Ankush GoyalPartner
Rohan KohliSenior Associate
Natansh JainAssociate
Key Developments
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Liberalisation of foreign investment in the space sector
On 4 March 2024, the government issued Press Note 1 of 2024 amending India’s Consolidated Foreign Direct Investment Policy (FDI Policy) to significantly liberalise foreign investments in the space sector as follows:
- Up to 74% under the automatic route with respect to satellites’ manufacturing and operation, satellite data products and ground segment and user segment;
- Up to 49% under the automatic route with respect to launch vehicles and associated systems or sub-systems, creation of spaceport for launching and receiving spacecraft; and
- Up to 100% under the automatic route with respect to manufacturing of components and systems/sub-systems for satellites, ground segment, and user segment.
The new regime is expected to attract and ease foreign investment from private players, which was largely restricted under the previous regulations.
(To read our detailed update on this development, click here.)
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Direct Listing of shares on international exchanges in GIFT-IFSC
To facilitate the listing of equity shares by Indian companies on permissible international exchanges, the Ministry of Corporate Affairs (MCA) issued the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 (LEAP Rules) on 24 January 2024. India International Exchange and NSE International Exchange, each situated in the Gujarat International Finance Tec (GIFT) City – International Financial Services Centre (IFSC), are currently permitted international exchanges.
The LEAP Rules apply to both listed and unlisted public companies, providing a comprehensive framework for direct listings on international exchanges. Simultaneously, the Department of Economic Affairs (DEA), Ministry of Finance, also notified the ‘Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme’ and amended the NDI Rules to enable direct listing on GIFT-IFSC.
Previously, the Companies (Amendment) Act, 2020 also introduced relevant provisions in the Companies Act, 2013 (CA 2013), to permit direct listing of securities of certain Indian public companies on authorised stock exchanges in specified foreign or designated jurisdictions. These provisions took effect on 30 October 2023.
These developments are aimed at enhancing access to foreign investment for businesses seeking global market access and broadening the investor base.
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Central Processing Center established to ease the process of company registration
To facilitate ease of doing business, the MCA has streamlined the process of registering companies in India by establishing a Central Processing Center (CPC). The CPC has been entrusted with the responsibility of examining all applications, e-forms, and other documents submitted for approval or registration by the registrar. The CPC will also examine filings relating to various resolutions, share capital alterations, name change applications, and conversions of company types.
Through the CPC, the MCA aims to alleviate delays and resolve issues that were causing regulatory compliance to become cumbersome. The benefits accorded to companies through the new process are summarised below.
- Uniformity: Multiple filings will be handled collectively by the CPC, ensuring uniform nationwide processing of filings, and reducing discrepancies that may arise due to varying interpretations taken by different regional offices/registrars.
- Efficiency: CPC is mandated to render a decision within 30 days of the filing of an application, except in cases requiring approval from higher authorities. This greatly reduces the turnaround time and expedites the process for companies.
- Transparency: The centralised system is expected to improve transparency and accountability thereby making the entire process more user-friendly.
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Revised requirements for determining beneficial ownership in alternative investment funds
The Securities and Exchange Board of India has revised the norms for determining ‘beneficial ownership’ by alternative investment funds (AIF) to align with the revised requirements for determining ‘beneficial ownership’ under the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Accordingly, investors or the beneficial owners of AIFs must not be:
- listed in the sanctions list issued by the United Nations Security Council; and
- residents of countries identified by the Financial Action Task Force (FATF) as having strategic deficiencies in Anti-Money Laundering or Combating the Financing of Terrorism to which counter measures apply, or that have not made sufficient progress in addressing the deficiencies, or have not committed to an action plan developed by the FATF to address the deficiencies.
These requirements aim to align the Indian AIF framework with global standards in combating money laundering and terrorism financing, presenting businesses with a clearer framework for compliance and risk management. AIF managers are also prohibited from accepting further capital contributions from investors who fail to meet these revised conditions, reinforcing the integrity of the financial system.
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Liquidation process amended to allow for increased stakeholder involvement
The Insolvency and Bankruptcy Board of India (IBBI) has modified the regulatory framework governing the liquidation process from 12 February 2024. The amendments include provisions for allowing the liquidator to reduce the reserve price of assets, facilitating private sales only after consultation with the Stakeholders’ Consultation Committee (SCC), and mandating regular SCC meetings for timely decision-making. Liquidators are now required to provide comprehensive reports at SCC meetings, justify any cost overruns, and consult the SCC before initiating legal proceedings or deciding on the corporate debtor’s status as a going concern.
Other amendments address early dissolution procedures, modification of compliance certificates, withdrawal of funds from the corporate liquidation account, and filing of compromise proposals.
Through a separate circular, the IBBI has also mandated liquidators to furnish progress reports to members of the SCC after receiving a confidential undertaking. Previously, such progress reports were exclusively submitted only to the adjudicating authority and the IBBI, essentially excluding other stakeholders, such as creditors, from accessing crucial information regarding the liquidation process.
These changes are geared towards addressing information asymmetry and fostering greater transparency and inclusivity in the liquidation process, thereby promoting confidence and trust in the overall liquidation framework.
