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 April 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 of the latest developments in India’s corporate legal landscape.
Recent Updates:
- A separate scheme for investment and trading in Sovereign Green Bonds (SGrBs) by eligible foreign investors in the International Financial Services Centre (IFSC) is being prepared in consultation with the Government and the IFSC Authority in order to encourage broader participation from eligible non-resident investors.
- The Maharashtra Real Estate Regulatory Authority (MahaRERA) flagged 212 projects in the state, launched between January and April 2023. This step was taken by MahaRERA as it was not updated about the construction status by the project developers, which raised concerns about the progress of the construction and adherence to their timelines.
- The Bureau of Civil Aviation Security issued guidelines that became effective on March 30, 2024, permitting passengers to leave from aircraft via airport departure gates in cases of prolonged flight delays post-boarding. This initiative aimed to alleviate congestion and address delays, ensures passengers are not stranded inside aircraft for extended periods. Under these new directives, passengers experiencing significant flight delays or emergencies after boarding now have the option to exit through the departure gate of the respective airport.
- In a recent development, the Securities Exchange Board of India (SEBI) has taken action against a co-founder of the Investment Institute who was engaged in offering guidance regarding buying, selling, or handling securities or investment products in exchange for compensation. This financial influencer is directed to deposit INR 12 crores, termed as ‘unlawful gain,’ as he was delivering investment advisory services without acquiring registration from SEBI, thus breaching regulatory guidelines.
Foreign Direct Investment Updates:
- The Central Government notified the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2024 on April 16, 2024, in the space sector. As per the amended rules,
- Satellite Activities: Investment in satellite manufacturing, operation, data products, and ground/user segments has been permitted up to 74% automatically. Beyond this, Government approval is needed;
- Launch Vehicles and Spaceports: Investment in launch vehicles, associated systems, and spaceports are allowed up to 49% automatically. Higher investment requires government approval;
- Manufacturing of Satellite Components: Investment in satellite components manufacturing is fully permitted (100%) without needing any additional approval; and
- Regulatory Compliance: Companies must comply with sectoral guidelines issued by the Department of Space.
- The Government is planning to relax foreign direct investment norms for banking, insurance, and defense sectors which is likely to come post-elections.
Reserve Bank of India (RBI) Updates:
- RBI vide its notification dated April 19, 2019, has amended the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 to add the mechanism for the payment and remittance procedures for purchasing and selling equity shares of Indian companies listed on international exchanges by permissible holders.
Purchase Consideration: Investors can now pay for the purchase or subscription of equity shares through banking channels to either a foreign currency account of the Indian company or via inward remittance from abroad through banking channels in accordance with the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015.
Sale Proceeds: The sale proceeds (after deduction of taxes) of the equity shares can be remitted outside India or credited to the bank account of the permissible holder in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
- RBI has issued the Master Direction – Reserve Bank of India (Asset Reconstruction Companies) Directions, 2024, effective from April 24, 2024, and it will apply to every Asset Reconstruction Company (ARC) registered with RBI. The key points of the Master Directions are as follows:
- Minimum net owned fund (NOF) of INR 300 crores. Existing ARCs have been provided a time to achieve the minimum required NOF by March 31, 2026;
- ARCs with a minimum NOF of Rs 1,000 crore can act as resolution applicants;
- Maintenance of capital adequacy ratio at a minimum of 15% of its total risk-weighted assets;
- No investment in land or building is permissible, except for investment for its use up to 10% of its owned funds or for satisfaction of claims;
- Money to be raised by way of the deposit is prohibited;
- Individuals cannot hold the positions of Managing Director (MD), Chief-Executive- Officer (CEO), or Whole-time Director (WTD) after the age of 70;
- Term for MD/CEO or WTD cannot exceed 5 years at a time with a maximum total tenure of 15 years; and
- Reporting to the Indian Banks Association (IBA), the details of chartered accountants, advocates, and valuers who have committed serious irregularities in the course of rendering their professional services for inclusion in the IBA database of third-party entities involved in fraud.
- RBI has decided to expand the scope of trade and allowed Regulated Entities (REs) to hedge their gold price risk using over-the-counter derivatives in the IFSC, along with derivatives on exchanges in the IFSC. This change is effective immediately and expands the options for managing gold price risks.
- REs must provide a clear and easy-to-understand document called a “Key Fact Statement” (KFS) to all prospective borrowers from October 1, 2024, onwards. This KFS will outline all the important details of the loan, so borrowers can make informed decisions before signing anything. Once a borrower agrees to the terms listed in the KFS, it will become binding. Credit card receivables are exempted from this category. Moreover, the KFS will be assigned a unique proposal number and must remain valid for at least 3 working days for loans having a tenor of 7 days or more. For loans lasting less than 7 days, the KFS validity period will be 1 working day.
SEBI Updates:
- To ensure a uniform compliance standard and for ease of compliance process, SEBI vide its circular dated April 18, 2024, issued the standard reporting format for the Alternative Investment Fund (AIF) concerning the audit report of the Private Placement Memorandum (PPM) in consultation with pilot Standard Setting Forum of AIFs (SFA). According to the Master Circular, AIFs are required to submit their annual PPM report to the trustee, board of directors, or designated partners of the AIF, as well as the board of directors or designated partners of the manager and SEBI, within 6 months from the end of the financial year ending March 31, 2024.
Ministry of Corporate Affairs (MCA) Updates:
- MCA has decided to extend the deadline for stakeholders to submit their comments on the draft digital competition bill and the report of the Committee on Digital Competition Law till May 15, 2024.
Technology, Media, and Telecommunications Updates:
- The Government has established five working groups under the Ministry of Electronics and Information Technology for studying and drafting guidelines concerning data anonymization, zero trust architecture, Internet-of-Things devices, mobile device security, and digital education. The primary objective is to develop and adopt frameworks that ensure the effective and efficient implementation of e-governance projects across various ministries and government departments.
- Direct-to-home (DTH) operators like Bharti Airtel, Tata Play and others have sought a telecom sector-like tariff forbearance to price their offerings due to high competition with the coming of over-the-top (OTP) platforms. Tariff forbearance is provided to operators so that they set their own tariffs without any approval from the Telecom Regulatory Authority of India (TRAI) when the competition in the industry is high, however, they are required to intimate the same to TRAI.
Tax Updates
- On April 8, 2024, the Central Board of Direct Taxes (CBDT) clarified that there is no such ongoing special drive to review the cases of mismatch cases related to the House Rent Allowance and actual rent paid by the taxpayers, as claimed by the media reports.
- The Central and State Goods and Services Tax officials have initiated a collaborative effort to conduct audits under the indirect tax framework, effective from the onset of this financial year. This recommendation for the collaboration of audits was suggested during the national coordination meeting held in the month of March 2024, in order to streamline tax investigations and eliminate unnecessary notifications and investigations. As per the investigations, there are about 11,000 cases of dual investigation by both central and state authorities.
- The Income Tax Department has extended the deadline for charitable and religious trusts to submit registration applications to June 30, 2024 vide a circular issued by CBDT on April 25, 2024, which also announced the extension for filing Form 10A/ Form 10AB under the Income-Tax Act, 1961. Initially set for September 30, 2023, the due date had been extended multiple times to address various difficulties of the taxpayers.
Upcoming Nuggets
- On April 16, 2024, RBI released two draft directions namely – Regulation of Payment Aggregators – Physical Point of Sale and Amendments to the existing directions on Payment Aggregators, for public comments. The comments are invited by May 31, 2024.
- Following the announcement in the Statement on Developmental and Regulatory Policies dated December 08, 2023, regarding the establishment of a regulatory framework for loan product aggregation by lending service providers, RBI has published the Draft Circular titled ‘Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders’. Comments or feedback on the draft circular are sought by May 31, 2024.
From the Docket:
- The Supreme Court in the matter of Mahakali Sujatha v. The Branch Manager, Future Generali India Life Insurance Company Limited & Anr. observed that in cases of insurance contracts, the burden of proving the allegations of any non-disclosure of a material fact or any fraud to compensate the insured person or their nominee lies with the Insurance Company alone.
We trust that this edition of our newsletter has proven to be an enlightening and valuable resource for your professional endeavours. 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!