Legal & Industry Updates - April 2025
LEGAL & INDUSTRY UPDATES
Draft Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (“Draft Rules”) (source)
The Ministry of Corporate Affairs (“MCA”) has notified the Draft Rules, proposing amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, with the aim to relax rules that would make a larger number of companies, especially the small and medium ones, eligible for fast-track mergers, thereby improving ease of doing business. Section 233 (Merger or amalgamation of certain companies) of the Companies Act, 2013, provides for mergers or amalgamation of certain companies through approval of Central Government (“CG”) and the MCA has delegated the powers to regional directors in this regard. However, post amendment, requirements and procedures for speedy approval of company mergers would be rationalized, the scope for fast-track mergers would be widened and the entire merger process be made simpler.
Securities and Exchange Board of India (“SEBI”) Clarifies Compliance Officer Level Requirement in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) (source)
SEBI, on 3rd April, 2025, has clarified that the term ‘level' used in LODR Regulations refers to the position of the compliance officer in the organization structure of the listed entity, further explaining that ‘one level below the board of directors' means one level below the managing director or the whole-time director who are part of the board of directors of the listed entity. The objective of the clarification is to align compliance efforts with business operations while ensuring that organizations adhere to legal and ethical standards, thereby protecting shareholders, investors and other stakeholders. Also, the main intention is to empower the compliance officer by placing them at a senior organizational level where they can effectively ensure regulatory compliance.
SEBI Raises Threshold for Additional Foreign Portfolio Investors (“FPIs”) Disclosures to INR 50,000 Crore (source)
SEBI, on 9th April, 2025, has eased the disclosure norms for FPIs by doubling the asset threshold from INR 25,000 crore to INR 50,000 crore for making granular beneficial ownership disclosures amid an increase in the market size. Post the amendment, FPIs (individually or as an investor group), holding more than INR 50,000 crore of equity Assets Under Management in Indian markets are required to disclose details of all entities holding any ownership, economic interest, or control, on a full look through basis.
SEBI Chairman: SEBI to Review Existing Regulations, Review Outdated Regulations (source)
The SEBI Chairman, on 17th April, 2025, has stressed on the need for an optimum regulation in financial markets by reviewing the existing regulations and removing those that are outdated. SEBI has planned to intensify its consultations with stakeholders in this regard to prepare a pragmatic roadmap for achieving its objectives of simplified yet effective regulations. Moreover, under the Financial Stability and Development Council, chaired by the Finance Minister of India, there exists a robust institutional mechanism for financial regulators to come together for the harmonisation of policies and regulations, ease of doing business, and reducing the cost of compliance in a rapidly growing securities market. The primary objective is to not only to ensure market integrity and promote trust, but also the development of the market.
SEBI Proposes Direct Arbitration of Complaints in Securities Market (source)
SEBI, on 21st April, 2025, has proposed to offer a direct arbitration mechanism for resolving disputes in cases with claims of at least INR 10 crore and those which are chronic and repetitive in nature, with the aim to tweak the framework for Online Dispute Resolution (“ODR”) in the Indian securities market in a bid to provide clarity and better implementation. However, if arbitration is not opted, the case would be closed in the ODR portal but could still be pursued legally outside the system. SEBI further suggested that conciliation settlements should be electronically accepted and legally binding and it was also proposed that the ODR institutions should have separate panels for conciliators and arbitrators.
Insolvency and Bankruptcy Board of India (“IBBI”) Seeks Feedback on Simplifying Procedures, Easing Compliance (source)
The IBBI, on 7th April, 2025, has invited public suggestions on all regulations under the Insolvency and Bankruptcy Code, 2016 (“IBC”), with the aim to simplify processes, ease compliance and lower costs. This initiative reflects the IBBI’s ongoing commitment to addressing legal and practical challenges in insolvency and liquidation and a positive commitment to refining the regulatory architecture to better address the requirements of all stakeholders. Further, simplified rules would let Insolvency Professionals and related bodies focus on core duties, while allowing regulators to target systemic risks.
CG to Amend the IBC to Curb the Role of Resolution Professionals (“RPs”) for Improved Efficiency (source)
The CG is prepared to revise the IBC with amendments aimed at streamlining the Corporate Insolvency Resolution Process (“CIRP”) by reducing the powers of RPs, with the primary objective to enhance transparency and accelerate resolutions, while also empowering creditors and other stakeholders. The proposed amendments address concerns over delays and allegations of inefficiencies in the CIRP where RPs currently hold substantial authority to manage distressed companies. The amendments also propose a compressed 165-day insolvency resolution window, a significant reduction from the existing 330 day timeline. Another transformative proposal is the expansion of the pre-packaged insolvency resolution framework, initially designed for Micro, Small and Medium Enterprises, to larger corporates.
Reserve Bank of India (“RBI”) Caps Foreign Exchange Management Act, 1999 (“FEMA”) Violation Penalty at INR 2 Lakh to Ease Compliance Burden (source)
The RBI, on 24th April, 2025, has capped the penalty amount for the FEMA violations to INR 2 lakh, down from a percentage of the amount of violations earlier in an easing of regulations. Various violations including the use of liberalised remittance scheme proceeds not reinvested within 180 days, exports not made within one year of advance receipt and gifting high value shares without RBI permission would now be penalized to a maximum of INR 2 lakhs as opposed to 0.30% to 0.75% of the violation amount earlier. The primary objective of rationalizing the penalty amount is to significantly ease the burden on individuals and corporations involved in high-value contraventions.
Ministry of Law and Justice (“Law Ministry”) Stresses on Reducing Litigation Involving CG (source)
The Law Ministry, on 4th April, 2025, has warned that ineffective implementation aimed at public good may lead to court cases, as intended beneficiaries excluded from such actions may take legal recourse, thereby highlighting the importance of reducing litigations involving the CG. There are about seven lakh cases pending where CG is a party, therefore, minimizing "unwarranted appeals" in courts, addressing inconsistencies in notifications and orders that lead to court cases, introducing stringent measures to simplify legal procedures, and preventing unnecessary litigation are the key measures proposed by the Law Ministry.
A Renowned Real Estate Company Seeks Higher Thresholds in Digital Competition Bill, 2024 (“DC Bill”) to Boost Mid-Sized Startups (source)
A reputed real estate company has summoned CG to increase the thresholds for defining big technology companies under the DC Bill, emphasizing that the current criteria could hinder the growth of mid-sized startups. They further highlighted that the current user threshold of 10 million and business threshold of 10,000 are too restrictive for emerging firms and urged CG to consider the cost-benefit dynamics of compliance to prevent discouraging any new entrants. The plea came amid ongoing deliberations over the DC Bill, which aims to create a fair and competitive digital ecosystem in India.
Startup Policy Forum (“SPF”) Appeals CG to Resolve ‘Reverse Flipping’ Process (source)
SPF has urged CG to set up a dedicated task force to simplify the process of ‘reverse flipping’ which allows startups domiciled overseas to relocate to India, considering the move would push for additional reforms to remove procedural hurdles. SPF, in a communication to MCA, flagged significant delays and uncertainties many startups continue to face despite recent positive regulatory changes as the fast track merger route is currently available only to wholly owned subsidiaries which poses a practical hurdle since most startups have complex shareholding structures that include minority shareholders in their Indian subsidiaries and overseas parents.
Supreme Court (“SC”) Cautions Against Misuse of Environmental Laws to Stall Development Projects (source)
As reported, while rejecting a plea against a floating solar power project in Maharashtra, the SC has raised concerns over the misuse of environmental activism to obstruct development projects, further suggesting that few non-governmental organizations (“NGO”) might be acting on behalf of losing bidders or external entities to stall India’s progress. The SC noted that the NGO had rushed to the National Green Tribunal (“NGT”) as soon as the tender was issued, claiming that the solar project would harm the sanctuary. However, the NGT, after examining responses from the Ministry of Environment, Forest and Climate Change, upheld CG’s policy of promoting solar energy. With no legal foundation for the challenge, the NGT dismissed the case, and the SC upheld the decision.
Madras High Court (“HC”) Disallows Arbitration Without Exhausting Credit Information Dispute Remedies (source)
The Madras HC, while challenging a previous ruling, has stated that the borrowers cannot invoke arbitration proceedings to address disputes related to the non-updating of their credit history by various credit bureau companies without first utilizing the alternative remedies prescribed under the Credit Information Companies (Regulation) Act, 2005 (“the Act”). The RBI had also challenged the said ruling that permitted arbitration proceedings without requiring the borrower to exhaust statutory remedies. Similarly, disagreeing with the ruling, the HC emphasised that section 18 (Settlement of dispute) of the Act provides for dispute resolution through arbitration only if no other remedy is available under the law and since the Act outlines a specific mechanism for correcting and updating credit information, arbitration cannot be the first recourse.
Disclaimer: The updates provided in this document is not a legal opinion and does not claim to capture all legal developments related to the subject matter stated herein. It is advisable to seek legal advice for accurate applicability, prior to relying on the updates for any legal matter.