India: Amendment to Appointment and Qualification of Directors
Although, a company is an artificial person having its independent existence distinguished from its members, the affairs of the company are monitored and regulated by its management which is the board of directors who act as its brain. These directors are designated with numerous powers including power to make calls for shareholders with respect to money unpaid on their shares, authorization of securities buy-back, issue of debentures, borrowing money, investment of funds, grant of loans, diversification of business, corporate restricting, etc.
Directors act as the trustee as well as agent of the company which has appointed them. It is important for them to act with reasonable care with due-diligence exercising their skill. Owing to the vital roles played by the directors in running of the company, it is necessary that they are appropriately qualified for the said position. Section 164 of the Companies Act, 2013 lays down the basic criteria stating the eligibility requirements for a director in the company namely-
Possession of Director Identification Number (“DIN”);
Soundness of mind;
Solvency of financial status;
No past record of any conviction or imprisonment (min 6 months) within the last 5 years;
No order of Tribunal disqualifying the appointment as director;
Non-payment of unpaid amount on shares held.
The Ministry of Corporate Affairs issued the Companies (Appointment and Qualification of Directors) Fourth Amendment Rules, 2018 on July 5, 2018, effective from July 10, 2018, in order to amend the Companies (Appointment and Qualification of Directors) Rules, 2014. The amended provisions are stated below:
- In addition to the process of cancellation or surrender or deactivation of DIN, the Central Government or Regional Director (Northern Region), or any officer authorised by the Central Government or Regional Director (Northern Region) shall have the power to deactivate the DIN, of an individual who does not intimate his particulars in e-form DIR-3-KYC within stipulated time in accordance with Rule 12A. [Rule 11(2)]
- The revised provisions allow for the de-activated DIN to be re-activated only after e-form DIR-3-KYC is filed along with fee as prescribed under Companies (Registration Offices and Fees) Rules, 2014 in addition to the requirements of cancellation or surrender or deactivation of DIN. [Rule 11(2)]
- A new provision Rule 12A has been inserted whereby every individual who has been allotted a DIN as on 31st March of a financial year, as per these rules shall, submit e-form DIR-3-KYC to the Central Government on or before 30th April of immediate next financial year. Provided that every individual who has already been allotted a Director Identification Number (DIN) as on 31st March 2018, shall submit e-form DIR-3 KYC on or before 31st August 2018.
- In the Annexure after Form DIR-3 i.e. KYC form details of the director along with his verification in the said regard are to be included.
The new amendments aim to ensure the appointment of directors having fulfilled the requisite needs in respect of the DIN.
India: Alternative Investment / Venture Capital Funds: SEBI Regulations
Investment has always been a lucrative scheme for the businesspersons to enhance their earnings among various modes, including direct equity, mutual funds, gold, real estate, fixed deposits, etc. Investments may be made individually or in a group.
Alternative Investment Funds:
One of the means of investments done collectively are through Alternative Investment Funds (hereinafter referred to as “AIF”) meaning any funds established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors. These investors may be whether Indian or foreigner, for investing it in accordance with a defined investment policy for the benefit of its investors. The AIF in India is regulated by the Securities Exchange Board of India (hereinafter referred to as “SEBI”), under the provisions of SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) issued on May 21, 2012.
With a recent SEBI circular on Overseas Investment by Alternative Investment Funds (AIFs) / Venture Capital Funds (VCFs) (hereinafter referred to as “the SEBI notification”) dated July 3, 2018, allowing overseas investment by AIFs and VCFs to the extent of USD 750 million taking a leap from the earlier limit of USD 500 million.
Venture Capital Funds
Another means of joint investment are Venture Capital Funds (hereinafter referred to as “VCF”) which are funds established in the form of a trust or a company including a body corporate having a dedicated pool of capital. SEBI controls such transactions in accordance with the aid of the SEBI (Venture Capital Funds) Regulations, 1996.
The SEBI circular also mandated the disclosure of the below stated details, by AIF/ VCF, in order to monitor the utilization of overseas investment limits-
- Reporting the utilization of the overseas limits within 5 working days of such utilization on SEBI intermediary portal at https://siportal.sebi.gov.in .
- Reporting of the following information through SEBI intermediary portal:
- In case an AIF / VCF has not utilized the overseas limit granted to them within a period of 6 months from the date of SEBI approval (hereinafter referred to as ‘validity period’), the same shall be reported within 2 working days after expiry of the validity period;
- In case an AIF / VCF has not utilized as a part of the overseas limit within the validity period, the same shall be reported within 2 working days after expiry of the validity period;
- In case an AIF/ VCF wishes to surrender the overseas limit at any point of time within the validity period, the same shall be reported within 2 working days from the date of decision to surrender the limit.
With the introduction of the SEBI circular SEBI not only aims to protect the interests of investors in securities market but also to promote the development and regulation of the securities market in India.
NCLT bench allows e-filing in India
Advancement of science and technology has led to numerous benefits to the life of the modern man. One of the gifts of this modernization is digitalization which has touched various aspects of our day to day life. India is also matching up with this fast-paced tech-marathon using the e-platform for carrying out various activities such as gaining knowledge, storing data, running e-commerce, making payment online thereby capturing the world with a click.
The increased facilities of the electronic system have now been incorporated in judicial setups as well. Various Courts have opted for displaying the daily orders and judgements online. In furtherance of the same, the National Company Law Tribunal vide its notification dated August 16, 2018, has ordered for the commencement of e-filing of applications, petitions, appeals, replies, etc.
This serves as an addition to the approach of the Government promoting digitalization. Earlier this month, the Chief Justice of India Hon’ble Justice Dipak Misra launched a host of smartphone apps to help litigants, from all parts of the country file cases and even make e-payments to courts.
In the ever-changing times, where technology has solved complicated issues being faced by human life in an easy manner, the progressive approach of the Courts in opting for digital means for filing documents helps creating safe records. In the longer run such steps would also cause reduction in the paper-work.
India: New E-commerce Policy
The growth of science and technology has created great impact on the lives of the modern humans who rely on it for numerous day to day activities. Commercial activities have also held the arm of technology whereby multiple business transactions are now being conducted vis the electronic media. In the recent years, India has witnessed mushrooming and growth of a number of E-commerce companies, such as E-bay, Flipkart, Amazon, Uber, Makemytrip.com, IRCTC, etc.
Presently, India does not have any E-commerce policy to regulate the affairs of the commercial activities being performed on the e-platforms. However, the legal provisions governing the e-commerce are the Information Technology Act, 2000 and the Consumer Protection Act, 1986. India faces various challenges in the domain of e-commerce including the processing of the transactions, foreign investment thereto.
Owing to the recommendations of the World Trade Organization and with the aim to facilitate an ecosystem for domestic economy, strengthening consumer protection in the e-commerce space, the Ministry of Commerce and Industry proposed a draft E-commerce policy on July 30, 2018. News of the draft policy was not welcomed by all the concerned stakeholders and it received criticism on account of various reasons including, data localization, permission to the Indian-owned and Indian-controlled online marketplaces to hold inventory as long as products are 100% domestically produced, setting up of e-commerce regulator, etc. Although the said policy was welcomed by domestic retailers and small e-commerce players, MNCs and foreign-owned E-commerce businesses have had reservations.
India: Necessity of licensed food outlets
Being a country of food loving people, India is a market of multiple food joints delighting numerous taste-buds. There has been a rapid and remarkable increase in the restaurant business of the nation which cater to the needs of around 1.2 billion citizens. Ranging between the wide market of the country, eateries are visible throughout the country varying from small hawkers on the roads to the most expensive and lavish restaurants symbolizing the class and status of the segment of the population visiting them.
The commercialization of food products in India is administered by the Food Safety Standards Authority of India (hereinafter referred as “FSSAI”) according to the guidelines issued under the Food Safety Standards Authority of India Act, 2006 (hereinafter referred to as the “Act”).
Registration and Licensing prerequisite
In order to ensure the safety of the consumers, the Government emphasizes on the need of obtaining requisite licenses and adhere by the standards prescribed. The Food Safety and Standards (Licensing and Registration of Food Business) Regulations, 2011, (hereinafter referred to as the “Regulations”) lays down the procedure for registration and licensing of food business in India. Some of the provisions of the Regulations state the following:
- For the purpose of registration of the business, the applicant is required to submit application with the Registering Authority with payment of prescribed fees and a self-attested declaration of adherence assuring that the applicant shall follow the basic hygiene and safety requirements;
- No person shall commence any food business unless he possesses a valid license for commencing or carrying on food business granted by the Central Licensing Authority. For the said purpose, the applicant is required to submit documents such as Blueprint/layout plan of the unit, details of directors/ partners/ proprietor & equipment, proof of possession of premises, Food Safety Management System plan, documents indicating constitution of the food unit (like partnership deed, articles of association), NOCs from Municipality or local body and from State Pollution Control Board, source of raw material, etc.
The grant of the aforesaid registration and license certifies that the food business operators carry out their activities in a clean, adequately lighted & ventilated, hygienic environment, having proper storage facilities and sanitation facilities thus safeguarding the interests of the consumers.
Food delivery entities delist non-licensed food joints
Food delivery entities such as Zomato and Swiggy have adopted a pragmatic approach of working towards the safety of its customers. These corporates have delisted the restaurants lacking the license issued by FSSAI in furtherance of the FSSAI directive issued on July 20, 2018 requiring the online food operators for delisting such joints by July 31, 2018.
With the revolution in the food services industry, there has been a substantial rise in the number organized food outlets. Since food has a major contribution in the growth of the Indian economy, it is important that the businesspersons involved therein follow the legal compliances to deliver highest quality service.
India: RERA- Haryana: Withdraw certifications to incomplete projects
Improvement in opportunities and the growing scale of economy in the country has elevated India to emerge as one of the favourable destinations for carrying out business. This has led to rise in the real estate sector as well. It is one of the major sectors dominating the argo-based economy of the nation. With increasing Gross Domestic Product, real estate has expanded the scope in residential as well as commercial arena.
Regulatory framework governing Real Estate
In order to promote the real estate sector and to ensure sale of plot, apartment or building, or sale of real estate project, in an efficient and transparent manner to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal, the Government has enforced the Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as the “Act”). The Act has also established the Real Estate Regulatory Authority (hereinafter referred to as the “Regulatory Authority”) and the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Authority.
The monitoring of the issues relating to real estate at the local level, each State has formulated its independent real estate regulation and development rules.
According the provisions of the Act, no promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase any real estate project unless a completion certificate has been obtained certifying that the real estate project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority under the local laws. [Section 3(1) read with Section 2(q) of the Act].
In furtherance to the execution of conveyance deed in favour of the allottees, the promoter of the real estate project is required to obtain the occupancy certificate permitting occupation of any building, which has provision for civic infrastructure such as water, sanitation and electricity, as applicable as per local laws to enable handing over of the possession to them. [Section 17 read with Section 2(zf) of the Act]
The promoter of the real estate project is responsible to obtain the completion certificate or the occupancy certificate, or both, as applicable as per local laws or other laws for the time being in force and to make it available to the allottees [Section 11 (4) (b) of the Act].
In the news…
Considering the troubles faced by the homebuyers, the Haryana Real Estate Regulatory Authority – Gurugram bench has ordered the Town and Country Planning Department (hereinafter referred to as “DTCP”) Haryana, to withdraw the Completion Certificate, or Occupation Certificate, issued to projects that are yet to complete the development. The DTCP has been required to initiate an inquiry as to how such certificates have been procured fraudulently. Show-cause notices have been issued to such builders who have deceived to obtain the aforesaid certifications in respect of incomplete projects. The regulatory authority has directed DTCP to take disciplinary action against officers with whose connivance builders have secured clearances.
With a view to safeguard the interests of the real estate buyers, the Regulatory Authority of Haryana has come forward with a pragmatic approach to take action against the developers who have illegally obtained occupation/ completion certificate in respect of projects which fail to meet the criteria of completion.