source)
CG is on the verge of developing an action plan to stimulate investment in the startup sector, with the focus on expanding the seven-year-old Startup India initiative. The Department for Promotion of Industry and Internal Trade is considering various measures, including the development of performance indicators like investments, startup numbers and job creation, with the aim to address regulatory hurdles, taxation issues, ease of doing business challenges, and global expansion obstacles for Indian startups. The initiative also intends to identify bottlenecks preventing investors, including high net worth individuals and businesses, from investing in startups. The action plan further focuses on enhancing policy support and recommendations for the startup ecosystem to facilitate investment and market access.
The Ministry of Corporate Affairs (“MCA”) to Enforce Corporate Governance Rules on Indian Startups (source)
MCA is working on new guidelines for large unlisted companies, including unicorns, with the aim to enhance corporate governance standards, ensure transparency through regular financial reporting as well as guarantee fair operation in the interest of all stakeholders. Since the startups being a significant part of India's business landscape, are very often nearing scrutiny due to corporate governance issues, MCA is conducting discussions to amend the Companies Act, 2013, with recommendations from the Company Law Committee, with the primary objective to strengthen corporate governance by addressing issues like board composition, and enhance audit frameworks, thereby ensuring greater accountability in India's business environment.
New Labour Laws Mandate Companies to Compensate for Unused Leaves Exceeding Thirty Days (source)
The four new labor laws namely the Occupational Safety, Health and Working Conditions Code, 2020, (“OSH Code”), the Code on Wages, 2019, the Industrial Relations Code, 2020 and the Code on Social Security, 2020, that are awaiting implementation, are expected to bring about substantial changes in the employment landscape. One of the notable changes, specifically in the OSH Code, is related to unused leaves exceeding 30 days in a calendar year. Section 32 (Annual leave with wages, etc.) of the OSH Code allows employees to carry forward annual leave to the following year, up to a maximum of 30 days. However, if at the end of the calendar year the annual leave balance exceeds 30, then the employee would be entitled to encash the excess leave and carry forward 30 days to the next year. The OSH Code also clarifies that ‘managerial’ or ‘supervisory’ employees are not covered under the definition of employee.
The Drugs Controller of India (“DCGI”) Warns States and Union Territories Against Falsified Versions of Critical Medications (source)
DCGI, on 6th September, 2023, has issued directives to all states and union territories to monitor the sale of counterfeit versions of 2 vital drugs, Defitelio and Adcetris, following alerts from the World Health Organization. Adcetris injections which are used in treating Hodgkin's lymphoma and anaplastic large cell lymphoma, have been identified as falsified in India and other countries, and are often available through unregulated online channels. Additionally, DCGI has also warned of falsified Defitelio, which poses serious health risks and ineffective treatment of patients. Healthcare professionals are urged to be cautious in prescribing these drugs and report adverse reactions, while the consumers are advised to procure medicines from authorized sources.
Indian Renewable Energy Development Agency Limited (“IREDA”) and India Infrastructure Finance Company Limited (“IIFCL”) Join Forces to Boost Renewable Energy Projects (source)
IREDA and IIFCL, on 4th September, 2023, have signed a Memorandum of Understanding (“MoU”) with the aim to finance renewable energy projects, including small hydro projects, by engaging in co-lending and loan syndication for all categories of renewable energy projects, and fixing interest rates for IREDA borrowings for a period of 3-4 years. Further, IIFCL may also invest in IREDA's bonds as per specified terms. This partnership aligns with India's goal of achieving 50% non-fossil fuel energy by 2030 and leverages IREDA's green financing expertise and IIFCL's infrastructure financing capabilities.
Buying Green Power Maybe Made Mandatory Under the Energy Conservation Act, 2001 (“Energy Act”) (source)
CG is considering making national renewable purchase obligations (“RPOs”) mandatory under the Energy Act, non-compliance of which could lead to large penalties. RPOs require obligated entities to purchase a minimum amount of renewable energy out of the total consumption by obligated entities, which include distribution companies, open-access consumers, and captive power producers. Currently, even though CG announces the RPO trajectory for the country, the same are finalised by state regulatory commissions under The Electricity Act, 2003, and therefore, the trajectories may differ from those notified by CG which lead to shortfall in compliance by distribution utilities and absence of stricter enforcement for RPOs.
The Mediation Act, 2023 (source)
The Mediation Act, 2023, which was passed by both the Rajya Sabha and Lok Sabha, received Presidential assent on 14th September, 2023. The Act aims to promote and facilitate mediation across various types of disputes, emphasizing pre-litigation mediation and preserving party autonomy in mediator selection. It also permits online mediation while maintaining strict confidentiality. The Act further introduces the concept of community mediation and prioritizes wide applicability, and expeditious dispute resolution, with a mandated timeframe of 120 days. The Act also establishes a Mediation Council of India to oversee mediator registration and recognize mediation service providers, thereby enhancing the mediation landscape in the country.
Supreme Court of India (“SC”) Data comes under the National Judicial Data Grid (“NJDG”) Portal for Greater Transparency (source)
The integration of SC into NJDG portal marks the successful completion of the flagship e-courts project, encompassing all three tiers of the Indian judiciary. Recognized as a vital innovation under CG’s "Ease of Doing Business" initiative, the NJDG portal would serve as a national repository of case data from courts across the nation, offering accessible case-related information, statistics, and a year-wise breakdown of SC's workload. Post the integration, users can see real time information on pendency and disposal of cases, total pendency of registered and unregistered cases or the number of cases decided quorum-wise, at the click of a button. This initiative remains unmatched, providing transparency, accountability and efficiency to India's judicial system, ultimately empowering informed decision-making and increased coordination.
Global Information Technology (“IT”) Hardware Companies Advocate for Lifting of Import Restrictions (source)
Major IT hardware companies who have applied for the revised production-linked incentive scheme in India, have urged CG to either lift the import restrictions or provide adequate time for a local ecosystem to develop before implementing the licensing requirement. The companies expressed concerns that the import licensing requirement places unnecessary pressure on them, as there is currently no established ecosystem in India for manufacturing these hardware products and have therefore further requested that the restrictions be temporarily lifted to allow them to continue operations smoothly thereby supporting industry’s growth. CG had recently categorized IT hardware imports as restricted and required licenses for them, as part of an initiative to promote local manufacturing.
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.