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Corporate & Commercial
Finance Minister Nirmala Sitharaman announced in the Union Budget 2021 that the government would soon introduce a newer version of the MCA21 (MCA21 V3) in order to promote its ease of doing business initiative. Further, there have been news reports that the government is planning to launch a mobile app for corporate filings in order to reduce the compliance burden on companies in India. MCA21 V3 is being rolled out in two phases, with the first phase having been rolled out on 24 May 2021.
The Companies Act 2013 defines a 'producer company' as a body corporate which, among other things, carries on or has an objective relating to certain specified activities. This article sets out the key features of producer companies, including with respect to share capital, voting rights, directors, general meetings and general reserves.
The Ministry of Corporate Affairs recently amended the Companies Act 2013 and the Companies (Corporate Social Responsibility Policy) Rules 2014, introducing a plethora of changes to the act's corporate social responsibility (CSR) provisions. The amended provisions will ensure that companies which fall under their purview spend the requisite amount on CSR activities rather than just explaining why they have not done so and avoiding any consequences.
In order to improve limited liability partnership (LLP) compliance and regulate the designated partners of LLPs, the Ministry of Corporate Affairs recently stated that it will extend certain sections of the Companies Act 2013 to the Limited Liability Partnership Act and therefore LLPs. It is surprising that the LLP structure, which was introduced by the government to relax and ease the process of setting up small businesses, is now pushing the same small enterprises towards a stricter compliance regime.
When the Companies Act 2013 entered into force, the concept of 'one-person companies' ('OPCs') was introduced. New amended rules recently entered into force and provide that natural persons who are Indian citizens, whether resident in India or not, can incorporate OPCs in India. This move has been highly welcomed by start-ups and innovators as it will boost the entrepreneurial capabilities of non-resident Indians and overseas citizens of India and help them to enter the Indian market.
In 2020 the central government issued an office memorandum which stated that the hindrances that have occurred within supply chains due to COVID-19 should fall within the purview of natural calamity and thus force majeure clauses may be invoked in situations where deemed appropriate. The crux of the issue is: when can force majeure be invoked due to breaches that have occurred in contracts between parties due to COVID-19?
The central government recently notified the Foreign Contribution (Regulation) Amendment Act. The amendment act aims to strengthen organisations' compliance mechanisms, enhance transparency and accountability in the use of foreign contributions and prevent the misuse of funds received from foreign contributions by certain organisations and instead promote the use of such funds by genuine non-governmental organisations which are working to improve the welfare of society.
The Companies (Amendment) Act recently entered into force and aims to decriminalise minor, technical and procedural non-compliance based on the nature and gravity of such offences, thereby facilitating and promoting the ease of doing business and further facilitating the ease of living for law-abiding corporates in India.
The Companies Act 2013 is the exclusive legislation which deals with corporate social responsibility (CSR) provisions in India. In response to the COVID-19 pandemic, the Ministry of Corporate Affairs has issued various amendments to the Companies Act. On the one hand, the amendments propose to provide ease of compliance to companies; however, on the other, they also seek to penalise companies and their officers for non-compliance with CSR provisions.
The Companies (Amendment) Act 2020 and the Foreign Contribution (Regulation) Amendment Act 2020 recently came into force, amending the Companies Act 2013 and the Foreign Contribution (Regulation) Act 2010. This article sets out the salient changes introduced by both amendment acts, including with respect to producer companies, offences and the remuneration of non-executive directors.
In view of the COVID-19 pandemic and continuing restrictions on the movement of individuals, the Ministry of Corporate Affairs (MCA) recently issued a circular allowing companies to convene their annual general meeting (AGM) through videoconferencing or other audiovisual means (ie, electronically). With AGMs around the corner, it will be interesting to see how companies will hold virtual AGMs in practice and whether companies and their members will welcome the MCA's relaxations.
India's company law regime has evolved over the years and become stricter and more penal in nature. There has been a paradigm shift in the legislature's viewpoint with regard to the Companies Act's stringency. There has also been a recent trend to promote foreign investment in India. Accordingly, the legislature has adopted measures in order to decriminalise – or at least liberalise – India's company law regime.
Proxy advisers have gained prominence over recent years in relation to corporate governance matters and have become an integral part of shareholder activism in India. In order to standardise the process across proxy advisory firms, the Securities and Exchange Board of India recently issued its Procedural Guidelines for Proxy Advisers and a circular on grievance resolution between listed entities and proxy advisers.
Reclassification of micro, small and medium enterprises provides stimulus to enterprises in light of COVID-19India | 03 August 2020
The Ministry of Micro, Small and Medium Enterprises recently notified certain criteria for classifying enterprises as micro, small and medium enterprises (MSMEs) and specified the form and procedure for filing the applicable memorandum. The change in the classification of MSMEs is a part of the relief package offered to the MSME sector amid the COVID-19 outbreak. This reclassification has been well received across sectors as it will help MSMEs to increase in size without losing their entitled benefits.
The COVID-19 pandemic has affected businesses' ability to comply with various statutory rules and regulations due to lockdowns and other social distancing measures. The government – particularly the Ministry of Corporate Affairs (MCA) – has proactively introduced various measures to support companies in their ability to comply with the Companies Act 2013. Most notably, the MCA has relaxed the restrictions around which corporate actions can occur at virtual board meetings until 30 September 2020.
When setting up a business in India, attention must be paid to the laws which govern companies. Of particular note is the Companies Act, which encompasses a wide range of provisions relating to governance, including with regard to incorporation, capital infusion, management and administration, audits and accountability.
When setting up a business, it is crucial to determine the appropriate legal entity in view of the business's exact needs. The entity should be relevant from a fundraising and taxation perspective and with respect to the foreign direct investment norms in light of the nature of the business and the activities that it proposes to conduct. For instance, certain relaxations are offered to limited liability partnerships which are not offered to companies and vice versa.
The Supreme Court recently considered the implications of parties changing the venue or place of arbitration by mutual agreement. This is an important decision on the effect that a change of venue in arbitration proceedings has on the courts which have supervisory jurisdiction over said proceedings. The court, having held that the courts at the new arbitration venue had exclusive jurisdiction over the arbitral proceedings, has once again reinforced the legal importance of the seat of arbitration.
While adjudicating an interim application, the Bombay High Court recently held that registration under the Copyright Act 1957 is not compulsory for seeking relief thereunder. In doing so, the court, after going through the jurisprudence on the subject matter, held the findings in Dhiraj Dewani to be per incuriam and incorrect.
The Bombay High Court was recently posed with an issue regarding the fate of proceedings under the Prevention of Money Laundering Act 2002 in the event of compromise or compounding in a predicate offence. This judgment is significant as it ensures that perpetrators of serious economic offences cannot use actions such as compromise or settlement to undermine the object of a statute of public importance.
The Supreme Court recently dealt with the question of whether a consumer complaint filed and registered under an earlier piece of legislation which was then repealed must be entertained under the provisions of newer legislation. This judgment is significant as it reiterates the law governing the saving provisions and fate of proceedings initiated and pending under repealed enactments.
The Code of Criminal Procedure 1973 bars the courts from taking cognisance of offences directed against the administration of justice for the purpose of preventing baseless or vindictive prosecutions by private litigants, parties or third parties. There seems to be a clear distinction between the cases which may or may not fall within the restrictions imposed under the code. Therefore, it is incumbent on the courts to delineate between such cases based on a consideration of the facts and law specific to each case.
In a recent case, the Supreme Court decided on the limitation period for filing an application under Section 11 of the Arbitration and Conciliation Act 1996 and whether the court can refuse to refer a dispute to arbitration under Section 11 where the claims are ex facie time barred. The court observed that the issue of limitation, in essence, speaks to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal.
The judiciary has frequently acknowledged the ill effects of lingering litigation. Accordingly, several mechanisms have been introduced to provide some respite to clogged judicial instruments. At the same time, the courts have professed the effective application of existing devices to reduce vexatious and frivolous claims. The awarding of actual realistic costs is one step towards better employment of the legal provisions to tame the ever-growing expanse of false, frivolous and vindictive claims.
Tech, Data, Telecoms & Media
The increased use of technology in personal and professional life due to the ongoing COVID-19 pandemic has also led to an increase in the need to ensure data protection and privacy. While India has no express legislation governing data protection or privacy, the relevant laws in this respect are the Information Technology Act 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules.