We extend a warm welcome to our esteemed readers as we present our newsletter. In this edition, we shed light on the latest developments in India’s corporate legal sphere for March 2024. Our dedicated team has compiled a range of news and insights, encompassing regulatory advancements to keep you 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 to abreast you through the latest developments in India’s corporate legal landscape.
Recent Updates:
- The Chairman of the Telecom Regulatory Authority of India (TRAI) has announced that it will issue a detailed consultation paper on updating the national broadcast policy. The focus of this revision is to position India as a prominent global center for content creation. TRAI would solicit feedback from diverse stakeholders on the draft policy.
- On March 15, 2024, the Ministry of Commerce & Industry notified the Patents (Amendment) Rules, 2024 which will come into effect from the date of its notification. The revised rules seek to implement significant modifications to conform with global standards, foster innovation within the innovator community, and safeguard their rights. Key changes include the introduction of a new certificate of inventorship to acknowledge inventors’ contributions to patented inventions, a reduction in the timeline for filing a request for examination from 48 months to 31 months, and a 10% reduction in the renewal fee if paid in advance through electronic mode for at least 4 years.
- Concentrated and inter-connected private equity and venture capital funds (CIFs) as required by SEBI must comply with extra compliance standards to minimize the use of fund vehicles to bypass. Earlier SEBI launched a consultation paper on January 19, 2024, proposing a framework to regulate CIF transactions.
Reserve Bank of India (RBI) Updates:
- In a significant development, the Reserve Bank of India (RBI) has issued an Omnibus Framework for recognising Self-Regulatory Organisations (SROs) for Regulated Entities (REs) of the RBI Under this framework, SROs will play a crucial role in promoting adherence to regulatory standards and best practices among REs, thereby fostering a culture of self-regulation within the industry. The said framework contains broad parameters for an SRO viz., objectives and responsibilities, eligibility criteria, governance standards, and application process for grant of recognition, and other basic conditions for grant of recognition, which will be common for any SRO. The key features of the framework are as follows:
- SRO shall be a non-profit company having an adequate net worth and no entity shall hold more than 10% of the shareholding in an SRO.
- SRO shall have a suitable provision in their articles of association / bye-laws for discharging its functions and to ensure compliance with the framework;
- SRO shall be managed by competent professionals and shall frame a policy on the rotation of directors for important positions in the board. Any change in the directorship or any adverse information about any director shall be immediately reported to RBI;
- Recognition granted to the SRO shall be subject to a periodic review by the RBI; and
- Membership criteria of the SRO shall be as prescribed by the RBI
- RBI has issued the following clarifications on the circular on Investments in Alternative Investment Funds (AIFs) issued by it on December 19, 2024:
- REs can make downstream ‘equity’ investments in any scheme of AIF which has investment in a debtor company(s) of the RE;
- Provision shall have to be made only for the portion of the investment made by the RE in the AIF scheme, which is subsequently utilized by the AIF to invest in the debtor company;
- Investment made by REs in subordinated units with a priority distribution model will be subject to a complete deduction from the RE’s capital funds only if such AIF does not have any downstream investment; and
- Investments made by REs through intermediaries like funds of funds and mutual funds are excluded from the ambit of the said circular.
Securities Exchange Board of India (SEBI) Updates:
- SEBI vide its circular dated March 12, 2024, has revised the date of applicability for implementation of the simplified format of Scheme Information Documents (SIDs) issued by it on November 1, 2023.
- SEBI’s circulars that allowed for relaxation in circumstances involving the allotment of securities via private placement shall stand rescinded with effect from 6 (six) months. Under the Companies Act, 1956, the issuance of securities to 49 people was deemed a private placement and the limit was increased to up to 200 under the Companies Act, 2013. In respect of cases under the Companies Act, 1956, involving the issuance of securities to more than 49 persons but up to 200 persons in a financial year, companies could avoid penalties by offering investors the option to surrender securities with refunds plus 15% interest.
- SEBI amended it’s circular dated August 24, 2023 (Mandating additional disclosures by Foreign Portfolio Investors (FPI) that fulfill certain objective criteria). As per the amended circular, FPI with more than 50% of their Indian equity Assets Under Management (AUM) in a corporate group are exempt from making additional disclosures, provided the following conditions are met:
- The apex company of such corporate group has no identified promoter;
- FPI holds not more than 50% of its Indian equity AUM in the corporate group, after disregarding its holding in the apex company; and
- Composite holdings of all such FPIs (that meet the 50% concentration criteria excluding FPIs that are either exempted or have disclosed) in the apex company is less than 3% of the total equity share capital of the apex company.
Technology, Media, and Telecommunications Updates:
- Ministry of Electronics and Information Technology (Meity) vide its notification dated March 20, 2024, notified the Fact Check Unit (FCU) of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, under the Press Information Bureau of the Ministry of Information and Broadcasting. The FCU identifies fake or false or misleading online content related to the business of the central government.
Tax Updates
- Central Board of Direct Taxes (CBDT) vide its circular dated March 6, 2024, has clarified that the charitable trust/ institution is not obligated to make specific investments representing 15% of the amount that is already donated to other trusts under provisions under the Finance Act, 2023.
- CBDT has extended the due date of filing Form No. 26QE (form for reporting transactions in virtual digital assets) till May 30, 20223 for the period commencing from July 1, 2022, till February 28, 2023, under Section 194S of the Income Tax Act, 1961. In addition, the fee or interest to be levied for the said period has also been waived.
- CBDT on March 19, 2024, made a significant change to the India-Spain Double Taxation Avoidance Agreement (DTAA) by lowering the tax rate on royalties and fees for technical services. The amended DTAA, now states that the royalties and fees for technical services may be taxed in the Contracting State where they are incurred, subject to that State’s laws. However, if the recipient is the beneficial owner of the royalties or fees for technical services, the tax levied shall not be more than 10% of the gross amount of royalties or fees.
Competition Commission of India (CCI) updates:
- On March 6, 2024, the Competition Commission of India (CCI) has notified the following regulations:
- CCI (Settlement) Regulations 2024: Under the Settlement Regulations, if the director general of CCI’s investigative arm finds a party in violation of the Competition Act, that party has the option to submit a settlement application. The CCI will review the application, assessing whether the proposed settlement terms serve the public interest and adequately resolve the alleged violations.
- CCI (Commitment) Regulations, 2024: Under the Commitment Regulations, any entity facing allegations of anti-competitive behavior and under investigation can apply with the CCI. This application should outline the entity’s proposed commitments and strategies for addressing the alleged violations and competition issues.
- CCI (Determination of Turnover or Income) Regulations: These Regulations are prescribed for determining the turnover or income for an enterprise as well as an individual under the Competition Act, 2002.
The provisions of the above-mentioned regulations shall come into effect from the date of notification.
- In addition to the above-mentioned regulations, CCI has issued CCI (Determination of Monetary Penalty) Guidelines, 2024. These guidelines establish a framework for determining penalties for enterprises under the Competition Act, 2002, aiming to improve transparency and consistency in penalizing anti-competitive behavior. The provisions of these guidelines came into force immediately upon notification.
Upcoming Nuggets
- On March 5, 2024, MeitY released a notification to call for project proposals for Research and Development in Cyber Security. The call for proposals was made by the Cyber Security Research and Development (CSRD) Group of MeitY, focusing on several thrust areas. These included, but were not limited to:
- Digital Forensics
- IoT (Internet of Things) Security
- Data Security
- Mobile Security
- Network and System Security
The intention behind this initiative was likely to encourage and support research efforts in these critical areas of cyber security, aiming to bolster the nation’s capabilities in combating cyber threats and ensuring digital resilience.
- On March 12, 2024, the Ministry of Corporate Affairs (MCA) invited public comments on the Reports of the Committee on Digital Competition Law (CDCL) and Draft Bill on Digital Competition Law. MCA had constituted CDCL on the recommendations of the 53rd report of the Parliamentary Standing Committee on Finance on the subject titled ‘Anti-Competitive Practices by Big Tech Companies’ to examine the need for a separate law on competition in digital markets.
- International Financial Services Centres Authority (IFSC) vide notification dated March 26, 2024, issued a consultation paper on Draft IFSCA (Book-keeping, Accounting, Taxation and Financial Crime Compliance Services) Regulations, 2024 for public comments. The comments were invited on the proposed draft by April 16, 2024. These regulations aim to put in place the regulatory framework relating to registration and operations of book-keeping, accounting, taxation, and financial crime compliance services from IFSC.
From the Docket:
- In the matter of HT Mobile Solutions Ltd. & Anr.(Appellants )vs. Regional Director, Ministry of Corporate Affairs & Ors.(Respondents), the NCLAT reiterated that NCLT has the power to exercise discretion to give such directions on any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement under Section 231(1) (b) of the Companies Act, 2013. The learned NCLT was thus duly vested with sufficient powers under the Companies Act, to even partly sanction the scheme.
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, we warmly encourage you to reach out to us at knowledge@sarthaklaw.com.
We will be back next month with another newsletter. Until then, stay safe, stay healthy, and enjoy!