We hope this message finds you and your loved ones safe and healthy.
We are delighted to welcome you back to our newsletter for the month of April 2023, where we have endeavored to keep you informed about the latest updates from India’s corporate legal landscape. We have been busy curating a selection of news and insights including new case laws and regulatory developments to keep you up-to-date and informed. So, please sit back, grab a cup of coffee, and dive into the developments that took place in the first month of the new financial year of 2023-24.
Updates from the Competition Law
The Competition Act, 2002 has been amended by the Indian parliament by passing the Competition (Amendment) Act 2023 thereby granting more power to the Competition Commission of India (CCI) to prevent anti-competitive practices. The aim of this amendment is to update the Competition Law, especially in digital markets, and align it with the current economic conditions. The amendments have been made based on the recommendations from the Competition Law Review Committee, constituted by the Government of India. The most significant amendment involves enhancing the approach for imposing penalties on companies either on income or global turnover that participates in such anti-competitive activities. Earlier, the ‘penalty’ was based on ‘relevant turnover’ which included only domestic turnover. However, the changes made by this bill are not extensive, and the Digital Competition Law Committee will handle any significant overhaul of the competition regime, if necessary. The lower house of the Parliament passed the Bill in March 2023 after it was referred to the Standing Committee on Finance for examination in August 2022, and after a few alterations were presented in February 2023.
Updates from the Reserve Bank of India (RBI)
The RBI has launched a new framework for acceptance of ‘Green Deposits’ for Regulated Entities to boost green financing which will come into effect from June 01, 2023. Green finance means lending and investing in activities/projects that contribute to climate risk mitigation and adaptation, and other environmental objectives. Under this framework, funds raised through green deposits by the corporates will be used for financing activities or projects associated with renewable energy, energy efficiency, clean transportation, climate change adaptation, and sustainable water & waste.
With the aim to make India’s International Financial Services Centres (IFSCs) appealing to resident investors and to bring remittances into IFSC at par with foreign remittances under the Liberalized Remittance Scheme (LRS) framework, the RBI has withdrawn the requirement for the immediate repatriation of funds remaining idle in the Foreign Currency Account (FCA) in India’s IFSCs accounts for up to 15 days. As transaction timelines often get extended due to various reasons, the requirement of repatriating any fund not in use for up to 15 days from the date of their receipt, was creating challenges for resident investors. In February 2023, RBI brought in investment in IFSC’s securities by resident individuals under the LRS framework.
On April 28, 2023, the RBI amended the Master Direction on Know Your Customer (KYC) Direction, in 2016. The changes were made to accommodate the growing preference for face-to-face lending transactions and permit lenders to rely on digital documents, such as those stored on the DigiLocker, to avoid physical contact with the borrowers. Further, this modification was required to incorporate the March 7, 2023, amendments of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, instructions on the procedure of implementation of Section 12A of the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005, and update certain instructions in accordance with FATF recommendations.
Updates from the Ministry of Commerce and Industry
With the objective of increasing the country’s exports to USD 2 trillion by 2030, the Government of India has released a new Foreign Trade Policy (FTP), 2023 which took effect from April 01, 2023. The new FTP marks a shift from an incentives-based regime to a remission and entitlement-based regime. Unlike the prior FTPs, which typically had a tenure of five years, this new policy has no pre-determined end date and will be updated by the Central Government as and when needed to adapt to the changing trade conditions at the regional and international levels.
Updates from the Ministry of Corporate Affairs (MCA)
MCA vide notification dated April 17, 2023, has amended the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 whereby it has made the Registrar, Centre for Processing Accelerated Corporate Exit as the approving authority for the purpose of voluntary strike off by eligible companies under Section 248(2) of the Companies Act, 2013. Pursuant to the said amendment, the requirement to obtain consent from the shareholders has been dispensed with.
Insurance sector regulator Insurance Regulatory and Development Authority of India (IRDAI) has invited comments on the proposed revised Guidelines for Remuneration for Non-Executive Directors and persons in Key Managerial Positions of private insurers to ensure alignment of compensation with prudent risk management.
From the Docket
The Supreme Court has held in N.N. Global Mercantile Private Limited versus M/s. Indo Unique Flame Ltd. & Ors., that the absence of registration and stamping of an arbitration clause in a contract renders it unenforceable.
In the case of Mansarovar Commercial Pvt Ltd vs. Commissioner of Income Tax, Delhi, the Apex Court has ruled that the tax jurisdiction is determined by the location where the control and management of the company’s affairs are being conducted and not the place of registration of a company under the Income Tax Act, 1961.
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