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Corporate Law Brief-December 2023

We warmly welcome our valued readers as we take immense pride in introducing our newsletter. This edition brings to light the most recent happenings in the arena of India’s corporate legal domain for the month of December 2023. Our team has diligently gathered an array of news and insights covering regulatory advancement, ensuring your continuous awareness and knowledge. Get comfortable, enjoy your favorite drink, and set off on an expedition through India’s corporate legal landscape.

Wishing you and your loved ones a very Happy and Healthy New Year, 2024!
We extend a warm welcome to our esteemed readers as we proudly present our newsletter. In this edition, we shed light on the latest developments in India’s corporate legal sphere for December 2023. Our dedicated team has compiled a range of news and insights, encompassing regulatory advancements to keep you well informed. Stay ahead with our carefully curated newsletter, featuring regulatory updates and insights. Sit back, relax with your favorite drink, and embark on a journey through India’s corporate legal landscape.
Recent Updates:

With the aim of enhancing speed, transparency, and efficiency in the adjudication process, the Ministry of Corporate Affairs plans to launch online adjudications (e-adjudication) on its filing portal by March 2024. Once launched, all proceedings/hearings by the Registrar of Companies (RoCs) pertaining to company law violations and defaults will be conducted entirely online.

The Finance Minister announced that the Virtual Digital Assets (VDA) service providers (such as Coinswitch, WazirX, and CoinDCX) have now registered with the Financial Intelligence Unit-India and will be considered as reporting entities VDA-related services in India under the Prevention of Money Laundering Act, 2002 (PMLA). The reporting requirements also apply to offshore crypto exchanges servicing the Indian market.

The Employees Provident Fund Organization (EPFO) has notified a standard of procedure to make the freezing and de-freezing accounts a time-bound process. The verification process of accounts of individuals and establishments for due diligence has been capped at 30 days which can be extended up to another 14 days.

Technology, Media, and Telecommunications Updates:

The Telecommunications Act 2023 (Telecom Act) became law after receiving the assent of the President on December 24, 2023, marking a significant overhaul of the country’s regulatory framework for the telecommunications sector. The Telecom Act addresses the need for a modernized and secure telecommunication infrastructure to drive digital transformation and economic growth. The Telecom Act repealed the Indian Telegraph Act, of 1885, and the Indian Wireless Telegraphy Act, 1933, replacing them with a unified legal framework.

The Telecom Act outlines a framework for:

  • authorization of telecommunication services, telecommunication networks, and possession of radio equipment, assignment and efficient utilization of spectrum including provisions for harmonization and re-farming, development of new technologies, and regulatory sandbox for innovation using spectrum;
  • developing and maintaining telecommunication networks through right-of-way provisions, and establishment of common ducts;
  • standards and conformity assessment of telecommunication equipment, telecommunication identifiers, telecommunication network, and telecommunication services;
  • national security, public emergency, and public safety;
  • protection and defining duties of users;
  • resolution of disputes; and
  • effective implementation of the proposed legislation.

Reserve Bank of India (RBI) Updates:

RBI vide its notification dated December 12, 2023, bid farewell to the additional factor authentication for transactions up to Rupees 1 lakh in 3 categories i.e., mutual fund subscriptions, insurance premiums, and credit card bills. This move aims for smoother and faster processing, eliminating the need for One-Time Passwords (OTPs) for transactions up to Rupees 1 lakh falling under any of these categories.

To regulate investments made by Regulated Entities (REs) in  Alternative Investment Funds (AIFs), the RBI issued a circular dated December 19, 2023, issued the following advisory:

  • REs are prohibited to invest in AIF schemes that have downstream investments in any company, to which the RE currently has or has had a loan or investment exposure in, anytime within the past 12 months (debtor company);
  • investment in the AIF scheme to be liquidated within 30 days by the REs if an AIF scheme makes a downstream investment in their debtor company. This timeline will apply to existing investments as well. Failure to liquidate their investments within the specified timeframe shall result in a 100% provision being made on such investments in their books; and
  • investments by REs in subordinated units of AIFs with a ‘priority distribution model’ will be fully deducted from their capital funds.

RBI vide its notification dated December 21, 2023 introduced the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 (Regulations). These Regulations replaced the existing 2016 regulations in the following manner:

  • under the Regulations, unless permitted by RBI or allowed under the Foreign Exchange Management Act, 1999 (FEMA), no person in India can make payment or receive payment from a person resident outside India;
  • all transactions between residents and non-residents must be conducted through an authorized bank or authorized person;
  • for trade transactions involving payments for exports or imports, transactions with Nepal and Bhutan should be in Indian Rupees, with an exception in specific cases. For member countries of the Asian Clearing Union (ACU) other than Nepal and Bhutan, the ACU mechanism or directions from the RBI shall apply. For countries outside the ACU, payments can be in Indian Rupees or any foreign currency;
  • for non-trade transactions, including other types of cross-border financial exchanges, transactions with Nepal and Bhutan should be in Indian Rupees, with provision for foreign currency in certain cases. For other countries, transactions can be in Indian Rupees or any foreign currency; and
  • for any current account transaction not involving trade that occurs between a resident and a non-resident visiting India, the payment must be in Indian Rupees. Furthermore, payments or receipts under these Regulations can also be settled by debit or credit to a bank account, in accordance with the rules under FEMA.

RBI, in its notification dated December 28, 2023, amended Para 2.2 of the Master Direction- Lending to Micro, Small & Medium Enterprises (MSME) Sector (Direction). Banks are now directed to follow the classification stated in the Udyam Registration Certificate (URC) for priority sector lending (PSL) purposes. Furthermore, Paragraphs 2.4 to 2.7 of the Direction, which previously explained the rules for calculating the investment in plant and machinery or equipment, the turnover and the factors to classify the enterprises as small, medium, and large enterprises, have now been deleted.
Securities Exchange Board of India (SEBI) Updates:

In order to promote ease of doing business, SEBI vide its circular dated December 06, 2023, standardized the framework for calculating the available Net Distributable Cash Flow (NDCF) by Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and their respective Holding Companies (Hold Cos). According to the rules, the NDCF is computed at the level of REITs, InvITs, and their Hold Cos or Special Purpose Vehicles (SPVs). The minimum distribution should be 90 percent of the NDCF at both the trust level and the Hold Cos/SPV level, subject to the applicable provisions in the Companies Act, 2013 or the Limited Liability Partnership Act, 2008. This new framework will come into effect from April 1, 2024.
SEBI’s circular dated December 11, 2023, clarified the process in cases where investors have not furnished their demat account details. SEBI suggested the creation of a distinct escrow account, termed the ‘Aggregate Escrow Demat Account’ by the AIFs which would serve the exclusive purpose of holding demat units of the AIFs on behalf of the investors until their demat details are made available. Subsequently, these units will be transferred to the investors’ respective accounts. In June 2023, SEBI mandated that all AIFs with a corpus exceeding Rupees 500 crores must issue their units in dematerialized form by October 31, 2023, while those with a lower corpus should comply by April 2024.
SEBI amended its circular dated July 31, 2023, on December 20, 2023, regarding the online resolution of disputes in the Indian securities market. The market regulator has clarified the following aspects of the online arbitration process and arbitrator’s fee along with other clarifications:

  • entities shall enroll in the online dispute resolution portal immediately upon grant of registration or listing;
  • the market participant, whom the investor engages in an online arbitration, is obligated to actively participate in the arbitration process. Within 10 days of the investor initiating the online arbitration, the market participant must deposit 100% of the admissible claim value with the relevant Market Infrastructure Institution (MII) and cover the fees for online arbitration;
  • if market participants opt for online arbitration, they must notify the Online Dispute Resolution (ODR) institution within 10 days after concluding the conciliation process. Additionally, within 5 days of this notification, they are required to deposit 100% of the admissible claim value with the relevant MII and pay the fees for initiating the online arbitration; and
  • the fee slab for arbitration has been revised to include the range of ‘above Rupees 50 lakh-Rupees 1 crore’.

SEBI through its circular dated December 27, 2023, extended the deadline till June 30, 2024 for dematerialization and mutual fund account holders to furnish their nomination.

SEBI vide its circular dated December 28, 2023, revised the Social Stock Exchange (SSE) framework by amending the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR), and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR). The updated framework outlines the minimum criteria for Not-for-Profit Organizations (NPOs) seeking SSE registration under regulation 292F of the ICDR Regulations. Requirements include submitting a valid registration certificate under Sections 12A/12AA/12AB/10(23C)/10(46) of the Income Tax Act, 1961 (valid for at least 12 months) and possessing an 80G registration under the Income Tax Act, 1961 for those under Sections 12A/12AA/12AB. Additionally, the framework provides a procedure for the public issuance of Zero Coupon Zero Principal Instruments by NPOs.
Upcoming Nuggets:
RBI released a draft framework dated December 21, 2023, on Omnibus Framework for recognizing Self-Regulatory Organizations (SROs) for its Regulated Entities (REs). The draft covers key aspects like objectives, responsibilities, eligibility criteria, governance standards, and the application process for the recognition of SROs.
RBI invited comments on the Draft Reserve Bank of India (Bond Forwards) Directions, 2023. Bond forwards involve a derivative contract where one party commits to buying a specific debt instrument from another party on a future date at a pre-determined price. The last date for submitting the comments is January 25, 2024.
From the Docket:
In Shakti Yezdani & Anr. v. Jayanand Jayant Salgaonkar & Ors., the Supreme Court has held that the nomination of an individual in a share/debenture certificate does not confer title on the death of the original holder. Instead, the succession of these instruments is determined in accordance with the applicable law to intestate succession or the instructions of the deceased holder contained in a valid will. The SC has further clarified that the vesting of securities in favour of the nominee contemplated under S. 109A of the Companies Act 1956 (pari materia S. 72 of Companies Act, 2013) & Bye-Law 9.11.1 of Depositories Act, 1996 is for a limited purpose i.e., to ensure that there exists no confusion pertaining to legal formalities that are to be undertaken upon the death of the holder and thus, to avoid litigation over the nomination.
The SC’s 7-judge constitution bench has reversed its earlier judgment where it held that arbitration clauses in unstamped agreements are not enforceable. The SC ruled that an instrument lacking proper stamping or having insufficient stamping would be deemed inadmissible as evidence, but emphasized that since this is a curable defect, it does not make the agreement void or unenforceable. You can read more about our coverage of the SC’s judgment here.

We trust that this edition of our newsletter has proven to be an enlightening and valuable resource for your professional endeavors. If you have any questions about any of these developments or would like to see something different next month in your inbox, we warmly encourage you to reach out to us at

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