Corporate Law Dispute Resolution ESG Governance GST RBI SEBI

Corporate Law Brief-July 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 July 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.

We hope this message finds you and your loved ones safe and healthy!

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 July 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.

Recent Corporate Sector Updates:

  • India is exploring its options to promote trade settlement in INR. The Society for Worldwide Interbank Financial Telecommunications (SWIFT), a system used globally to transfer payments and securities across borders, is an example of the international financial messaging system that India attempts to establish.
  • The Food Safety Standards Authority of India (FSSAI) will review the World Health Organization’s (WHO) report that expresses concern about the artificial sweetener aspartame which is touted as a healthier alternative to sugar. A report by the International Agency for Research on Cancer (IARC), which runs under WHO suggested that it may be linked to cancer.
  • The Ministry of Corporate Affairs (MCA) on July 04, 2023, tweeted that it will examine the competition issues in the digital markets while the Ministry of Electronics and Information Technology (Meity), will address matters pertaining to the sector-specific and technical issues. This clarity arrives at a pivotal moment as the two Government departments are actively working on introducing essential legislations, such as the Digital India Act and Digital Competition Law, aimed at regulating the multifaceted aspects of India’s rapidly evolving digital market.
  • On July 17, 2023, the Financial Stability Board (FSB) published its global regulatory framework for crypto-asset operations. This framework is based on the idea of ‘same activity, same risk, same regulation,’ to offer a solid foundation for ensuring that activities involving crypto assets are subject to uniform and comprehensive regulation, compatible with the risks they pose, while encouraging responsible innovations that are potentially brought about by technological change.

RBI’s Card Network Directive: Changes Ahead

  • The Reserve Bank of India (RBI) vide its circular dated July 05, 2023, has issued directions for the issuers of debit, prepaid, or credit cards in relation to their arrangement with the card networks which will come into effect from October 01, 2023. It forbids card issuers to enter into any arrangements or agreements with card networks that restrain them from availing the services of other card networks. In addition, the card issuers should provide an option to their eligible customers to choose any one among the multiple card networks.

Securities and Exchange Board of India’s (SEBI) Updates: Enhancing Governance, Dispute Resolution, ESG Reporting, and More

  • The SEBI issued a circular on July 07, 2023, outlining the roles and responsibilities of trustees and board directors of Asset Management Companies (AMCs) of mutual funds. It mandates trustees to take accountability for ensuring the justness of fees and expenses imposed by mutual fund houses. Additionally, the trustees are required to oversee that the functioning of AMCs remain free from improper influence from the AMC’s Sponsor, its related parties, and other stakeholders. Moreover, it is the trustees’ duty to ensure that no unfair advantages are extended by AMCs to any of their affiliated or group entities. To ensure investor protection, compliance, and education by AMCs a Unit Holder Protection Committee is introduced which will report to the AMC’s board.
  • SEBI has released a set of guidelines aimed at enhancing and clarifying disclosures to be made under Regulation 30 and Regulation 30A of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (LODR). Regulation 30A was introduced through an amendment to the LODR on June 14, 2023. Agreements affecting the management control of the listed entity involving shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, and employees of a listed entity or of its holding, subsidiary, and associate company, need to be disclosed to the stock exchange. These changes apply retroactively, covering both existing and future agreements.
  • On July 27, 2023, SEBI announced the framework to set up the Corporate Debt Market Development Fund (CDMDF), an alternative investment fund regulated by the capital markets regulator. The CDMDF is envisaged as a ‘backstop facility’ for purchasing investment-grade corporate debt securities to develop confidence among the participants during stressed market conditions. The Guarantee Scheme for Corporate Debt (GSCD) aims to provide guarantee cover against the debt raised or to be raised by CDMDF. This fund is aimed to provide stability to the market in times of market dislocation.
  • SEBI has notified the SEBI (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 vide notification dated July 03, 2023. The ‘Dispute Resolution Mechanism’ has been inserted in various  Regulations viz. Merchant Bankers; Registrars to an Issue and Share Transfer Agents; Debenture Trustees; Mutual Funds; Custodian; Credit Rating Agencies; Collective Investment Schemes; KYC (Know Your Client) Registration Agency; Alternative Investment Funds; Investment Advisers; Research Analysts; Infrastructure Investment Trusts; Real Estate Investment Trusts; Listing Obligations and Disclosure Requirements; Foreign Portfolio Investors; Portfolio Managers; and Vault Managers.
  • SEBI has introduced the Online Dispute Resolution Portal (ODR Portal) which harnesses online conciliation and online arbitration for the resolution of disputes arising in the Indian securities market. The ODR Portal leverages online conciliation and arbitration to streamline the existing dispute resolution process and expand the role of Market Infrastructure Institutions (MIIs) like Stock Exchanges and Depositories. With the establishment of this common ODR Portal, SEBI aims to offer investors and market participants a faster, transparent, and efficient resolution process.
  • SEBI has released new rules to improve the reporting of Environmental, Social, Governance (ESG) performance for listed companies by including value chain disclosures. It requires the top 1000 listed entities (by market capitalisation) to whom reporting under the Business Responsibility and Sustainability Report (BRSR) applies, to obtain ‘reasonable assurances’ on all indicators of BRSR Core, a framework prepared by the ESG Advisory Committee based on National Guidelines. From financial year 2023-24, the top 1000 listed entities are required to make disclosures as per the updated BRSR format as part of their annual reports.
  • On July 4, 2023, SEBI issued a circular to provide clarity on the requirements for appointment of directors by entities that have listed their debt securities. It clarified that the appointment of a director including nominee director is driven by the provisions of the principal document of the entity (Articles of association, in case of companies under the Companies Act, 2013). A nominee director is a director, and therefore, except for specific provisions of law, articles, or the terms of the agreement under which the right of nomination comes, the position, appointment process, responsibilities, etc., of the nominee director are the same as that of any other director on the board.
  • Companies seeking initial public offerings (IPOs) shall have to amend their articles of association to eliminate director nomination rights granted to promoters and investment shareholders. In place of that, they must request shareholder permission for such rights.

Tax Updates: Clarifications, GST Demands, and New Insurance Accounting Standard

  • The Central Board of Indirect Taxes and Customs (CBIC) clarified the taxability of shares owned in a subsidiary firm by the holding company by issuing a circular. According to CBIC, securities are neither deemed as goods nor services under clauses 52 and 102 of the Central Goods and Services Tax (CGST) Act, which define goods and services, respectively. It was clarified that for a transaction or activity to be considered as supply of services, a ‘supply’ as defined by Section 7 of the CGST Act must exist.
  • The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued tax demand notices to several local business entities in relation to the corporate guarantees given on behalf of their subsidiaries as well as to foreign corporations where such guarantees have been made for their Indian subsidiaries. In view of the authorities, as parent businesses furnish corporate guarantees to maximize returns on investment on these subsidiaries, the practice is a ‘service’ subject to GST taxation.
  • The Government is set to release a new accounting standard for insurance contracts which will bring Indian norms in line with international practices. It will help global investors assess the risk exposure of domestic insurers more accurately. Recently, National Financial Reporting Authority (NFRA) has shared its recommendations with the MCA, and once approved it will be notified under the Companies (Indian Accounting Standards) Rules 2015 which will replace existing Ind AS 104, Insurance Contracts.
  • The Cabinet has consented to the recommendation of the GST Council to impose 28% GST on the full-face value of online gaming, casinos, and horse racing without differentiating between games of skill or chance. To implement this decision, the Government is expected to introduce a legal amendment that will include online gaming and horse racing as taxable actionable claims under Schedule III.

ASCI’s Guidelines

  • The self-regulatory authority for the advertising industry, Advertising Standards Council of India (ASCI), has announced that crowdsourcing platforms must henceforth disclose the fees they charge while soliciting donations for humanitarian causes. It has also been made explicit in the criteria for charitable cause commercials that graphic depictions of victims in distress, especially children and minors, should not be used by advertisers.

Upcoming Nuggets:

  • To ensure financial stability and mitigate risks related to cybersecurity and prevent fraud in the Fintech industry, Reserve Bank of India (RBI) is working on regulation for financial technology companies which would encompass issuing regular guidelines and the regulatory sandbox framework.
  • The Telecom Regulation Authority of India (TRAI) has issued consultation papers on the regulatory framework for OTT Communication Services and the selective banning of OTT Services. The Stakeholders can provide their inputs until August 4, 2023, and counter-comments are invited until August 18, 2023. In response to the Department of Telecommunications (DoT) request to reevaluate its previous recommendations and propose a suitable regulatory mechanism for over-the-top (OTT) services, TRAI is revisiting its stance after three years.
  • According to an interview the Center gave to the Economic Times, the Center is working on the broad outline of a cyber-security bill that could define various aspects of online safety and lay out objective guidelines and rules defining what constitutes cyber fraud, providing a modern legal framework to address 21st-century crime that had previously been dealt with by modified provisions of British law from the 19th century. The proposed legislation, which could either be an addition to the Digital India Bill, will most likely include details on the criminal penalties for cyber breaches as well as a definition of a cybercriminal for the purposes of the new law.
  • According to the Economic Times, the Center could mandate businesses that deal with both personal and non-personal data to obtain new consent from their customers each time they upgrade their services and change the terms and conditions. It was mentioned that the Digital Personal Data Protection (DPDP) Bill would soon include a clause to this effect. With this change, the idea of “continuous consent” will be abandoned, in which apps and services obtain users’ initial consent to process their data upon signing up for the service, and then continue to do so based on that consent.

From the Docket:

  • A Public Interest Litigation (PIL) titled as ‘Social Organisation for Creating Humanity v. Union of India’ filed by the Noida-based NGO in the Delhi Hight Court challenges the constitutional and legislative validity of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 concerning the online gaming. The PIL cites ‘regulatory confusion’ as there are dual set of laws and uncertainty on whether central or state laws should be followed with respect to online gaming. It also raises concerns over the Government’s move to establish Self-Regulatory Bodies (SRBs).

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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