Tanmay PatnaikPartner
Sidharth RathoreAssociate
Trusha ModiAssociate
Key Developments
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First living will executed in Goa; implementation mechanism awaited from other states in line with the Supreme Court’s directions
The Supreme Court recognised Advanced Medical Directives (AMD) or living wills in 2018.1 AMDs provide a humane option for end-of-life care, sparing terminally ill patients and their families from prolonged suffering and financial burdens. An AMD details a person’s wishes regarding life-sustaining treatments such as artificial feeding, respiration, and resuscitation. However, the procedure provided for executing AMDs was onerous. Therefore, in January 2023, the constitution bench of the Supreme Court2 simplified the process.3
On 1 June 2024, Justice MS Sonak became the first person to execute his AMD in Goa in the presence of two witnesses. The AMD was processed by the chief medical officer and submitted to the mamlatdar, who forwarded it to the nodal officer appointed by the district collector. Copies were also kept with the individual, their family and their doctors, enabling the necessary authorities to action the living will at the appropriate moment, keeping in mind the time-sensitive nature of such documents.
However, most states are yet to implement the mechanism suggested by the Supreme Court even a year after the judicial reform. The Haryana government has notified rules, though there is no mention of the institutional apparatus established. The Maharashtra government has responded to a public interest litigation criticising its apparent inaction by claiming that it has appointed over 400 officers in observance of the Supreme Court’s directions, yet the secondary medical boards required to give effect to a living will are absent.
As of now, individuals in Maharashtra – and across most of India – cannot validly execute and register an AMD. However, remedial directions of the Bombay High Court are awaited, which will hopefully rectify the situation in Maharashtra.
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Supreme Court tables two matters challenging gender discrimination under Muslim personal law
Religious personal laws have drawn significant criticism for discriminating between individuals based on gender. This has historically resulted in several policy reforms, such as the Hindu Succession (Amendment) Act, 2005, which placed females on a level playing field with males in matters of coparcenary rights and inheritance under the Hindu personal law. Sharia law, the doctrinal Islamic jurisprudence, governs Indian Muslims in matters of marriage, inheritance, and succession. It has also attracted constitutional challenges on the grounds of patent discrimination based on gender, as well as arbitrary limitation of the testamentary freedom of Muslims. In a move to resolve these challenges, the Supreme Court has tabled two cases for consideration.
In the first case, through an order dated 29 April 2024, the Court has asked for the government’s response to a petition seeking a declaration that non-practicing Muslims must be governed by the provisions of the Indian Succession Act, 1925, and not by Sharia.4 Under Sharia, women are entitled to only half of what their male counterparts can receive in matters of succession. This has been challenged in Court as being discriminatory. The petition also seeks that the Court allow other non-practicing Muslims to obtain similar reliefs if they so desire. The case is tabled for further consideration on 23 August 2024.
In the second case, through an order dated 16 May 2024, the Court placed on record the issue of whether a Muslim testator can dispose of their entire estate through a testamentary act, or if this right is limited to a maximum of one-third of the estate under Sharia.5 When hearing this matter, the Court will also consider whether Muslim women can stake an equal claim to men in matters of succession given the fundamental right of equality and right against discrimination recognised under the Indian Constitution. The Court has appointed an amicus curiae and sought the Attorney General of India’s assistance in this matter. Further proceedings have been scheduled for 21 August 2024.
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Tightened scrutiny on beneficial ownership for foreign owned or controlled companies
The Ministry of Corporate Affairs (MCA) has tightened its scrutiny of beneficial ownership for companies owned and controlled by a foreign entity or investor (FOCC), potentially impacting compliance and disclosure practices significantly. Sections 89 and 90 of the Companies Act, 2013 (Companies Act) require companies to disclose details of beneficial interest and significant beneficial owners (SBO), including the nature of interest. According to an order of the Registrar of Companies (RoC) for Delhi and Haryana dated 22 May 2024 (RoC Order), the MCA imposed an aggregate fine of approximately INR 27 lakh on Mr. Satya Nadella (CEO, Microsoft), Mr. Ryan Roslansky (CEO and President, LinkedIn Corporation) and several other executives of these tech companies for violating SBO norms in respect of LinkedIn Technology Information Private Limited (LinkedIn India).
The RoC Order stated that because Mr. Ryan Roslansky controls the board of directors of LinkedIn India, and reports to Mr. Satya Nadella, both of them are considered SBOs of LinkedIn India. The RoC applied the reporting channel test to evaluate beneficial ownership. It concluded that “majority of the directors of the subject company (i.e., LinkedIn India) are employees of LinkedIn Corporation or Microsoft Corporation whose reporting channel would end up to Mr. Ryan Roslansky or Mr. Satya Nadella”. It also stated that actual exercise of control or significant influence is not required to be proved, and hence, the ‘right to exercise’ control over the majority of directors of LinkedIn India was held by Mr. Ryan Roslansky or Mr. Satya Nadella.
Strict enquiries into the reporting channels of FOCC structures may be carried out by the MCA to verify compliance with SBO norms. Companies and investors must not only reassess their compliance strategies but also evaluate the degree of control and influence afforded to professional executives. Given the wide ambit of the definition of ‘significant influence’ and ‘control’ under the Companies Act, and the recent scrutiny by the MCA, individuals holding key managerial and other executive positions in FOCCs who also hold the ‘right to exercise’ control over a majority of the directors must be mindful of their potential characterisation as an SBO.
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SEBI permits up to 100% NRI contribution for foreign portfolio investors based in International Financial Services Centre to increase the inflow of foreign investment
On 27 June 2024, the Securities and Exchange Board of India (SEBI) issued a circular6 citing an amendment to the SEBI (Foreign Portfolio Investors) Regulations, 2019 (FPI Regulations), which allows up to 100% aggregate contribution by Non-Resident Indians (NRI), Overseas Citizens of India (OCI), and Resident Indians (RI) in the corpus of Foreign Portfolio Investors (FPI) based in the International Financial Services Centre (IFSC) and regulated by the IFSC Authority (IFSCA). This regulatory shift is likely to open new avenues for investment and increase foreign investment inflows.
The enhanced flexibility is seen as a strategic response to the longstanding demand for greater participation of NRIs and OCIs in the Indian securities market. Under the new rules, FPIs must submit a declaration to their Designated Depository Participant (DDP) at registration if they intend to have 50% or more of their corpus contributed by NRIs, OCIs, and RIs. Existing FPIs have a six-month window to comply with this requirement. However, the contribution of a single NRI, OCI, or RI must be less than 25% of the total FPI corpus, and the combined contribution from NRIs, OCIs, and RIs must be less than 50% the total FPI corpus.
SEBI has imposed certain Know Your Customer requirements on such NRIs and OCIs without specifying an investment threshold. FPIs will be required to submit copies of PAN (or other documents specified by SEBI) for all their NRI, OCI, and RI investors, along with details of their economic interests in the FPI, to the DDP. If an individual lacks a PAN, the FPI must submit a suitable declaration with prescribed identity documents, such as an Indian passport, OCI card, or Aadhaar. Similar disclosures are required for indirect holdings in the FPI through non-individual entities primarily funded, owned, or controlled by NRI, OCI, or RI individuals. Submission of such documents may not be required if such FPIs satisfy certain conditions, such as pooling of all contributions by such investors into one investment vehicle, all investors having pari-passu and pro-rata rights in the fund, and several diversification requirements.
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Investments in family investment funds clarified to be overseas portfolio investments
Investments in unlisted securities of foreign entities of 10% or more, or with control are categorised as Overseas Direct Investments (ODI). Investments other than ODI in foreign entities, including investment in any security issued by an investment fund or a vehicle set up in an IFSC, are categorised as Overseas Portfolio Investments (OPI). Different sets of conditions and thresholds apply to investments under the OPI and ODI routes.
Given that a single family (including family-owned entities) would typically be required to be the beneficial owner of at least 80% of the units and have ‘control’ of a Family Investment Fund (FIF), it was unclear whether investments into FIFs set up in IFSC should be considered as ODI.
The Reserve Bank of India (RBI), through a circular dated 7 June 20247, has clarified that “A person resident in India, being an Indian entity or a resident individual, may make investment (including sponsor contribution) in units or any other instrument (by whatever name called) issued by an investment fund or vehicle set up in an IFSC, as OPI”. This means that OPI in an IFSC in India by a person resident in India or an Indian entity has been clarified to include investment in any instrument, irrespective of nomenclature, issued by an investment fund or vehicle in an IFSC.
Separately, the definition of duly regulated investment funds was widened to also include investment funds whose activities are regulated by the financial sector regulator of the host country or jurisdiction through a fund manager. The earlier definition was restricted to funds which were directly regulated by the financial regulator of the host country. This increases opportunities for potential overseas investment in jurisdictions such as Singapore, where investment funds are not directly regulated but rather are indirectly regulated by regulations imposed on fund managers.
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Portugal reintroduces tax breaks for non-habitual residents
The Portuguese government has announced plans to reintroduce tax breaks for non-habitual residents to attract skilled workers. Originally launched in 2009 during a financial crisis, the ‘Non-Habitual Resident’ scheme provided a special 20% tax rate on Portuguese-sourced income for high-value activities such as practising medicine or teaching at universities for individuals spending over 183 days annually in the country. The scheme also included tax exemptions on nearly all foreign income, if taxed in the country of origin, and a 10% flat tax rate on foreign-source pensions. Historically, the scheme has been criticised for adding to the soaring housing rates and pricing out many native Portuguese from the domestic market.
The government has also approved a phased reduction in the normal corporate income tax rate from 21% to 15% by 2027. Additionally, a new mandatory minimum tax rate of 15% for all multinationals operating in Portugal and for large Portuguese companies has been established. These measures are part of broader incentives aimed at encouraging private investment and facilitating company mergers to enhance competitiveness against the dominant European players.
[1]Common Cause (A Regd. Society) v Union of India, AIR 2018 SC 1665
[2]Common Cause (A Regd. Society) v Union of India, MA No. 1699/ 2019 in WP (C) No. 215/ 2005
[3]Under the simplified regime, AMD can be executed before a notary or gazetted officer (rather than the previous requirement of the presence of a Judicial Magistrate First Class), after which the original is forwarded to the custodians appointed by the state government. The AMD may also be included in the digital health records. At the time of implementation, the primary healthcare provider will perform the requisite medical diligence, after which the primary medical board (constituted/nominated by the hospital) and the secondary medical board (constituted/nominated by the state government) will pass a final decision on the implementation of the AMD.
[4]Safiya PM v Union of India, WP (Civil) No.135/2024
[5]Tarsem v. Dharma & Ors., CA No(s). 2497-2498/2024
[6]Circular SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/89
[7]Circular RBI/2024-25/41, A.P. (DIR Series) Circular No. 09
