Govt decriminalises Companies Act to promote greater ease of doing business

Source: Business Standard, Sept 21, 2020

New Delhi: The Companies Bill has decriminalised 48 sections by removing or reducing penal provisions and omitting imprisonment for various offences that were considered procedural and technical in nature, a move that will help corporates in ease of doing business.

The Bill, passed on Saturday in the Lok Sabha, comes at a time when companies are reeling under stress due the Covid-19 pandemic. Finance and Corporate Affairs Minister Nirmala Sitharaman said decriminalisation of various provisions under the companies law will also help small firms by reducing the litigation burden on them.

The Bill has proposed doing away with imprisonment for nine offences, which relate to non-compliance with orders of the national company law tribunal (NCLT). These include matters relating to winding-up of companies, default in publication of NCLT order relating to reduction of share capital, rectification of registers of security holders, variation of rights of shareholders, and payment of interest and redemption of debentures.

In case of corporate social responsibility (CSR), if a company fails to transfer the amount to a specified fund, it shall be liable to a penalty twice the amount required to be transferred or Rs 1 crore, whichever is less. Also, every officer of the company, which is in default, will have to pay a penalty of one-tenth of the amount required to be transferred by the firm, instead of the earlier provision of three years imprisonment and maximum fine of Rs 5 lakh.

“These amendments are in furtherance of the objective of CAB 2020 to eliminate subjectivity in the adjudication process, which exists in such cases because the Act provides the adjudicating officer with the power to order either a punishment of imprisonment or impose a criminal fine, or both,” Pavan Kumar Vijay, founder of Corporate Professionals, said.

The Bill has also omitted the punishment of imprisonment prescribed under Sections 26(9) and 40(5) of the Act relating to the provision of public offering of securities by a company such as matters to be stated in the prospectus. However, the quantum of the monetary penalty under each of these provisions remains unchanged.

Imprisonment for non-compliance with procedure for buyback prescribed under Section 68 of the Act and also for various lapses in financial statements of the company are also to be done away with, according to the Bill. The government has also rationalised several penalties under the Act such as for delay in filing the financial statement with the registrar of companies.

The corporate affairs ministry has decriminalised sections where the complainant can enter into a compromise, and agree to have the charges dropped against the accused.

Such offences include, for instance, default with respect to the section 8 (11), which deals with formation of companies with charitable objects, section 26 (9) regarding matters to be stated in the prospectus. The punishment in these cases includes a fine as well as provision for imprisonment for the company’s directors or other individuals involved.

According to the new penal provision, if any person fails to make a declaration of significant beneficial ownership, the minimum penalty has been reduced by half to Rs 50,000 and in case of continuing failure Rs 1,000 each day up to a maximum level of Rs 200,000.

In the last amendment to the Companies Act, the government had decriminalised 16 sections. Most of them covered lapses such as prohibition on issue of shares at discount or failure to file a copy of financial statement with the registrar.

Lok Sabha passes bill to amend Factoring Regulation Act to support MSMEs

Source: Business Standard, Sept 21, 2020

New Delhi: Lok Sabha on Sunday passed a bill to amend the Factoring Regulation Act that seeks to help micro, small and medium enterprises by providing additional avenues for getting credit facility.

The Factoring Regulation (Amendment) Bill, which was introduced on September 14, was passed by voice vote after a brief discussion.

The Factoring Regulation Act, 2011 was enacted to provide for regulating the assignment of receivables to factors, registration of factors carrying on factoring business and the rights and obligations of parties to the contract for assignment of receivables.

Minister of State for Finance Anurag Thakur said it would greatly help the financial system.

“The amendments are expected to help micro, small and medium enterprises significantly by providing added avenues for getting credit facility, especially through Trade Receivables Discounting System.

“Increase in the availability of working capital may lead to growth in the business of the micro, small and medium enterprises sector and also boost employment in the country,” according to Statement of Objects and Reasons of the bill.

Ministry of MSME re-activates the micro-industrialization process in Rural India

Source: IBEF.org, Sept 18, 2020

A few days ago, Ministry of Micro Small and Medium Enterprises (MSME), had announced expanding and doubling the support to Artisans who might be interested in making Agarbatti. Taking these efforts further, the Ministry has now come out with new guidelines for two more schemes which include ‘Pottery Activity’ and ‘Beekeeping Activity’.

These new initiatives of the Ministry with beneficiary-oriented Self-Employment schemes, are aimed at rejuvenating the grass root economy contributing to AtmaNirbhar Bharat Abhiyan.

For ‘Pottery Activity’ Government will provide assistance of pottery wheel, Clay Blunger, Granulator etc. It will also provide Wheel Pottery Training for traditional pottery artisans and Press Pottery training for pottery as well as non-pottery artisans in Self Help Groups. There is also provisioned to provide Jigger-Jolly training programme for pottery as well as non-pottery artisan in Self Help Groups.

This is being done:

  • In order to enhance the production, technical knowhow of pottery artisans and to develop new products at reduced costs.
  • To enhance the income of pottery artisans through training and modern / automated equipment;
  • To provide skill-development to SHGs of pottery-artisans on focused /decorative products, with new pottery designs;
  • To encourage the successful traditional potter to set up unit under PMEGP scheme;
  • To develop necessary market linkages by tying up with exports and large buying houses;
  • To innovate new products and raw materials to make international scale pottery in the country
  • Preparing them to graduate from pottery to crockery and
  • Trainer’s training programme for skilled pottery artisans who want to work as Master Trainers.

In case of the POTTERY improvements in the Scheme are:

i) skill-development training on focused products like garden pots, cooking-wares, khullad, water bottles, decorator products, mural, etc. to SHGs of pottery-artisans has been introduced.

ii) Focus of the new Scheme is to enhance the production, technical knowhow of pottery artisans and efficiency of potter energy kilns to reduce cost of production

iii) Efforts will be made to develop necessary market linkages by tying up with exports and large buying houses

A total of 6075 Traditional and others (non-traditional) pottery artisans/Rural Un-employed youth/Migrant Labourers will get benefitted from this Scheme.

As Financial support for the year 2020-21, an amount of Rs.19.50 crore (US$ 2.64 million) will be expended to support 6075 artisans with a Centre of Excellence, with MGIRI, Wardha, CGCRI, Khurja, VNIT, Nagpur and suitable IIT/NID/ NIFT etc, for product development, advance skill programme, and quality standardization of products.

Additional amount of Rs. 50.00 crore (INR 6.79 million) has been provisioned for setting up of clusters in Terracotta, Red clay pottery, with new innovative value-added products to build pottery to crockery/ tile making capabilities, under ‘ SFURTI’ scheme of the Ministry.

In case of the Scheme for ‘Beekeeping Activity’, Government will provide assistance of Bee boxes, Tool kits etc. Under this scheme, Bee boxes, with Bee colonies, will also be distributed to Migrant workers in Prime Minister Gareeb Kalyan Rozgar Abhiyaan (PMGKRA) districts. A 5 days’ beekeeping training will also be provided to the beneficiaries through various Training Centres /State Beekeeping Extension Centres/ Master Trainers as per prescribed syllabus;

This is being done:

In order to create sustainable employment for the beekeepers / farmers.

To provide supplementary income for beekeepers / farmers;

To create awareness about Honey and other Hive Products;

To help artisans adopt scientific Beekeeping & Management practices;

To utilize available natural resources in beekeeping;

To create awareness about the benefits of beekeeping in cross pollination.

Ministry officials said that in addition to creating additional income sources through these employment opportunities, the ultimate objective is to make India self-sufficient in these products and to eventually capture the export markets.

As Improvements in Scheme for BEEKEEPING are:

– To increase the earnings of the artisans, value addition to the honey products proposed.

– facilitating adoption of scientific Beekeeping & Management practices

– Aiming to provide help in enhancing exports of honey-based products

To begin with, Scheme proposes to cover, during 2020-21, a total of 2050 Beekeepers, Entrepreneurs, Farmers, Unemployed Youth, Adivasis will get benefitted from these projects/programme. For this purpose a financial support of Rs.13.00 crore (US$ 1.76 million) during 2020-21 has been provisioned to support 2050 artisans ( 1250 people from Self Help Groups and 800 Migrant labourers), with a Centre of Excellence with CSIR/ IIT Or other Top class Institute to develop honey based new value added products.

Additional amount of Rs. 50.00 crore (INR 6.79 million) has also been kept for developing Beekeeping honey clusters under the ‘ SFURTI scheme of the Ministry.

Detailed guidelines for these Schemes in English and Hindi have been put on the Ministry’s websites. The same are also being circulated through social media outreach. It may be recalled that the initiative to rejuvenate Agarbatti making at grass-root level few days back, is a step which also directed towards make India AatmNirbhar in supply of this household consumption item. The interventions include the support to the artisans through training, raw material, innovation in the fragrance & packaging, use of new / alternate raw materials, marketing and financial support. The program will immediately benefit about 1500 artisans, in providing sustainable employment with increased earnings. Artisans living in rural areas, Self Help Groups (SHGs) and ‘Migrant workers’ will particularly benefit from the program. In addition to enhancing employment opportunities locally, the programme will also help in capturing the export market in such products.

Government extends mandatory BIS norms for toys

Source: ETRetail.com, Sept 16, 2020

NEW DELHI: In what has come as a big relief for domestic toy manufacturers, the government on Tuesday extended the mandatory BIS certification by four months. The new norm will be implemented from January 1, 2021. This will allow the manufacturers to dispose of their stocks, which otherwise were not allowed to be sold in the market from September 1.

The government had implemented the mandatory BIS certification for all toys meant for children below 14 years from September 1, which had put the domestic industry in deep crisis as only two toy makers had got the BIS licence and the process was underway for 81 other cases.

This was first published in TOI online on September 13 highlighting how domestic players were more hit due the government decision. Officials had said as per the law, the sale of non-BIS toys manufactured before September 1 was not permitted. “We welcome the government decision to extend the date for implementation of the quality control order (QCO). This is a big relief. We had been demanding this so that industry gets little more time to put the systems in place to comply with the order. We are completely with the government for complying with standards as children safety is our priority,” said Ajay Aggarwal, president of Toys Association of India said.

Representatives of major toy makers associations had told the government that the kicking in of the mandatory standards had hit Indian manufacturers.

Tencent invests $62.8 million in Walmart-controlled Flipkart

Source: Financial Express, Sept 17, 2020

Tencent is investing about $62.8 million in Walmart-controlled Flipkart, according to filings sourced from business signals platform paper.vc. The investment is most likely part of Walmart-led $1.2 billion infusion in Flipkart announced in July.

Tencent’s stake in Flipkart is estimated to be between 4%-5.3% currently. China-based Tencent is a minority investor in the e-commerce firm and shares the cap table with other minority investors including Tiger Global, Accel, former CEO and co-founder Binny Bansal, Microsoft and Singapore GIC.

The Walmart-led $1.2 billion equity round gave Flipkart a post-money valuation of $24.9 billion. The investment round was also backed by the company’s existing stakeholders.

Flipkart had said in a statement that the funds would be released in two tranches during the financial year.

The funds will come in handy as Flipkart is gearing up for its upcoming Big Billion Days sale.

E-commerce companies like Flipkart and Amazon have been expanding their capacities and recruiting fresh staff as order volumes increased manifold on the back of most consumers shifting to online platforms. On Tuesday, Flipkart said that it expects the upcoming festive sale to create more than 70,000 direct jobs. The direct jobs will be in addition to lakhs of indirect seasonal employment opportunities that the sale event has the potential to generate.

Facebook India announces a grant of $4.3 million for small businesses

Source: Financial Express, Sept 16, 2020

Facebook India on Tuesday announced a grant of $4.3 million (Rs 32 crore) for more than 3,000 small businesses across Delhi, Gurgaon, Mumbai, Hyderabad, and Bengaluru where the company has offices.

The development is in line with Facebook’s $100 million global grant for small businesses announced in March.

The grant includes both cash and ad credits, with cash constituting a larger share. The grant programme is open to small businesses from all industries and verticals, and businesses do not need to have a Facebook family of apps presence in order to apply. They are also free to do what they wish to do with this grant, Ajit Mohan, MD and VP at Facebook India said in a blog post.

Facebook conducted a survey on small and medium-sized businesses (SMBs) around the world to ascertain the impact of Covid-19 in collaboration with OECD and World Bank and found out that more than a third of operational SMBs on Facebook India expect cash flow to be a challenge in the next few months. The survey also revealed that 41% of operational SMBs on Facebook India reported to have made at least a quarter of their sales digitally.

“We hope that our grant, along with the numerous other steps that we’re taking to aid the recovery of small businesses, can help some of them emerge from the crisis,” Mohan said.

Facebook also announced the discovery and sale of gift cards to help small businesses reach more potential customers online. “Configuring gift cards on Facebook and Instagram is free for businesses, and we have tied up with multiple partners to enable the issuance and management of gift cards,” Mohan added.

As demand soars, bicycles industry cruises into high-growth lane

Source: The Hindu Business Line, Sept 14, 2020

Mumbai: The coronavirus pandemic and the resultant lockdowns have signalled a turnaround for the bicycle industry. Better still, demand is unlikely to fall even in a post-pandemic scenario, as industry players believe that such behavioural and cultural shifts tend to last, coupled with the fact that the factors that led to the rise in demand are expected to persist.

“There has been a 100 per cent year-on-year increase in retail demand for bicycles across tier-1 cities in India, while demand has increased by 50 per cent in tier-2 cities and tier-3 cities from April 2020 onwards. The increased demand is expected to settle down at 25-50 per cent for all times to come due to the higher need for fitness, continued social distancing and a pro-cycling culture,” KB Thakur, Secretary-General, All-India Cycle Manufacturers’ Association (AICMA), told BuisnessLine.

“It has never ever happened that there is so much demand. Our bicycle shops are empty now, because whatever bicycles are coming in are getting booked 15-20 days in advance. This has never happened in the last 30-40 years,” said Thakur.

“People will remember 2020 as the ‘cycling year’”, said Aman Pathak, Sr. General Manager – Marketing, Avon Cycles Ltd. “In India, we are seeing such a demand for bicycles for the first time in the last 40-50 years,” he affirmed. Between May and now, demand for bicycles has been increasing by 20-25 per cent every month, he said.

The need for social distancing, dwindling preference for public transport amid health concerns, rising affinity towards personal mobility — with cycles becoming the most economic option for short to medium distance travelling requirements — as well as cycling emerging as a safe fitness option, are the primary reasons for the surge in demand for bicycles, said Pankaj M Munjal, Chairman and Managing Director, HMC, a Hero Motors Company. The long, sedentary hours spent working from home also prompted people to turn to cycling in a bid to seek some reprieve, he said.

Gyms also continue to remain closed amid the pandemic, further fuelling the preference for cycling as a fitness option, said industry players. Schools remaining shut have also aided demand for bicycles since cycling remains one of the few outdoor activities that ensures social distancing for kids, they said.

This trend of booming demand for bicycles has been perceptible not just in India, but across the globe.

But, will the increased demand seen by bicycles peter off once the lockdowns are fully lifted? Once the lockdowns are fully lifted in a post-pandemic scenario, some of these factors may no longer hold true, coupled with the fact that private vehicles and public transportation will resume operations.

“We believe that demand may peak at some point in the future, but we are not expecting a major drop or blow as you term it,” said Munjal. “We are expecting the shift in consumer behaviour towards cycling to stay… It can be evidently construed therefore, that a behavioural shift has come about among a large number of people vis-a-vis cycling. Yes, we expect this momentum to continue even after the pandemic because evidence suggests that such behavioural and cultural shifts tend to stay, once achieved,” he said.

“We strongly believe that this is the beginning of a turnaround in the bicycle industry, and we will see a larger presence of bicycles on our roads in the near future, which will pave the way for greater mass consumption of different types of bicycles,” Munjal added.

The coronavirus-induced lockdown has also led people to seriously introspect on the importance of health and the environment. With pollution levels in cities falling drastically during this time, people are now focusing on reducing the carbon footprint, explained Thakur.

Moreover, while demand has picked up for almost all categories of bicycles, it is the premium cycles that have witnessed exponential growth, said industry players. Since geared and premium bicycles, which fall under the broad term ‘fancy bicycles’, are more attuned to the fitness requirements of customers, the demand for this segment has been going up so much that a ₹25,000-bicycle is no longer considered premium, unlike before, said Pathak.

Hero Cycles has witnessed a 100 per cent jump in demand for bicycles above v10,000 and electric cycles, along with a 50 per cent jump in demand for traditional cycles in the ₹5,000-10,000 range, said Munjal. This demand has been most notable in metros and top tier cities where the urban affluent consumers have been taking to cycling increasingly, he added.

“The demand for mid- to high-end bicycles is likely to remain for some time even when the gyms open because of the health-scare factor, coupled with the fact that schools are also likely to remain shut for a while,” said Rajeev Singh, partner and automotive sector leader at Deloitte.

“The demand, thanks to the fitness freaks moving away from gyms to taking up bicycling, or because of kids taking to cycling, elastic (in nature). It will not go back to pre-Covid time numbers, neither will it continue at the same point that it is at today. But it will definitely create some significant shift, going ahead, in those categories of bicycles. There will be a permanent shift that will happen because of these changing habits. Because of the consumer habits that have changed in these months, at least some of these people will continue to do bicycling even in the post pandemic era,” explained Singh.

Meanwhile, against this increasing and unexpected demand, the bicycle companies have not been able to even cater to the normal demand — demand pertaining to pre-Covid times — due to factors like shortage of labour (due to migrant labour not having resumed work fully), shortage of raw materials and restrictions within factories on account of the Covid-19 norms, Thakur pointed out. There is a 15-30-day waiting period for supplies, he added.

The bicycle industry has been able to fulfil only 70 per cent of the orders globally due to the unprecedented increase in demand, said Pathak.

Hence, bicycle sales numbers for the April-August FY21 period will not be higher than the corresponding period of FY20, despite the exponential increase in demand.

Going ahead, most of the big bicycle manufacturers in the country are gearing up for large orders because the industry currently has no stock on its hands, said Singh, pointing out that there are waiting periods for cycles. “Even if the consumer demand dips, production will continue because you need to fulfil the value chain, as it is completely empty now following the sudden spike in demand. That’s why production is likely to continue for some time in the future,” said Singh.

The bicycle industry has also been in talks with the government seeking support for sector in the form of infrastructure and cycling tracks to help sustain this growth trend, said Pathak.

All stakeholders, including the Government, are trying to promote cycling, affirmed Thakur.

For instance, an advisory issued by the Ministry of Housing and Urban Affairs to all the States and Union Territories of India, dated June 2, 2020, has strongly encouraged the adoption of non-motorised transport (NMT). It cited examples of initiatives taken to promote NMT in cities around the world, which includes pop-up bike lanes and sidewalks, provision of parking and charging equipment and financing options to make cycling more accessible. “As most of the urban trips are clocked in under five kilometres, NMT offers the perfect opportunity to implement in this Covid-19 crisis as it entails low cost, (demands) less human resource, (and is) easy and quick to implement, scalable and environment-friendly,” it further stated.

Government planning incentives worth $23 billion to boost manufacturing

Source: ETRetail.com, Sept 11, 2020

India is planning to offer incentives worth 1.68 trillion rupees ($23 billion) to attract companies to set up manufacturing in the South Asian nation, people with knowledge of the matter said.

Prime Minister Narendra Modi’s government will offer production-linked incentives to automobile manufacturers, solar panel makers, and specialty steel to consumer appliance companies, according to documents reviewed by Bloomberg News. Textile units, food processing plants and specialized pharmaceutical product makers are also being considered for the plan.

The incentive program, being spearheaded by the country’s policy planning body, uses the template of a scheme implemented earlier this year to draw businesses away from China. About two dozen companies including Samsung Electronics Co., Hon Hai Precision Industry Co., known as Foxconn and Wistron Corp. pledged $1.5 billion of investments to set up mobile-phone factories in the country, according to the government, after authorities offered to pay them an amount equivalent to 4%-6% of their incremental sales over the next five years.

New Delhi has been working on attracting investments to revive an economy that posted its worst slump among major economies last quarter, when it contracted 23.9%. Corporate taxes are already among the lowest in Asia, while insolvency rules were overhauled to improve the ease of doing business. But those have done little to make it the first choice for businesses looking to diversify supply chains away from China.

Vietnam continues to be the most favored destination, followed by Cambodia, Myanmar, Bangladesh and Thailand, according to a recent survey by Standard Chartered Plc.

“The move will definitely have a positive impact on manufacturing, especially for so-called booming sectors such as solar and electronics,” Madan Sabnavis, chief economist at Care Ratings Ltd. said. “It is a good way of attracting investments and has potential to make a difference in these sectors”.

The government is also planning to introduce a phased manufacturing program for other sectors to allow companies to gradually increase local value-addition. The program, currently in vogue for components and accessories used for mobile phones, is proposed to be extended for furniture, plastics, toys and low-value consumer durables. Most of these items are currently imported from China.

The details of both the programs are being worked out and would be put up for the approval of the federal Cabinet soon, they said.

A spokesperson for Niti Aayog, the government’s policy think tank, didn’t answer a call made during business hours.

India imported goods worth $65 billion from China in the year ended March 31, while its exports to the neighboring nation stood at $17 billion, leaving a trade deficit of $48 billion, according to latest government data.

India slips 26 spots on Global Economic Freedom Index 2020

Source: Financial Express, Sept 10, 2020

India has fallen 26 spots to the 105th position on the Global Economic Freedom Index 2020, according to a report released on Thursday. The country was at the 79th spot in last year’s rankings. The Economic Freedom of the World: 2020 Annual Report by Canada’s Fraser Institute has been released in India in conjunction with New Delhi-based think tank Centre For Civil Society.

The report said prospects for increasing economic freedom in India depend on next generation reforms in factor markets and in greater openness to international trade. India reported marginal decrease in size of government (from 8.22 to 7.16), legal system and property rights (from 5.17 to 5.06), freedom to trade internationally (6.08 to 5.71) and regulation of credit, labour and business (6.63 to 6.53).

A score closer to 10 indicates a higher level of economic freedom. According to the report, based on 2018 data, Hong Kong and Singapore once again topped the index, continuing their streak as first and second ranked, respectively.

India has been ranked higher than China, which stands at the 124th position.

New Zealand, Switzerland, US, Australia, Mauritius, Georgia, Canada and Ireland round out the top-10.

The report measures economic freedom (levels of personal choice, ability to enter markets, security of privately owned property, rule of law, among others) by analysing the policies and institutions of 162 countries and territories.

The 10 lowest-rated countries are African Republic, Democratic Republic of Congo, Zimbabwe, Republic of Congo, Algeria, Iran, Angola, Libya, Sudan and Venezuela. Other notable rankings include Japan (20th), Germany (21st), Italy (51st), France (58th), Mexico (68th), Russia (89th) and Brazil (105th). Centre for Civil Society President Partha J Shah said since the ranking is based on 2018 data, many new restrictions on international trade, tightening of the credit market due to NPAs and COVID-19’s impact on debt and deficits are not reflected in India’s score.

Centre finalises guidelines for online endorsements

Source: The Economic Times, Sept 11, 2020

Bengaluru | Mumbai: Social media influencers and digital marketers could face a bumpy ride as the onus of ensuring the veracity of claims made in advertisements could fall upon them soon. The government’s draft guidelines targeted at preventing misleading advertisements has an entire section on due diligence to be made by endorsers. It has sought feedback on the guidelines before September 18.

The guidelines will apply to manufacturers or service providers, advertising agencies and endorsers, covering all advertising or marketing communications, regardless of form, format or medium. The proposed rules could increase litigation on endorsers, including social media influencers, and raise their compliance burden, industry and legal experts told ET, although they could streamline what is an otherwise highly unorganised and fast-growing sector.

“The guidelines will certainly be applicable to them (influencers) and they will have to be more informed about whatever they are endorsing. What I do see happening is that you might have a lot of litigation where a lot of people get sued,” said Gaurav Dani, founding partner at Indus Law. The guidelines say obtaining advice from an advertising self-regulatory organisation or legal opinion from a legal practitioner about the accuracy of endorsements will be considered sufficient due diligence. “But, it is possible that even a lawyer may be unable to certify the validity of certain claims,” said Vinay Joy, partner at law firm Khaitan & Co.