Legal & Industry Updates - June 2025
LEGAL & INDUSTRY UPDATES
Securities and Exchange Board of India (“SEBI”) Eases Employee Stock Ownership Plans (“ESOPs”) for Startup Founders (source)
The SEBI, on 18th June, 2025, has eased rules for startup founders on retaining their ESOPs, allowing them to hold share-based benefits even after listing, though under certain conditions. Founders can now retain ESOPs granted at least a year before filing the draft red herring prospectus. These stock options may continue to be exercised even after the company gets listed, and the founders are classified as promoters. Earlier, when filing Initial Public Offering (“IPO”) papers, founders were regarded as promoters and once the company was listed, they could no longer be granted ESOPs and had to liquidate any outstanding stock options before going public. SEBI has acknowledged that this rule negatively impacted founders during the IPO process.
Startups Fire Up Hiring Engine in Pursuit of Senior Executives (source)
New startups that have raised fresh capital in recent months are driving a revival in senior-level hiring across the sector. Various renowned and upcoming startups are actively filling leadership roles or plugging key vacancies ahead of planned IPOs. These companies are planning to strengthen their leadership teams after securing fresh capital and paying them handsome salaries, including generous stock options, in order to gear up for the next phases of growth and eventually drive long-term value creation.
Bar Council of India (“BCI”) Approves Entry of Foreign Law Firms in India for Non-Litigious Practice (source)
The BCI has officially formalized the decision to open the Indian legal market to foreign law firms, a move that was deliberated upon in 2023. Post the amendment, foreign law firms and lawyers would be permitted to operate only in non-litigious matters, such as advisory work and international arbitration and would be allowed to advise only on foreign and international law, and not on Indian legal matters. While the step marks a significant milestone in the liberalization of the legal services sector, prominent legal experts have emphasized the pressing need to amend the Advocates Act, 1961 in order to provide a clear legal framework for foreign lawyers. The move to formally allow foreign law firms to operate comes amid growing globalization of legal services and increasing demand for cross-border expertise.
Supreme Court (“SC”): Laws Made by Parliament or State Legislature Cannot be Act of Contempt of Court (“CoC”) (source)
The SC has asserted that enacting a law by legislature contradictory to previous court orders cannot be viewed as CoC. SC further held that a legislature has the powers to remove the basis of a judgment or, validate through an amendment or a law which has been struck down. The order also stated that any piece of legislation enacted by a legislature can be assailed within the manner known to law by mounting a challenge against its validity on the twin prongs of legislative competence or constitutional validity. This ruling came while addressing a plea concerning the Chhattisgarh government's alleged non-compliance with directives to halt support for vigilante groups. SC emphasized the separation of powers, noting that challenges to legislation must be based on legislative competence or constitutional validity.
Kerala High Court (“HC”) Constitutes Committee to Improve Lawyer-Police Relationship (source)
The Kerala HC, on 9th June, 2025, has constituted a committee to suggest comprehensive guidelines to improve the relationship between the police and the lawyers, further requesting the committee to review a report submitted by the state police chief, regarding the policy for interactions between themselves within court premises, as well as suggest measures for overall improvement of the relationship. In 2024, the court passed the order on a suo motu case it had initiated last year to address instances of police violence against lawyers in Kerala after an advocate was allegedly attacked by police officials while in the premises of a court., post which, the court had decided to issue guidelines that police authorities would have to adhere to while interacting with lawyers, judges and staff members of courts across Kerala.
Despite SC Approval, HCs Still Reluctant to Appoint Retired Judges to Handle Backlog (source)
As reported, the HCs have not shown keenness on appointing ad-hoc judges to tackle the pending criminal cases even though the SC had given a go-ahead few months ago to appoint retired judges for the same. Considering a backlog of over 18 lakh criminal cases, the SC, in January 2025, allowed the HCs to appoint ad-hoc judges, not exceeding 10 per cent of the court’s total sanctioned strength. Further, Article 224A (Appointment of Retired Judges at HCs) of the Constitution of India also allows the appointment of retired judges as ad-hoc judges in HCs to help deal with pendency. However, the procedure to appoint ad-hoc judges would be the same except that the President would not sign the warrant of appointment though the assent of the President would be sought for such an appointment.
Parliament Panel to Draft Code of Conduct for Judges (source)
A parliamentary panel is set to deliberate on a code of conduct for judges in the higher judiciary, coinciding with the potential impeachment proceedings against a renowned Justice of SC in whose residence unaccounted cash was found. The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice, in a meeting, intends to address the issue and also ponder upon the post-retirement assignment of judges.
Electronic-Commerce (“E-Comm”) Dark Pattern Crackdown to Increase Compliance Pressure on Retailers (source)
The Central Government (“CG”) is on the verge to crackdown the “dark patterns” that the consumer internet companies use by utilizing manipulative and misleading design techniques on their applications, to trick users into making unwanted purchases or make it harder for them to cancel membership programs. This came after Union Consumer Affairs Minister held a meeting with the representatives from a number of online businesses, wherein it was decided that workflows for internal compliance, including audits, sign-offs, and regular reporting, must be formalised on platforms. Additionally, CG suggested that a joint working group be established to investigate and take action to find e-comm platform infractions of dark pattern regulations which would then periodically communicate the findings with the consumer affairs department.
National Company Law Appellate Tribunal (“NCLAT”): National Company Law Tribunal (“NCLT”) Has Powers to Direct Probe into Company’s Affairs in Insolvency Matters (source)
NCLAT has explicated that NCLT can order investigation into the affairs of the company by probe agencies in cases related to the Insolvency and Bankruptcy Code, 2016 (“IBC”) by exercising its power under Section 213 (Investigation into company’s affairs in other cases) of the Companies Act, 2013, wherein it can direct for investigation, after complying with the precondition, i.e. affording a reasonable opportunity to the parties concerned. Under the IBC, NCLT is termed as the Adjudicating Authority (“AA”) for resolution and liquidation proceedings. NCLAT further said that NCLT can also exercise its jurisdiction under Rule 11 (Inherent Powers) of the NCLT Rules, 2016, where it is of the view that a copy of the order needs to be forwarded to the relevant statutory authorities for investigation.
Indian Companies Target Foreign Semiconductor Assets to Fast-Track Semiconductor Aspiration (source)
Indian semiconductor companies are targeting strategic overseas acquisitions to boost their chip manufacturing and assembly ambitions, with the aim to gain proprietary expertise, precision equipment, and critical intellectual property. Key semiconductor players are acquiring foreign assets while investing in greenfield facilities in India as these acquisitions are crucial for upskilling local workforces and establishing robust training pipelines. The move towards advanced packaging technologies could enhance India’s global position in the semiconductor industry.
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.