First & foremost, we wish all our readers a very happy & healthy 2021!
Below are certain key reforms & legal developments in India during 2020 which we thought would be of interest:
- On 22 January 2020, the Securities and Exchange Board of India (SEBI) issued a circular to streamline the process for rights issue in order to make it more effective and efficient by amending SEBI (Listing Obligations and Disclosure Requirements) (LODR) Regulations, 2015 and SEBI (Issue of Capital and Disclosure Requirements) (ICDR) Regulations, 2018. Key changes introduced by the circular include: (i) reduction of period of intimation to the stock exchanges prescribed under regulation 42 (2) of SEBI (LODR) Regulations, 2015 from 7 to 3 working days; (ii) issuance of newspaper advertisement disclosing date of completion of dispatch and intimation to stock exchanges for dissemination on their websites under Regulation 84 (1) SEBI (ICDR) to be completed by the issuer at least 2 days before the date of opening of the issue; (iii) introduction of dematerialized rights entitlements (RE); and (iv) trading of RE on stock exchange platforms in a manner similar to equity shares.
- On 23 January 2020, the Reserve Bank of India (RBI) issued a circular pertaining to voluntary retention route (VRR) for Foreign Portfolio Investors (FPI), which raised the investment cap from INR 75,000 crores (approx. USD 10 billion) to 150,000 crores (approx. USD 20 billion) and permitted FPIs that have been allotted investment limits under VRR to transfer their investments made under the general investment limit to VRR.
- As part of Government of India’s Ease of Doing Business (EOB) initiatives, the Ministry of Corporate Affairs (MCA) made necessary amendments to the Companies (Incorporation) Rules 2014 and subsequently notified and deployed a new Web Form ‘SPICe+’, an integrated Web form offering multiple services viz. name reservation, incorporation, DIN allotment, mandatory issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra) and bank account opening, allotment of GSTIN, where applied, thereby replacing the existing SPICe form. SPICe+ would offer 10 services by 3 Central Government Ministries & Departments (MCA, Ministry of Labour & Department of Revenue in the Ministry of Finance) and one State Government (Maharashtra), thereby saving as many procedures, time and cost for starting a business in India and would be applicable for all new company incorporations with effect from 23 February 2020.
- On 5 March 2020, SEBI launched a mobile application for the convenience of investors to lodge their grievances in SEBI Complaints Redress System (SCORES). SCORES is a platform designed to help investors to lodge their complaints online with SEBI pertaining to securities market against listed companies, SEBI registered intermediaries and SEBI recognized Market Infrastructure Institution.
- On 24 March 2020, the MCA issued a notification raising the minimum amount of default for matters relating to the insolvency and liquidation of corporate debtors under the Insolvency and Bankruptcy Code, 2016 to INR 1 crore (approx. USD 136,720) from INR 1 Lakh (approx. USD 1,367).
- RBI vide circular dated 3 April 2020, permitted receipt of foreign inward remittances from non-residents through non-resident exchange houses towards the ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM-CARES) Fund, subject to the condition that AD Category-I banks shall maintain the full details of the remitters directly credit the remittances to the fund.
- On 28 March 2020, the MCA issued an office memorandum stating that any contribution towards the PM-CARES Fund would qualify as corporate social responsibility expenditure. Subsequently, MCA issued a notification, including the PM-CARES Fund in item (viii) of Schedule VII to the Companies Act, 2013, deemed to have come into force on 28 March 2020.
- On 20 April 2020, the Insolvency and Bankruptcy Board of India (IBBI) notified the IBBI (Insolvency Resolution Process for Corporate Persons) (CIRP) (Third Amendment) Regulations, 2020 with effect from 29 March 2020. The amendment inserts a new provision under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 for excluding the lockdown period imposed by the Central Government in the wake of Covid-19 in computing the timelines for any activity that could not be completed due to the lockdown, in relation to a corporate insolvency resolution process.
- On 23 May 2020, the RBI issued a circular extending the resolution of timelines under the Prudential Framework on Resolution of Stressed Assets dated 7 June 2019: for accounts that were within the review period as on 1 March 2020, the period from 1 March 2020 to 31 August 2020 would be excluded from the calculation of the 30-day timeline for the review period and the residual review period would resume from 1 September 2020, after which lenders would have the usual 180 days for resolution. For accounts where the review period was over, but the 180 day resolution period had not expired, the timeline for resolution would be extended by an additional 180 days from the date of expiry of the original 180 day period.
- On 5 June 2020, the President of India issued the Insolvency and Bankruptcy Code (IBC) (Amendment) Ordinance, 2020 due to the uncertainty caused by the Covid-19 pandemic and the related economic fallout, suspending initiation of corporate insolvency resolution proceedings for any defaults arising on or after the commencement of the nationwide lockdown on account of COVID-19 i.e. with effect from 25 March 2020 under the IBC for 6 months. On 24 September 2020, the MCA extended the said period of suspension from 25 September 2020 by another 3 months. On 22 December, 2020, the MCA issued a second notification extending the suspension by another 3 months with effect from 25 December 2020.
- On 1 July 2020, the amendments to the Indian Stamp Act, 1899 vide the Finance Act, 2019 and the Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 were brought into force. The amendments seek to bring uniformity in the rate of the stamp duty on securities across States to strengthen EOB by introducing changes including (i) collection of stamp duty by agents (who shall be the Stock Exchanges or authorized Clearing Corporations and the Depositories) on behalf of State Government and, (ii) a mechanism for appropriately sharing the stamp duty with relevant State Governments, based on the State of domicile of the buyer.
- On 20 July 2020, several provisions of the Consumer Protection Act, 2019 (CPA) were brought into force in India, replacing those of the previous enactment of 1986. CPA significantly enhances the pecuniary jurisdiction of the District Consumer Commissions and the State Consumer Commissions. CPA also seeks to establish a Central Consumer Protection Authority to regulate matters relating to violation of rights of consumers and unfair trade practices and also notably gives powers of review to the District Commissions and State Commissions that were absent under the erstwhile consumer law.
- On 23 July 2020, the Ministry of Consumer Affairs, Food and Public Distribution, Government of India notified the Consumer Protection (E-Commerce) Rules, 2020, to regulate and ensure transparency in the e-commerce goods and services sector within India. The rules mandate that e-commerce entities establish an adequate grievance redressal system, and publish details such as the legal name of the e-commerce entity, address, customer care number, security of payment methods, country of origin, and other relevant details about the goods and services sold on e-commerce portals.
- On 17 September 2020, the Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry (DPIIT), issued a Press Note permitting up to 74% foreign direct investment (FDI) in defence sector under the automatic route for companies seeking new industrial licenses. FDI beyond 74% in the defence sector is also permitted through the Government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded. Foreign investments in the defence sector would continue to be subject to scrutiny and review on the grounds of national security by the Government. Subsequently, on 8 December, 2020 the Ministry of Finance issued the Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2020 and thus, notified the aforementioned changes to India’s FDI Policy (FDI Policy).
- On 28 September 2020, the Companies (Amendment) Act, 2020 was enacted by the Parliament in its continuing exercise to decriminalize and rationalize certain minor offences under the Companies Act, 2013, in case of defaults which “lack any element of fraud or do not involve larger public interest”. Among other changes, the amendments also allow direct listing of certain classes of securities by a class of public companies in permissible foreign jurisdictions as per rules to be prescribed and also seek to reduce timelines for applying for rights issues. On 21 December 2020, certain provisions of the Companies (Amendment) Act, 2020 were brought into force by the MCA with immediate effect.
- Following the enactment of the Code on Wages in 2019, on 28 September 2020, the Parliament enacted 3 other Labour Codes:
- The Code on Social Security, 2020 (Social Security Code);
The Social Security Code amalgamates several laws relating to social security such as the Maternity Benefit Act, 1961 and the Payment of Gratuity Act, 1972. The Social Security Code empowers the Government to notify frameworks for workers employed in unorganized sectors, platform workers and gig workers and defines aggregators in order to expand social security coverage. The Social Security Code also seeks to extend the social security net of Employees’ State Insurance Corporation and Employees’ Provident Fund Organization.
2. The Industrial Relations Code, 2020 (Industrial Relations Code); and
The Industrial Relations Code amalgamates the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947. The Industrial Relations Code also raises the threshold for applicability of the standing orders to all industrial establishments to 300 or more workers. The Industrial Relations Code also makes new provisions for establishment of a re-skilling fund for training of retrenched workers.
3. The Occupational Safety, Health and Working Conditions Code, 2020 (Occupational Safety Code).
The Occupational Safety Code amalgamates and rationalises 13 central legislations pertaining to working conditions of various types of industries. It seeks to provide “one registration” for all establishments with 10 or more employees (except factories) and mandates the issuance of an appointment letter by the employer of an establishment with such information as may be prescribed, to promote formalisation in employment. The Central Government also seeks to establish the National Occupational and Health Advisory Board and State Occupational Safety and Health Advisory Board to provide recommendations to the government on the standards, rules and regulations for the safety of workers in factories, docks, buildings and construction work and other establishments.
On 18 December 2020, certain provisions relating to the constitution of the Central Advisory Board under the Code on Wages, 2019 were brought into force by the Central Government. The Central Advisory Board will deal with fixation or revision of minimum wages and other connected matters under the Code on Wages, 2019.
All the above 4 Labour Codes are expected to be brought into force at one go in 2021.
- On 29 September 2020, the Foreign Contribution (Regulation) Amendment Act, 2020 came into force, and amends the Foreign Contribution (Regulation) Act, 2010 (FCRA). The amendment seeks to enhance transparency and accountability in the receipt and utilisation of foreign contribution and facilitate genuine non-governmental organisations or associations. It also prohibit persons authorized to receive foreign contributions from transferring such foreign contributions to any other person. The amendment also decreases the cap on use of foreign contributions for administrative expenses to 20% from 50% among other changes.
- On 16 October 2020, the DPIIT released a clarification on FDI Policy for uploading/streaming of news and current affairs through digital media (Clarification). The Clarification enumerated various categories of Indian entities to which the 26% cap on FDI (through the Government Route) in News Digital Media Sector would be applicable including, digital media entities streaming/ uploading news and current affairs on websites, apps or other platforms, news agencies and news aggregators such as websites, blogs, podcasts.
- On 28 October 2020, the Consolidated Foreign Direct Investment Policy 2020 (FDI Policy 2020) was released by the DPIIT, effective from 15 October 2020. The FDI Policy 2020 subsumes and supersedes all previous Press Notes/ Press Releases/Clarifications issued prior to 15 October 2020. The FDI Policy 2020 primarily seeks to consolidate under one document the various amendments in foreign investment laws since the release of the last consolidated FDI policy in 2017.
- On 4 November 2020, the President of India promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020 (Ordinance), which empowers courts under Section 36 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) to grant an unconditional stay on the enforcement of an award where the arbitration agreement or the making of arbitral award is tainted by fraud or corruption upon a challenge to the award under the Arbitration Act. The Ordinance has also removed the Eighth Schedule, which was introduced under the Arbitration and Conciliation (Amendment) Act, 2019, and specified qualifications and accreditation of arbitrators but had effectively excluded foreign nationals from acting as arbitrators.
- On 26 November, 2020, the Competition Commission of India (CCI) notified the CCI (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2020. The amendment revises the existing combination regulations by deleting disclosure requirements regarding non-compete restrictions in the Form-1 combination notice. While inviting public comments on the said change earlier in the year, the CCI stated that the move was made with the objective to allow parties flexibility in determining non-compete restrictions and reducing the information burden on them. The parties will be responsible for ensuring that their non-compete arrangements are competition compliant and any concerns shall be dealt with under Section 3 and 4 of the Competition Act, 2002.