Introduction

Edition 10/20-21

Week – September 21st to September 25th

Quote for the week:

“The secret of success is to do the common thing uncommonly well.”

- John D. Rockefeller Jr.

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The ‘Swift e-Bulletin’ - weekly newsletter, covers all regulatory updates and critical judgements passed during the week. We hope that you liked our previous editions and found it to be of great value in its content. We want this newsletter to be valuable for you so, please share your feedback and suggestions to help us improve.

In the wake of COVID-19, we all are witnessing many relaxations, exemptions and amendments to the various legislations by regulatory authorities to ease out the operations during this time of crisis.

Further, various regulatory authorities have been proactive in bringing significant regulatory changes in recent challenging times. This week’s newsletter covers various circulars/notifications issued by certain regulatory authorities such as the Ministry of Corporate Affairs (“MCA”), Securities and Exchange Board of India (“SEBI”) and the Insolvency and Bankruptcy Board of India (“IBBI”), and critical judgements and orders passed by the National Company Law Tribunal (“NCLT”), SEBI, Supreme Court and High Court. With a constant endeavor to cover all regulatory updates and judgements/orders at one place, we have prepared a comprehensive summary for quick reference of such updates and Judgements / orders issued during the week of September 21, 2020 to September 25, 2020.

Thank you,

Swift Team

Table of Contents

REGULATORY UPDATES

MCA UPDATES

1. Parliament passes the Companies (Amendment) Bill, 2020 on September 22, 2020

• The Lok Sabha on Saturday, September 19, 2020 passed a bill to further amend around 48 Sections of the Companies Act, 2013 (“The Act”) by decriminalizing various non-compoundable offences in case of defaults, but not involving frauds, omitting imprisonment for various offences which were considered procedural and technical in nature. The bill was then passed by Rajya Sabha on September 22, 2020.
• The bill comes at a time when companies are reeling under stress due the coronavirus pandemic as a major relief for the stressed corporates and is aimed at increasing the ease of doing business measures for the companies in India.
• The bill removes the penalty, imprisonment for 9 offences which relate to non-compliance with orders of the National Company Law Tribunal (“NCLT”), and reduces the amount of fine payable in certain cases. These include matters relating to winding-up of companies, default in publication of NCLT order relating to reduction of share capital, rectification of registers of security holders, variation of rights of shareholders and payment of interest and redemption of debentures.
• Among other changes, some of the few highlighted in the bill are:
  • The bill proposes to introduce a new chapter XXIA in the Act in relation to ‘Producer Companies’, which was earlier part of the Companies Act, 1956
  • To empower the Central Government to exclude, in consultation with the SEBI, certain class of companies from the definition of "listed company", mainly for listing of debt securities mainly for Direct overseas listing of securities;
  • To clarify the jurisdiction of trial court on the basis of place of commission of offence under Section 452 of the Act for wrongful withholding of property of a company by its officers or employees, as the case may be;
  • To set up additional benches of the NCLT to hear appeals under Competition Act, 2002 and the Insolvency and Bankruptcy Code, 2016;
  • To make provisions for allowing payment of adequate remuneration to non-executive directors in case of inadequacy of profits, by aligning the same with the provisions for remuneration to executive directors in such cases;
  • The bill seeks to extend the exemptions to certain classes of non-banking financial companies and housing finance companies from filing of certain resolutions passed to grant loans or give guarantees or to provide security in respect of loans under clause (f) of sub-section (3) of Section 179 of the Act in the ordinary course of their business;
  • The bill proposes to extend the applicability of Section 446B of the Act which deals with ‘lesser penalties for small companies and one-person companies’, to all provisions of the Act which attract monetary penalties and also extend the same benefits to Producer Companies and start-ups;
  • To reduce timelines for applying for rights issues so as to speed up such issues under Section 62 of the Act;
  • To extend exemptions to certain classes of non-banking financial companies and housing finance companies from filing certain resolutions under Section 117 of the Act;
  • To provide relaxations around Corporate Social Responsibility provisions (CSR) in terms of constitution of CSR Committee and setting off excess CSR Spends;

To read the bill in detail, please click here.

SEBI UPDATES

1. SEBI prescribes Alternate Risk Management Framework (“ARMF”)  applicable in case of Near Zero and Negative Prices for the Commodity Derivatives Segment (CDS) vide circular dated September 21, 2020:

• SEBI, vide circulars dated October 01, 2015 and September 01, 2016, has, inter alia, prescribed the Risk Management Framework for the Commodity Derivatives Segment (CDS). In addition to circulars issued in the interregnum, the framework was further strengthened vide circular no. SEBI/HO/CDMRD/ DRMP/CIR/P /2020/15 dated January 27, 2020.
• In recent times, extreme volatility has been observed in commodity prices globally, particularly in the case of Crude Oil, wherein the prices had unprecedentedly gone down to zero and subsequently, even negative. In such a scenario, margins equivalent to even 100% of the futures price would not have been sufficient to cover the steep upward or downward price variations in the futures market.
• In order to enable risk management framework to handle such a scenario of ’near zero’ and negative prices, SEBI constituted a Task Force of Clearing Corporations (CCs) and market participants to review the risk management framework in such cases. The following has been decided based upon the recommendations of the said Task Force:
  • ARMF shall be applicable in such cases of near zero and negative prices for any underlying commodities/futures. Details of the ARMF are given at Annexure-I to this circular.
  • To begin with, the commodities having the following characteristics may be in principle treated as susceptible to the possibility of near zero and negative prices namely Commodities that need specialized storage space in physical markets, which, if not followed, may cause environmental hazards or have other external implications and Commodities that can’t be disposed of/ destroyed with ease i.e. disposal/destruction of such commodities may cause an environmental hazard or may incur significant cost.
  • The CCs shall ensure the readiness of their systems to implement the prescribed ARMF within 60 days of the date of this circular. However, CCs who do not presently provide for the clearing and settlement services of any such susceptible commodity, are not required to update their systems for the prescribed ARMF. This is subject to certification by their Risk Management Committee
  • The exchanges are also advised to take steps to make necessary amendments, if any, to the relevant bye-laws, rules and regulations for the implementation of the same, bring the provisions of this circular to the notice of their members and also to disseminate the same on their website and communicate to SEBI, the status of implementation of the provisions of this circular.

To read the circular in detail, please click here.