Posts

Amendments to the Share Capital and Debentures Rules

Amendments to the Share Capital and Debentures Rules
On 5th June 2020, the Ministry of Corporate Affairs notified certain amendments to the Companies (Share Capital and Debentures) Rules, 2014 (“Rules”) with respect to issuance of sweat equity shares and debenture redemption reserve (“Notification”).
A. Sweat Equity
Start-up companies were allowed to issue sweat equity shares to their directors or employees at discount or for consideration other than cash, for providing know-how or making available rights in the nature of intellectual property rights or value addition, upto fifty per cent of paid up share capital of the Company for a period upto 5 years from the date of incorporation or registration.

 

Pursuant to the Notification, start-up companies can issue sweat equity shares for 10 years from the date of incorporation or registration instead of 5 years. This move should surely help startups boost the morale of the employees during the slowdown caused by the pandemic Covid-19 crisis.

 

Further, in the said provision, the reference to old definition of a startup company which was issued by the Department of Industrial Policy and Promotion (“DIPP”) vide Notification No. G.S.R. 180(E) dated 17th February, 2016 is substituted with the new definition as issued vide Notification No. G.S.R. 127(E) dated 19th February, 2019. This is a welcome change after the DIPP broadened the definition of a startup in February 2019. It recognized an entity as a startup if it had been incorporated for less than 10 years and did not have a turnover of more than Rs. 100 crores for the financial year from the earlier turnover not exceeding Rs. 25 crores.

B.  Debenture Redemption Reserve
The Notification further provides that all listed companies in context of their issuance of privately placed debentures will now not be required to invest or deposit a sum of 15% of the amount of its debentures maturing during the year, ending on the 31st day of March of the next year on or before 30th day of April in each year.

 

The amendment to the Rules will free up vital cash resources of listed companies which would have been otherwise blocked for the requirement of such mandatory investment.

Disclaimer
This news flash has been written for the general interest of our clients and professional colleagues and is subject to change. This news flash is not to be construed as any form of solicitation. It is not intended to be exhaustive or a substitute for legal advice. We cannot assume legal liability for any errors or omissions. Specific advice must be sought before taking any action pursuant to this newsflash.

 

For further clarification and details on the above, you may write to Mr. Vaishakh Kapadia (Partner) at vkapadia@almtlegal.com, Mr. Ankit Parekh (Senior Associate) at aparekh@almtlegal.com, and Mr. Vinit Shah (Associate) at vshah@almtlegal.com.

Insolvency and Bankruptcy Laws – Extension of timelines

In view of the pandemic COVID-19 and the changing business environment due to COVID-19, the Insolvency and Bankruptcy Board of India (“IBBI”) has issued certain notifications to address various concerns of stakeholders in connection to Insolvency and Bankruptcy Code, 2016 (“Code”) and other regulations framed therewith.
The gist of some of the latest notifications issued by the IBBI are set out below:
1. The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”), provides that the corporate insolvency resolution process is a time bound process and it is required to be concluded by the insolvency professional in a prescribed period of 330 days including litigation period. The IBBI has amended the CIRP Regulations by inserting a new special provision which states that the period of lockdown imposed by the Central Government due to outbreak of pandemic COVID-19 will not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown in relation to a corporate insolvency resolution process.
2. The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”), the liquidation process is mandatorily required to be completed by the liquidator in a prescribed period of 365 days. Due to spread of COVID-19 and declaration of lockdown by the Central Government, the IBBI has amended the Liquidation Regulations by inserting new regulation which states that the period of lockdown imposed by the Central Government due to outbreak of pandemic COVID-19 will not be counted for the purposes of the time-line for any task that could not be completed due to such lockdown in relation to any liquidation process.
3. In addition to above, IBBI has also issued notification amending the Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations, 2020 whereby it has given certain relaxations on time lines and its rules for authorisation of assignment by Insolvency Professional Agencies to their professional members.
The above relaxations in timelines are evidence that the regulators are mindful of the difficulties and delay in compliances owing to COVID-19. The Government of India and the regulators are constantly making efforts to ensure that corporates and professionals have fair liberties to comply with the timelines and regulations.
Disclaimer
This news flash has been written for the general interest of our clients and professional colleagues and is subject to change. This news flash is not to be construed as any form of solicitation. It is not intended to be exhaustive or a substitute for legal advice. We cannot assume legal liability for any errors or omissions. Specific advice must be sought before taking any action pursuant to this news flash.

 

For further clarification and details on the above, you may write to Mr. Vaishakh Kapadia (Partner) at vkapadia@almtlegal.com, Mr. Ankit Parekh (Senior Associate) at aparekh@almtlegal.com and Mr. Vinit Shah (Associate) at vshah@almtlegal.com.