Governmental authorities in India have, from time to time, implemented various measures to facilitate ease of doing business for companies operating in India including, inter alia, by way of amendments to the Companies Act, 2013 (the “Act”). In the past 1 (one) year, these reforms have focused on introducing new mechanisms for swift adjudication of offences, and decriminalization and rationalization of criminal penalties, particularly in relation to minor, technical or procedural non-compliances under the Act.
The objective of decriminalization and recategorization of offences that was introduced by the Companies (Amendment) Act, 2019 is now sought to be augmented by the Companies (Amendment) Bill, 2020 (the “CAB 2020”) which was recently presented in the Lok Sabha on March 17, 2020. CAB 2020 has, amongst other matters, proposed amendments in respect of decriminalization of various compoundable offences and rationalization of penalties prescribed under the Act. CAB 2020 is currently awaiting legislative consideration.
In this note, we discuss the continuing efforts of the Indian governmental authorities towards streamlining the processes for dealing with certain non-compliances under the Act, and analyze if the critical changes proposed by CAB 2020 for further decriminalization of offences and alteration of penalties under the Act is a step in the right direction.
The outbreak of COVID-19 and its development into a pandemic has led governments across the world to take extraordinary measures to protect their residents. The Central Government and various State Governments in India, along with public-health authorities, not-for-profit organizations and corporates, are collecting, tracking, and using information about individuals to slow down the spread of COVID-19; however, since a large proportion of such information could be categorized as ‘personal data’ or ‘sensitive personal data’ its use is subject to the data protection laws in India. It is, therefore, essential that a balance is struck between an individual’s right to privacy and public interest at large. Separately, as a result of the COVID-19 pandemic, corporates are also required to implement aberrant measures to safeguard their employees and extended workforce. In this regard, the collection of personal data by corporates will need to be undertaken in compliance with the requirements of data protection laws in India.
This note discusses the use of technology platforms by the Government of India to curtail the spread of COVID-19 and the obligations of corporates in India in relation to their employees or business, in each case, in the context of the legal framework for data protection in India.
Following the outbreak of COVID-19 pandemic, the role of directors and senior management in taking appropriate measures, addressing concerns of various stakeholders and ensuring business continuity has become more important than ever. Directors and senior management should not only be cognizant of their duties and responsibilities during these turbulent times but also be mindful of the immediate and long term repercussions of their decisions on their respective businesses.
In recent times, there has been a deluge of orders, guidelines and notifications that have been issued by the Central government, state governments and various regulators in India to guide its citizens and the business corporations through the issues evolving in the course of COVID-19 pandemic. This note briefly sets out the key corporate governance and other related matters that the decisions makers should consider when responding to the COVID-19 pandemic and guiding their businesses through the lockdown and thereafter.
The outbreak of the coronavirus disease 2019 (COVID-19) pandemic has caused widespread disruption of businesses and daily life. As governments across the world struggle to contain the pandemic, a number of measures are being implemented aimed at minimizing its spread. In India, such measures are increasingly taking the form of mandatory social distancing through the imposition of a series of restrictions. As the situation evolves, the requirement for further restrictions is being constantly evaluated by governments and new measures are being implemented. The pandemic and the resulting measures raise a host of legal issues and concerns for businesses. This update analyzes certain legal and regulatory concerns arising in light of the COVID-19 pandemic and the consequent restrictions.
On February 3, 2020, the Ministry of Corporate Affairs notified sub-sections (11) and (12) of section 230 of the Companies Act, 2013 along with also notifying the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2020 and the National Company Law Tribunal (Amendment) Rules, 2020 (collectively, the “Takeover Notification”), which would enable shareholders of unlisted companies holding at least 75% securities (including depository receipts) with voting rights to acquire the remaining minority shareholders pursuant to a court-approved compromise or arrangement that includes a takeover offer.
Certain other methods that are generally considered for buying-out minority shareholders, often termed as minority squeeze-outs, include undertaking a selective reduction of share capital under section 66 of the Companies Act and the purchase of minority shareholding by a majority shareholder holding 90% or more of the share capital under section 236 of the Companies Act, 2013.
This note briefly discusses the new method of minority squeeze-out introduced by the Takeover Notification and considers whether the Takeover Notification makes it easier to squeeze out the minority shareholders as compared to the other available options mentioned in the paragraph above.
The Personal Data Protection Bill, 2019 (“PDP Bill”), which was presented before the lower house of the Indian Parliament on December 11, 2019, seeks to provide for the protection of personal data of individuals and establish a Data Protection Authority. The PDP Bill has been referred to a joint select committee of both the houses of the Indian Parliament, which is expected to submit its report in early 2020. Accordingly, there may be changes to the PDP Bill based on the recommendations of the joint select committee. Once enacted, the PDP Bill will replace Section 43 of the Information Technology Act, 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 and prevail over any other inconsistent laws in this regard (e.g., any sector-specific laws). This note provides an overview of the PDP Bill
Investors or other stakeholders routinely participate in the governance of an investee entity through nominees, often appointing a nominee as a director to safeguard its interests through the exercise of a veto or an affirmative vote (that is the right to approve or reject an act or resolution concerning the business and governance of the investee company).
The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (Insider Trading Regulations) require listed companies to use a trading window for monitoring trades by designated persons and their immediate relatives. The compliance officer is responsible for closing the trading window under certain circumstances when designated persons are reasonably expected to be in possession of unpublished price sensitive information.
The Securities and Exchange Board of India (SEBI) faces numerous challenges in investigating and determining insider trading violations. Lack of direct or conclusive evidence of violations is a key challenge in most cases. On 10 June 2019, SEBI issued a discussion paper on a proposed informant mechanism under which whistleblowers will be rewarded for reporting instances of insider trading.
The roles of various gatekeepers of corporate governance, such as auditors, independent directors and credit rating agencies, has increasingly come under scrutiny as a response to the various financial scandals that shook corporate India – from Satyam to IL&FS, and more recently, in the case of the auditor resigning from Reliance Capital.