celebrating our firm s 8th year

celebrating our firm s 8th year On 15 September 2018

anniversar y Clasis Law celebrated its 8th anniversary on September 17, 2018. Both the of ces, D e l h i a n d M u m b a i celebrated the occasion. Few pics shared here.

NEWSLETTER September 2018 Ranked amongst the TOP 40 Indian Law Firm, by RSG Consulting Rankings 2017 Welcome to the September Edition of the Clasis Law Newsletter This edition brings to our readers a featured article titled Private Placement of Securities- Key Amendments. This article accentuates the key amendments in the process of raising fund by private placement of shares. It provides an overview of the changes made in the procedural and disclosure requirements in order to simplify the process for the shareholders. The article also brie y discuss about the transparent and self- regulating approach of the regulators to signi cantly enhance the shareholder's con dence. We continue to highlight certain key judgements passed by the Hon'ble Court as well as changes in Corporate and Commercial laws and updates on Intellectual Property. Your inputs and feedback are always welcome and we look forward to our interactions with you. Contents Private Placement of Securities- Key Amendments Page 2 Legal Alerts Page 4 Corporate and Commercial Page 5 IP Update Page 8 Recent Events Page 9 Offbeat Page 10 Clasis Law s Managing Partner & Head of Corporate Practice, Vineet Aneja is recognized as one of India s Most Trusted Corporate Lawyers by ICCA, 2017 1

Private Placement of Securities- Key Amendments A company can nance its operation through issue of securities, debt funding or a combination of both. The three modes for securities nancing are through i) rights issue which involves further issue of share capital to existing shareholders; ii) public issue means offering securities to public at large and iii) private placement means any offer of securities or invitation to subscribe or issue of securities to a select group of persons by a company through private placement offer cum application (not exceeding two hundred (200) excluding Quali ed Institutional Buyers and employees covered under Employee Stock Ownership Plan). Amongst other modes of nancing the most prevalent means of nancing used by the Indian companies is through private placement of securities to the investors intending to invest in a company. Section 42 of Companies Act, 2013 and Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018 Section 42 of Companies Act, 2013 ("Act") prescribes the procedure and conditions upon which private placement of securities is made. The Report of the Company Law Committee ("CLC") issued in February 2016 recommended changes to private placement norms to simplify the processes, avoid duplication of disclosures, lessen regulatory interference and ensure greater self-regulation. This led to amendment of section 42 of the Act. Although the procedural requirements have been simpli ed and penalty for violation of norms of private placement has been signi cantly reduced the disclosure requirements have been enhanced signi cantly. Some of the key amendments in the requirements are highlighted below: Amendment in procedural requirements 1 No right of renunciation- The offer letter is required to be issued to speci c persons without the right to renounce their right to subscribe in favour of other persons. It implies that the person whose name is recorded by the Company shall have an option to either accept or reject the offer only. 2 No minimum allotment size- Erstwhile Rule 14 restricted the investment size per person to INR 20,000/- of face value of securities which has now been dropped off. 3 Stringent Conditions on utilization of funds- Section 42 (4) read with Rule 5 provides for the most signi cant amendment as to not permitting to utilise any monies raised through private placement till the allotment is complete and the return of allotment in Form PAS-3 is led with the Registrar of Companies ("ROC") within 15 days of allotment thereby implying that till the names of the investors are recorded with the ROC the funds cannot be utilised which provides an added protection to the investors 4 Amendment in timelines for ling return of allotment- The timelines for ling the return of allotment in Form PAS-3 is led with the ROC has been reduced to 15 days unlike the erstwhile provision of 30 days thereby indicating that ling of return of allotment is mandatory for utilization of funds for business purposes. 5 Relaxation in ling of PAS-4 and PAS-5 with ROC- Private Placement Offer Letter in Form PAS-4 and record of persons to whom the offer letter is issued in Form PAS-5 are required to be maintained by the Company and are no longer required to be led with the ROC. The requirement of ling of the offer letter with the Securities and Exchange Board of India ("SEBI") by listed issuers has also been dispensed with. 2

6 Simultaneous issue of different securities permitted- Section 42 (5) provides for the restriction as to no fresh issue of securities can be undertaken unless the previous offer of securities has been withdrawn, abandoned or securities have been allotted pursuant to the said offer. It has been clari ed that there can be simultaneous issue of more than one security if they are different securities e.g., issue of debentures and issue of equity shares can take place simultaneously. The 200 person limit is to be reckoned for each kind of security, individually. Amendment in Disclosure requirements = Private placement offer cum application letter (offer letter)- The erstwhile 'private placement offer letter' has been replaced with the new 'private placement offer cum application letter' pursuant to rule 14(3) of Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018. The intent of the CLC was to effectively reduce the duplication of disclosures and hence for the ease of doing business, have divided the offer letter in two parts. Part-A sets out extensive disclosure whereas Part-B is an application letter to be lled by the applicant. While the disclosures have been increased, the offer letter is no longer required to be led with the ROC or SEBI. Conclusion The changes to the private placement norms while they provide some respite have largely made compliances more cumbersome for issuance of securities. For instance, dropping of minimum investment size, separate shareholders' resolution, removal of unnecessary ling requirements are a welcome changes; however, the additional conditions on use of funds and increase in level of disclosures in the offer letter and a cut-off date for valuation increases compliance for the companies. Further, given the penalties involved in case of default in complying with the provisions of Section 42 it is pertinent for the companies making private placement to strictly follow the requirements as laid down in the section. For any clari cation or further information, please contact Neetika Ahuja Associate Partner E: Neetika.ahuja@clasislaw.com Swati Dhingra Associate E: swati.dhingra@clasislaw.com Amendment in Penal provisions = Introduction of penal provisions with respect to non- ling of Form PAS-3- If return of allotment in Form PAS-3 is not led within 15 days from the date of allotment of securities, the Company, its promoters and directors shall be liable to a penalty of INR 1,000 (Rupees One thousand) for each day of default and is capped at INR 2,500,000 (Rupees Two million ve hundred thousand). = Change in penal provisions with respect to private placement- For a non-compliance of the private placement provisions, now the penalty is capped at the amount raised through the private placement process or INR 20,000,000 (Rupees Twenty million), whichever is lower. Earlier, the penalty imposed was capped at higher of the two amounts. 3

Legal Alerts Bombay High Court holds that third party can le an appeal under section 37 of the Arbitration and Conciliation Act, 1996 against the interim measures passed by the Arbitral Tribunal The Hon'ble Bombay High Court ( the Court ) in its recent judgment of Prabhat Steel Traders Ltd. vs Excel Metal Processors Pvt. Ltd. & Ors. (Arbitration Petition Nos. 619/2017) along with a batch of appeals has decided on the question as to whether a third party (not party to the arbitration agreement) can le an appeal under section 37 of Arbitration & Conciliation Act 1996 ( the Act ) arising out of interim measures granted by the arbitral tribunal under section 17 of the Act after obtaining the leave of the Court or otherwise. The Court observed that the third party cannot apply to the arbitral tribunal for modi cation and for vacating the order of interim measures passed by such arbitral tribunal. However, in the case of a party to the arbitration agreement applying for interim measures under section 9 of the Act before a court, if any third party is likely to be affected by such interim measures as prayed for by a party to the arbitration agreement, no such interim measure can be granted against the third party unless it is impleaded as a party to the proceedings under section 9. The Court further held that, nonetheless, the third party has an option of being impleaded as party to the section 9 proceedings and can apply for modi cation and/or variation of the orders for interim measures granted by the Court. In the view of the Court, such third party cannot be asked to le a civil suit and to challenge the order for interim measures granted by the arbitral tribunal. Moreover, the Court held that in view of the fact that the powers of the Court under section 9 of the Act and powers of the arbitral tribunal under section 17 of the Act to grant interim measures are identical in light of the 2015 amendment to the Act. Therefore, even a third party who is directly or indirectly affected by the interim measures granted by the arbitral tribunal will have a remedy of an appeal under section 37 of the Act. In this regard, the Court observed though a stranger to an arbitration agreement cannot be allowed to be impleaded as a party to the arbitral proceedings before the arbitral tribunal and more particularly under section 17 of the Act nor can such third party seek an impleadment to the proceedings before the arbitral tribunal, he is however not precluded from challenging the said order before the arbitral tribunal under section 17 if he so aggrieved by such order by invoking the remedy of an appeal under section 37 of the Act. The Court opined that, in its view, section 34 of the Act also refers to the expression party which is absent in section 37 of the Act. The fact that the expression party is absent in section 37 of the Act makes the legislative intent clear that the said expression party deliberately not inserted so as to provide a remedy for an appeal to a third party who is affected by an interim measures granted by the arbitral tribunal or by the Court in proceedings led by and between the parties to the arbitration agreement. A perusal of section 17 and 9 of the Act which provide for interim measures which can be granted by the arbitral tribunal or the Court respectively clearly indicates that very exhaustive powers are given to the tribunal as well as to the Court for granting interim measures which may be affect a third party. Such party whose interest is prejudiced by such interim measures obtained by the parties to the arbitration agreement cannot be forced to wait till the outcome of the arbitration proceedings culminating into an award and till such time, an execution application is led by a successful party after the other party exhausting all his remedies provided under the Act fails. In conclusion, the Court granted the third party (Petitioner) the leave to appeal against the impugned order passed by the arbitrator and set aside the interim measures granted by the arbitrator. 4

Corporate and Commercial Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2018 On September 12, 2018, the MCA issued the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2018 further to amend the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 pursuant to which Form MR-2 (for application to the Central Government for approval of appointment of managing director or whole time director or manager) shall be substituted with a new Form MR-2. Noti cation of certain sections of the Companies (Amendment) Act, 2017 On September 12, 2018, the MCA issued a circular notifying section 66 to 70 (both sections included) of the Companies (Amendment) Act, 2017 and appointed September 12, 2018 as the date on which the provisions of sections 66 to 70 (both inclusive) of the said Act shall come into force. Section 66 to 70 of the Companies (Amendment) Act 2017 amends the following sections of the existing Companies Act, 2013: a) Section 196 relating to the appointment of managing director, whole-time director or manager; b) Section 197 relating to the overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of pro ts; c) Section 198 relating to calculation of pro ts; d) Section 200 relating to Central Government or company to x limit with regard to remuneration; and e) Section 201 relating to forms of, and procedure in relation to, certain applications. Amendment of Schedule V of the Companies Act, 2013 On September 12, 2018, the MCA issued a circular amending Schedule V of the Companies Act, 2013. Schedule V relates to section 197 and 197 of the Companies Act, 2013 regarding the conditions to be ful lled for the appointment of a managing or wholetime director or a manager without the approval of the central government. The following changes have been made vide this amendment: a) In Schedule V of the Companies Act, 2013 in Part l, under title "appointments" the following items shall be inserted namely:- the Insolvency and Bankruptcy Code, 2016; the Goods and Services Tax Act, 2017 and the Fugitive Economic Offenders Act, 2018; b) Certain words have been omitted or substituted in Part II, under the heading "remuneration", in Section II (relating to the remuneration payable by companies having no pro t or inadequate pro t without Central Government approval) and Section III (relating to the remuneration payable by companies having no pro t or inadequate pro t without Central Government approval in certain special circumstances). Companies (Prospectus and Allotment of Securities) Third Amendment Rules 2018 On September 10, 2018, the MCA noti ed the Companies (Prospectus and Allotment of Securities) Third Amendment Rules 2018 thereby adding a new Rule 9A which provides for the issue of securities in dematerialized form by unlisted public companies. The amendment provides that the amended rules would come into force from October 2, 2018. Further to the Ministry of Corporate Affairs (MCA) notifying the Companies (Prospectus and Allotment of Securities) Third Amendment Rules 2018, the MCA has released a press release clarifying that with effect from October 2, 2018, issue of further shares and transfer of all shares by unlisted public companies shall be in dematerialised form only. 5

Review of the penal provisions of the Companies Act, 2013 On August 27, 2018, the committee constituted by the Government of India in July 2018 to review the existing framework dealing with offences under the Companies Act, 2013 and related matters and make recommendations to promote better corporate compliance, submitted its report. The Committee undertook a detailed analysis of all penal provisions, which were then broken down into eight categories based on the nature of offences. The Committee recommended that the existing rigour of the law should continue for serious offences, covering six categories, whereas for lapses that are essentially technical or procedural in nature, mainly falling under two categories may be shifted to in-house adjudication process. The Committee observed that this would serve the twin purposes promoting of ease of doing business and better corporate compliance. It would also reduce the number of prosecutions led in the Special Courts, which would, in turn, facilitate speedier disposal of serious offences and bring serious offenders to book. The cross-cutting liability under section 447, which deals with corporate fraud, would continue to apply wherever fraud is found. The report, inter alia, makes recommendations for de-clogging the National Company Law Tribunal (NCLT) through signi cant reduction in compounding cases before the Tribunal. In addition, the report also touches upon certain essential elements related to corporate governance such as declaration of commencement of business, maintenance of a registered of ce, protection of depositors' interests, registration and management of charges, declaration of signi cant bene cial ownership, and independence of independent directors. However, in the absence of rules or clari cations on the logistics of setting of crèche facilities, employers were left in lurch as to the legislative clarity on various issues such as the distance within which the crèche facilities are to be located, the age group of children for whom crèche facilities need to be maintained and the duration of visits allowed for visits to such crèche facilities. In this regard, please note that Government of Karnataka has released draft Karnataka Maternity Bene t Rules, 2018 ("Karnataka Rules") which have been released for stakeholder comments. Furthermore, the state of Haryana has issued a press release for crèche facilities under the Maternity Bene t Act, 1961 dated 2 August 2018 ("Haryana Rules"). Since the of cial noti cation of Haryana Rules is not available, it cannot be ascertained whether these rules have come in force as on date. In addition to providing speci cations on infrastructure, food and medical facilities in a crèche, the above rules shed some clarity on the above issues such as both the rules prescribe that the crèche facilities should be located at a maximum distance of 500 metres from the entrance gate of the establishment. While both rules limit the age group of children for whom the crèche facilities need to be provided to 6 years, however the Karnataka rules stipulate an additional requirement of having one crèche for a group of 30 children and the requirement of an outdoor playing area. These requirements may increase the practical dif culties for employers. However these rules have not yet clari ed or touched upon a very important concern in relation to cost bearing of the crèche facilities and to what extent such costs can be passed on to the employees. Some visibility on Crèche facilities under the Maternity Bene t Act, 1961 for establishments in Karnataka and Haryana The Maternity Bene t Act, 1961 was amended vide the Maternity Bene t (Amendment) Act, 2017 which prescribed that every establishment having 50 or more employees shall have the facility of crèche within such distance as may be prescribed, either separately or along with common facilities. 6

Disclosure regarding constitution of POSH committee in the Board of Directors report The Ministry of Corporate Affairs on July 31, 2018 has noti ed the Companies (Accounts) Amendment Rules, 2018 ('Amendment Rules'). Amongst other things, these Amendment Rules specify that the directors are now required to include a statement in the Board report specifying that the company has complied with the provisions relating to the constitution of Internal Committee ('IC') under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"). It is relevant to note that the POSH Act casts an obligation on the employer to make prescribed disclosures in the annual report of the organization, which disclosure includes number of cases led, if any, and details of their disposal, although there is no direct statement on the constitution of IC. For a corporate employer, it is the board of directors who have to ultimately discharge the duties of an employer and make prescribed disclosures as per the POSH Act, in the annual directors report prepared under the Companies Act, 2013. In effect this new requirement under the Amendment Rules reiterates the employer's obligation to constitute an IC in terms of the POSH Act. While failure to constitute a IC under POSH Act is a serious contravention punishable under POSH Act, a failure to make appropriate disclosures in the director's report would be also become punishable under the Companies Act, 2013. Operation of drones in India On August 27, 2018, the Ministry of Civil Aviation issued the Requirements for Operation of Civil Remotely Piloted Aircraft System (RPAS) for operation of drones in India and announced the effective date for these requirements as December 1, 2018. These requirements are for a Remotely Piloted Aircraft (RPA), autonomous aircraft which are the various sub-sets of unmanned aircraft. Unmanned aircraft system (UAS) is an aircraft and its associated elements, which are operated with no pilot on board. Remotely piloted aircraft (RPA) is an unmanned aircraft, which is piloted from a remote pilot station. A remotely piloted aircraft, its associated remote pilot station(s), command and control links and any other components forms a Remotely Piloted Aircraft System (RPAS). This Civil Aviation Requirement (CAR) is issued under the provisions of Rule 15A and Rule 133A of the Aircraft Rules, 1937 and lays down requirements for obtaining Unique Identi cation Number (UIN), Unmanned Aircraft Operator Permit (UAOP) and other operational requirements for civil Remotely Piloted Aircraft System (RPAS). 7

IP Update The Bombay High Court - Habitual Infringer to pay heavy cost This is pertaining to a suit led by Glenmark Pharmaceuticals Limited ("the Plaintiff") against Curetech Skincare ("the Defendant No. 1) and Galpha Laboratories Limited ("the Defendant No. 2") (collectively "the Defendants") in the High Court of Mumbai for retraining the Defendants to use the mark "CLODID" in relation to the products of the Defendant No. 2. The Court noted that the Defendant No.2 has copied the word mark, the artwork, colour scheme, front style, manner of writing, trade dress of the Plaintiff's products CANDID. The Defendant No. 1 is the contract manufacturer of the products of the Defendant No. 2 and they claimed that they didn't have any right in relation to the trade mark/label CLODID. The Defendant No. 2 informed the Court their unwillingness to contest the suit and stated their willingness to submit to a decree. The Defendant No. 2 mentioned in the Court that they have inadvertently copied the trade mark/label of the Plaintiff and that they have earned approximately Rs. 2.92 crore by selling the goods bearing the mark "CLODID". The Defendant No. 2 also stated their willingness to submit to a decree and resolve the dispute. The Plaintiff pointed out to the Court that the Defendant No. 2 is a habitual offender and there has been numerous infringement cases led against the Defendant No. 2 by various organizations and therefore the Defendant No. 2 should not be allowed to go scot free. It was also mentioned in the Court by the Plaintiff that the Central Drugs Standard Control Organization in the past found the products of Defendant No. 2 as "not of standard quality/spurious/adulterated/misbranded" and the Plaintiff also submitted documents in support of their contention. The Court after observing the facts and circumstances of the case stated that the present case is the perfect example where "the corporate and nancial goals of such companies cloud the decision of its executives whose decisions are incentivised by pro ts, more often than not, at the cost of public health". The Court also mentioned that "drugs are not sweets. Pharmaceuticals companies which provide medicines for health of the consumer have a special duty of care towards them. These Companies, in fact, have a greater responsibility towards the general public". The Court states that usually the Courts are lenient toward the defendants who show their willingness to settle the matter and the Courts usually allow such defendants to settle the matter with or without cost. However, in this instant case, the Court found the Defendant No. 2 as not only dishonest but also audacious which display no regards to the authority/rule of law. The Court after examining various relevant aspects found that the Defendant No. 2 is not only indulging in infringing activities but also repeatedly copying brands of the other companies and also appear to be in complete violation of the FDA regulations from time to time. The Court was of the opinion that the Defendant No. 2 didn't deserve any leniency due to their habitual infringing attitude; however, on the assurance of the Defendant No. 2, the Court decided to impose a cost of Rs. 1. 50 crores. The Plaintiff prayed to the Court that the cost of R. 1.50 crore be paid directly to the Kerala relief fund by the Defendant No.2. The Court vide its order dated 28th August, 2018, directed the Defendant No. 2 to pay Rs. 1.50 crore towards the Kerala Flood relief fund and forthwith withdraw all the products bearing the mark "CLODID" and its variants from the market and destroy the same. The Court also directed the Defendant No. 2 to strictly abide by the rules and regulations of the FDA. 8

Recent Events Interactive meeting of Friends of South Africa 7th September 2018, Mumbai Clasis Law hosted an event in its Mumbai of ce on September 7 which was a successful interactive meeting of Friends of South Africa. The event was well attended by thought leaders from a cross section of the corporate world ranging from Power, Financial, Social, Healthcare, Tourism, Start-up ecocsystem etc. The Chief Guest was HE Ms. Maropene Ramokgopa, South African Consul General. She shared her insights about the potential that South Africa holds for companies willing to invest there. Those present shared views ranging from Financial & Investments, Medical Tourism, Power, Smart Grids, IT, Healthcare, Media etc. The event was attended by Vineet Aneja and Mustafa Motiwala of Clasis Law. 9

Offbeat world special days in September Each year September 8th marks UNESCO s International Literacy day, raising awareness globally on the issues surrounding adult and child literacy. First held in 1966 and now part of the UN s sustainable development goals program adopted in 2015, International Literacy day highlights the changes and improvements being made worldwide in literacy development. World Ozone Day ENGINEERS' DAY. The Engineering Community across India celebrates Engineers Day on 15 September every year as a tribute to the greatest Indian Engineer Bharat Ratna Mokshagundam Visvesvaraya. Year 2018 marks the 50th anniversary of the Engineers Day and 157th birth anniversary of Sir Mokshagundam Visvesvarayya. INTERNATIONAL DAY FOR THE PRESERVATION OF THE OZONE LAYER (WORLD OZONE DAY) on 16 September Ozone layer is a layer of ozone molecules, which is found particularly in the stratosphere layer of atmosphere ranging between 20 to 40 km. Ozone layer is formed in the atmosphere when the ultraviolet rays from the sun break a single oxygen atom. The oxygen atom then merges with oxygen and thus forms the nal ozone molecule. The problem that causes the depletion of this layer occurs when the harmful sun radiations after sticking the earth surface becomes unable to leave the atmosphere. Rose day is observed to let all cancer patients aware that they can face the disease with strong willpower and spirit. Its observed on every year September 22. Alertness about cancer is important not only for supporting the patients, but also for preventing it. Awareness programs on the Rose day also make normal people aware of the importance of being cautious about cancer. 10

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