IN THE NEWS
ATTENTION DIRECTORS !
Every person who is/was a director of a company should file form DIR3 KYC with the ministry of Corporate Affairs. The last date for filing the form without late fee, expired on 15th September 2018 and DINs (Directors Identification Numbers) of close to 21 lakh directors were deactivated on account of non compliance. The only option left with them to file the form with penalty of Rs.5000 to activate the DIN.
Now the ministry has given another opportunity to rectify the non compliance. Now DIR3KYC can be filed with a lesser penalty of Rs.500 and the last date for the same is 5th October 2018. Post this date, the fine will be increased to Rs.5000 once again.
People who have DIN and who haven't filed the form, can make use of this opportunity and rectify the non compliance.
Ignorance in law is not an excuse. Instead of blaming the ministry and government, know the law, follow the procedure and be a responsible and law abiding business participant.
INSIGHTS
THE SIGNIFICANCE OF BENEFICIAL OWNERSHIP!
The dynamic Companies Act
Recently, the Ministry of Company Affairs (MCA) notified a new Section 90 in place of the existing same section along with Rules. This deals with disclosure of beneficial ownership in certain cases. The new section 90 (along with the Rules) deals with identifying and self-disclosure by a “significant beneficial owner (SBO).
The thin line between being a Registered Owner and Beneficial Owner
To understand more about the significant beneficial owner, it is first important to understand the difference between a Registered owner and Beneficial owner.
A Registered owner is a person in whose name the shares are registered and shown in the Register of Members of the company. Such person need not always hold the beneficial interest in such shares. For example, if A is holding shares on behalf of B, A’s name is shown in the Register of members, then A is considered the Registered owner. However A does not have any beneficial interest in such shares.
A Beneficial owner is a person who actually holds beneficial interest in the shares though his name is not shown in the Register of Members. Such person is the legal owner of such shares. Taking the same example as above, if A is holding shares on behalf of B, then B is the beneficial / legal owner of such shares though B’s name is not entered in the Register of Members of the Company.
Using this thin yet distinct line of difference between the two concepts, individuals and corporates (including Trusts, Partnership firms etc) take advantage and park shares for tax evasion, money laundering, insider trading and other benami transactions.
In order to keep a check and balance, the MCA has re- introduced the new Section 90 of the Companies Act, 2013 alongside the Rules to encourage voluntary disclosure of (not just) beneficial shareholders but significant beneficial shareholders who hold substantial stakes and control of the company (especially Indian companies) and thus ensure transparency in dealings.
Significant Beneficial Owner
The new section 90 of the Companies Act, 2013 states that an individual, who either himself or with others directly oz vr indirectly holds beneficial interests of 10% or more shares in a company will be considered a significant beneficial holder as he will have the right to exercise significant influence over that company. Such individuals include a trust and or persons resident outside India.
Beneficial OwnerBeneficial InterestEvery individual, acting alone or together or Trust, Persons resident outside India, holding beneficial interests, in shares of a company / exercising of significant influence or control.Benefit, profit or advantage as a result of contract or ownership or control.
The new section 90 of the Act as well as the Companies (Significant Beneficial Owners) Rules, 2018 contain detailed provisions of the self-disclosures:
To read more, Click here
Challenges in compliance?
While the new Section 90 and it Rules have been widely welcomed as a means to make transparent the corporates, it is built in with its challenges. For instance, in listed companies, where share transfers are very common, it will become cumbersome and time-cost consuming to adhere to this compliance. Individuals often own and control numerous such transactions across countries, thereby making it challenging to identify such individuals and investigate across countries. Companies are likely to face inertia from the SBO’s in actually disclosing their investments within the given timelines. While the latest amendment to the Rules have endeavoured to address these challenges, they are not fool proof yet.
Conclusion
The new section 90 and its Rules are essentially to unearth the complex layer of investments mainly to identify if there are shell companies being run in the garb of using legal persons such a companies, firms and Trusts as members of other companies. These provisions are aimed at increasing transparency and curb illegal transactions. While the provisions under the old and new Companies Act only restricted to disclosure of registered and beneficial owners, the new section and rules has gone one step ahead – by laying down percentages and control of each such individual to determine the real owners of the company. The benefit of significant ownership or the significance of beneficial ownership – only time will tell.
WHAT'S BREWING
THE LEGALESE OF DIGITAL(L) PAYMENTS
Digital banking has been the natural outcome of demonetization. The vision of making India a “cash less” economy with a view to systematically weed out black money and make the entire economy transparent has resulted in tremendous increase of electronic payments, credit cards, debit cards, mobile wallets and payment apps. It helps make payment for a range of service – movie tickets, utility bills, transfer money and the like thru online platforms. Even Aadhar enrolment is essentially online.
Digital banking has some of the most important advantages – it is convenient, cost effective, transactions happen instantly and it is possible to keep track of the same. Also this enables data collection and data analysis to enable provide better services to the customers.
However, it is not free from flaws. There have been numerous instances of online frauds and errors resulting in loss and extreme inconvenience to the users. A (human) user is dealing with a (non human) online system or platform. It makes it that much more impersonal.
There are many instances of online digital banking case going wrong due to hacking of bank account, or credit / debit cards. In case of such frauds, it is almost entirely upon the customer to rectify the same (for no fault of theirs). Though lately banks have been instantly alerting the user in case of any suspicious activity, a lot needs to be done towards firewalling the customer interest. Data protection and security is the single largest challenge that is to be addressed. There is also the “hidden charges threat to the customer. Services charges such as “Internet handling charges” only escalate the customer cost.
Laws governing digital payments?
Under the watchful eye of the RBI, the National Payment Corporation of India (NPCI) was incorporated in 2008 – a joint venture between many banks. Many services like the Unified payment interface and the immediate mobile payment service was launched. But all these services are routed through Bank accounts. They do not govern other digital payment platforms.
The Payment and Settlement Systems Act, 2007 is the parent legislation that supervises digital banking and is regulated by the Reserve Bank of India (RBI). This legislation governs the online digital payment platforms such as the mobile wallets. However, it doesn’t seem to be adequate. Online platforms such as E-wallets are outside the ambit of the Banking Regulation of the RBI. They are more governed by NBFC regulations. There is also the ambiguity of whether other legislations becoming applicable in case of digital disputes - the Information Technology Act, Consumer Protection Act to name a few. These legislations have provisions that will attract any and all such online transactions under its ambit. The need of the hour seems to be an exclusive one stop shop regulatory body / authority to take cognisance of such challenges, deliberate and objectively pass judgment on such digital disputes.
With recent surveys suggesting that payments received through various digital platforms surpassing the traditional methods of banking and payments, it is important to ensure that there is adequate laws governing the same.
CIRCULARS & NOTIFICATIONS
MCA
IBBI
SEBI
FEMA
RBI
- Extension of Trading Hours of Securities Lending and Borrowing (SLB) Segment [24.08.2018]
- Amendment to SEBI Circular No. CIR/IMD/FPIC/CIR/P/2018/64 dated April 10, 2018 on Know Your Client Requirements for Foreign Portfolio Investors (FPIs)
- Electronic Book Mechanism for issuance of securities on private placement basis – Clarifications [16.08.2018]
- Streamlining the Process of public issue under the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations,2013, SEBI (Public Offer and Listing of Securitized Debt Instruments) Regulations, 2008 and SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015 [16.08.2018]
- Enhanced monitoring of Qualified Registrars to an Issue and Share Transfer Agents [10.08.2018]
- Compliance of regulation 13(2) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 [31.08.2018]
- Notice for Meetings of the Committee of Creditors under Section 24(3)(a) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 21 of the Insolvency and Bankruptcy Bard of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 [10.08.2018]
THE VERDICT
FUNDAMENTAL RIGHT TO SEXUALITY, SEXUAL AUTONOMY AND RIGHT TO CHOICE OF SEXUAL PARTNER TO BE PART OF RIGHT TO LIFE UNDER ARTICLE 21 OF THE CONSTITUTION; DECLARATION OF SECTION 377 AS UNCONSTITUTIONAL - Landmark Judgment(s) by the Supreme Court of India
Navtej Singh Johar & Ors Vs. Union of India through Secretary Ministry of Law & Justice –
(1) Writ Petition (Criminal) No. 76 of 2016
(2) Writ Petiton (Civil) No. 572 of 2018
(3) Writ Petition (Criminal) No. 88 of 2018
(4) Writ Petition (Criminal) No. 100 of 2018
(5) Writ Petition (Criminal) No. 101 of 2018
(6) Writ Petition (Criminal) No. 121 of 2018
The curtains came down on the colonial era legislation on provisions of Section 377 of the Indian Penal Code, 1861(IPC). The legislation that has been in existence since almost 1862 originally contained the provisions criminalized same sex, homosexual activities. It has been a long and protracted legal battle.
From 1994, when the first case was filed by an NGO which got eventually dismissed. The second case that was filed in 2001 was also dismissed along with its review petition as well. As the movement gained steam, the Supreme Court was under pressure to reconsider the judgment.
In 2009, section 377 was decriminalized. The court ruled that consensual sexual acts of adults in private is not violative of Articles 14, 15 & 21 of the Constitution. But the Court also ruled that the remaining part of Section 377 that governed nonconsensual sexual acts especially with minors will be a crime.
In 2013, a two judge bench of the SC overturned the previous judgment passed on Section 377 and it again became a criminal offence. The SC further ruled that it was up to the Parliament to consider the feasibility and desirability of scrapping section 377 of the IPC. While this sparked outrage across the country, it further strengthened the LGBTQI civil rights movement with a host of petitions being filed by NGOs such a Naz Foundation, the Government and individuals in 2014 onwards.
The discussion / debate heated up in the face of a 2014 Judgment by a three Judge Bench that granted a third gender status (different from male and female) to the LGBTQI community. This was quickly followed by a bunch of petitions including the one by noted classical dancer Navtej Singh Johar.
In 2017, in a parallel judgment, a nine Judge bench of the Supreme Court ruled that right to privacy was a fundamental right which included at its core the preservation of marriage, procreation, sanctity of family life, personal intimacies and sexual orientation. There was dichotomy between this judgment and the one under section 377 (that criminalized same sex acts).
In 2018 the Court referred the Navtej Singh matter to a five Judge bench of the Supreme Court. With cases being filed by other prominent members, it was argued that the right of equality, dignity to life and liberty was not being extended to the third gender community. Finally on 6th September, 2018 in a historic judgment the 5 judge bench headed by Chief Justice of India. Dipak Mishra while ruling that (i) the LGBT (Lesbian, gay, bisexual, transgender, and queer) community has the same rights as of any other citizen of India (ii) respecting each other’s right is supreme humanity held that criminalisation of private consensual sexual conduct between adults of the same sex under Section 377 of the Indian Penal Code is clearly unconstitutional. "Consensual sex between adults in a private space, which is not harmful to women or children, cannot be denied as it is a matter of individual choice. Section 377 results in discrimination and is violative of constitutional principles," said the Apex Court. In four concurring opinions, the Bench declared the 156-year-old “tyranny” of Section 377 as “irrational, indefensible and manifestly arbitrary”. Section 377 was struck down on the grounds that it was in violation of Articles 14 (Right to equality) 15 (Prohibition of discrimination) Article 19(1)(a) (Freedom of expression) and Article 21 (Right to life and personal liberty). The CJI further observed that it was important to stay in tune with the changing times of the society. A bold stand taken especially in a traditional and conservative country like India. A historic judgement indeed after almost quarter century.
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LEGAL-EASE
Malice:
The intentional doing of a wrongful act without just cause or excuse, with an intent to inflict an injury or under circumstances that the law will imply an evil intent. A condition of mind which prompts a person to do a wrongful act willfully, that is, on purpose, to the injury of another, or to do intentionally a wrongful act toward another without justification or excuse
Nefas:
That which is against right or the divine law. A wicked or impious thing or act.
Oblivion:
Act of forgetting, or fact of having forgotten; forgetfulness. Official ignoring of offenses. Amnesty, or general pardons,an act of oblivion. Sate or fact of being forgotten.
Pactional:
Realting to or generating an agreement; by way of bargain or covenant.
INFOGRAPHIC
A Sea of Change
ERIN BROKOVICH (2000) (Movie)
Based on a true story, Erin Brokovich is the cinematic representation of the story of an unemployed single mother who takes head on, an energy corporation for contaminating / polluting the ground water of a small sleepy town in California.
Julia Roberts played the titular role of Erin Brokovich – a struggling unemployed mother of three. Her empathetic lawyer gives her a job as a paid legal assistant at his office. Assigned the task of going through the case of a giant energy corporation -– Pacific Gas and Electric Company (PG&E) purchasing a home of a California resident, Erin visits that home only to find the couple having serious health issues and the company regularly sponsoring their medical check-ups. Puzzled, she finds out from the couple that they are doing it as a goodwill gesture to negate any possible effects of the “safe chromium” that their manufacturing plant released into the water table. Erin then begins to dig deep into the case only to find that the energy company has been covering up all along – for years, the plant has been poisonously contaminating the ground water of Hinkley town with carcinogenic hexavalent chromium – a harmful chemical known to cause cancers. Erin and her lawyer senior then decide that it is best to get into an alternative form of dispute resolution – a binding arbitration where by parties settle their dispute out of court and the award of the arbitrator including compensation cannot be appealed in Court. Erin then manages to convince and bring together 634 affected families to the arbitration. In this process she is also helped by two former employees of the plant and assigned the task of destroying documentary evidence. Based on objective evidence and the plight of the residents of the town, the arbitrator order a ‘never before heard’ compensation - $333 million to be distributed amongst the affected families. In the process she gets a “little” bonus.
The movie was a runaway success both commercially and critically winning Julia Roberts host of awards including the Academy award for her brilliant portrayal of Erin. A definite must watch for (legal) movie lovers!
Defending Jacob by William Landay
(Book / Novel)
Published by Random House in January 2012, the book is a telling tale of a father dealing with the accusation of his teenaged son being a murderer.
Andy Barber, an Assistant District Attorney in Massachusetts who is investigating the murder of his son Jacobs’ classmate. A series of events point to Jacob himself being the murderer. The trial commences and Andy reluctantly visits his own father – a murderer and rapist convicted for life in jail. Jacob is proven not guilty when a known paedophile in that area is found dead with a suicide note taking responsibility for the murder. The family is relieved and decides to holiday in Jamaica. A murder of a young girl that Jacob befriends in Jamaica (re)opens the can of worms. Read the book and find out how the parents eventually deal with the situation and their child. The novel is a crime thriller and family drama rolled into one.
REASONABLE DOUBTS (1991-1993)
(TV Series)
With a total run time of 44 episodes over 2 seasons in the early nineties, the TV series portrays a professional relationship between an old world detective Dicky Cobb (Mark Harmon) and a deaf assistant District Attorney Tess Kaufmann (played by Marlee Matle who is deaf in real life as well) in solving cases. The main reason of their off –beat professional combination being that Cobb was one of the only few officers who knew sign language to help Tess. Communication hardly seemed to be the issue between the two as Cobb always had an issue with Tess’s attitude rather than her hearing impairment.
(P)REVIEW
Focus is a matter of deciding what things you’re not going to do
– John Carmack
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