Regulatory Archives - S&R Associates

Cross-Border Share Swaps: Amendments to Regulatory Framework

Insights | September 12, 2024 | Practice Area: Mergers and Acquisitions, Regulatory, Tax

In order to simplify cross-border share swaps and address certain challenges under the existing regulatory framework, the Government of India has recently amended the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. The amendment became effective on August 16, 2024. Previously, permissible share swaps were restricted to issue of equity instruments by an Indian entity to foreign residents in exchange for equity instruments of another Indian company. The amendment now allows secondary share swaps and exchanges of equity instruments for equity capital of foreign companies. However, certain ambiguities persist, such as limitations on swaps involving Indian resident individuals and lack of guidance on downstream investments by Foreign Owned Controlled Companies (“FOCCs”) using share swaps. Further, Indian tax laws do not grant tax neutrality to swap structures unless conducted via merger or demerger, making such transactions taxable unless covered by a tax treaty benefit.

Foreign Investment in India from Bordering Countries: A Case for Review

Insights | August 29, 2024 | Practice Area: Mergers and Acquisitions, Regulatory

Press Note No. 3 (2020 Series) (“PN3”) was introduced with the primary objective of “curbing opportunistic takeovers and acquisitions of Indian companies due to the COVID-19 pandemic.” However, the circumstances that prompted introduction of PN3 have changed significantly. There is a need to reflect on PN3’s impact on India’s FDI landscape. This note discusses certain key issues in relation to PN3 and the way forward for foreign investments from China and other countries that share land border with India.

Investing in AI in India (Part 2): Tracking the Regulatory Landscape

Insights | August 28, 2024 | Practice Area: Competition/Antitrust, Data, Mergers and Acquisitions, Regulatory, Technology; Media and Telecommunications

Prospective investors in Indian artificial intelligence (“AI”) companies should familiarize themselves with the Indian government’s initiatives in AI regulation and the direction of future regulation. This note, the second of a multi-part series on investing in the Indian AI sector, outlines some of the key developments in AI in the country. However, it is important to keep in mind that India’s approach to AI governance may change in the future, given the rapidly evolving nature of technology as well as the country’s dynamic regulatory trajectory, including with respect to data, intermediary liability, digital technologies, telecommunications and digital competition, as discussed in this note.

Climate Change and ESG Considerations in India’s AI-Driven Future

Insights | August 14, 2024 | Practice Area: Clean Energy, Corporate Governance and ESG, Regulatory, Technology; Media and Telecommunications

As AI continues to transform industries in crucial ways, the training of large AI models remains highly energy- and resource-intensive, resulting in significant emissions and waste.
For countries and companies which have ambitious net-zero goals, balancing AI ambitions with existing decarbonization strategies is important. As India accelerates its journey towards becoming a global economic powerhouse, it may want to address the environmental implications of increased AI deployment, including by regulating AI with the aim of making increased adoption sustainable. Where companies are concerned, investing in ‘green AI’ will not only benefit the environment but may also enhance their ESG profiles. Going forward, the integration of climate considerations into AI policy is likely to become an important element of responsible AI development.

Related Party Transactions: Recent SEBI Scrutiny

Insights | August 13, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

The Securities and Exchange Board of India (“SEBI”) has been continuously calibrating the disclosure requirements applicable to Indian listed companies to increase transparency and accessibility of information to investors. Provisions regulating related party transactions (“RPTs”), and appropriate disclosure of such transactions, are a step in that direction. This note discusses two recent SEBI actions against listed companies related to RPTs and highlights the need for listed companies to have a comprehensive policy on RPTs that suitably addresses any perceived gaps or ambiguities.

Clean Energy: Issue 2 of 2024

Quarterly Roundups | August 12, 2024 | Practice Area: Clean Energy, Projects; Infrastructure and Energy, Regulatory

Pursuant to significant regulatory developments in the period between January and March 2024, as discussed in our previous clean energy quarterly update (Issue 1 of 2024), Issue 2 tracks and analyzes key regulatory developments between the months of April and June 2024, including in respect of the approved/revised list of manufacturers and models (related to solar photovoltaic modules and wind turbine models, respectively), rooftop solar projects, the optimal utilization of power generating stations, the National Green Hydrogen Mission, the determination of fees and charges to be collected by regional load dispatch centers, deviation settlement, EV charging infrastructure, quality control standards for electrical equipment, biomass utilization, the electricity grid code, and renewable energy tariff determination.

In addition, Issue 2 of 2024 tracks and discusses key regulatory developments across states, such as those with respect to open access (including green energy open access), consumer rights, resource adequacy, renewable purchase obligations, peer-to-peer energy transactions, and battery energy storage systems.

Regulatory Spotlight on Disclosure of Key Performance Indicators

Insights | August 8, 2024 | Practice Area: Capital Markets, Regulatory

The Securities and Exchange Board of India (“SEBI”) has increased its scrutiny of key performance indicators (“KPIs”) included in offer documents. Its focus is aimed at enhancing the transparency of pricing and the disclosure of performance, allowing IPO investors to obtain a clearer understanding of an issuer and its business. Given the focus on KPI disclosures, IPO-bound companies (regardless of the industry) must devote sufficient attention to identifying KPIs relevant to their business and understanding regulatory expectations in this regard.
This note provides an overview of the SEBI framework for disclosure of KPIs in offer documents.

Investing in AI in India (Part 1): Key Considerations

Insights | July 23, 2024 | Practice Area: Data, Intellectual Property, Mergers and Acquisitions, Private Equity, Regulatory, Technology; Media and Telecommunications

While investments in the AI sector in India present significant opportunities, they also present a unique set of risks within an evolving legal and regulatory landscape.
Before making an investment decision, investors should consider IP issues, data-related rights and compliance, any industry-specific concerns, the then-applicable regulatory framework as well as potential developments in AI regulation. In addition, investors should evaluate operational and contractual arrangements, undertake a technical due diligence, and assess potential liabilities and risks. Such risks include product and professional liability, algorithmic bias and discrimination, cybersecurity and data breaches, market and reputational risks, along with concerns related to transparency and explainability.

Decoding Front Running Trades

Insights | July 10, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

Front running trades are trades where an investor has placed an order in a stock while in possession of “non-public information” of “a substantial impending transaction” in that stock. Such trades not only distort the level playing field in the securities market by taking advantage of unequal information acquired through unfair means but also affect market integrity. This note tracks the evolution of jurisprudence related to front running in India and highlights the interpretational challenges and evidentiary issues relating to front running trades.

India’s New Data Protection Regime: Tracking Updates and Preparing for Compliance

Insights | July 1, 2024 | Practice Area: Data, Regulatory, Technology; Media and Telecommunications

The Digital Personal Data Protection Act, 2023 (the “DPDP Act”), published in India’s official gazette last year, is a new law regulating the collection, storage, use and processing of personal data. The DPDP Act will take effect from the date(s) notified by the Indian Government, and different dates may be notified for different provisions of the DPDP Act. Further, several provisions of the DPDP Act require specific rules which are yet to be notified.
According to a recent statement made by the new union minister of the Ministry of Electronics and Information Technology, the new rules are in advanced stages of drafting and are expected to be released for industry-wide consultation in the near future. Given that both rules and provisions of the DPDP Act are likely to be notified over the next few months, all entities need to check whether and to what extent the DPDP Act applies to them and their operations.
For the purpose of preparing for, and complying with, obligations under the DPDP Act, it would be advisable for all organizations to undertake data mapping exercises and data audits inter alia in order to facilitate the identification and determination of ‘personal’ information from mixed or legacy databases and/or organizational datasets.