celebrating our firm’s

year88thth

On 15 September 2018

anniversary

Clasis Law celebrated its 8th

anniversary on September

17, 2018. Both the ofces,

D e l h i a n d M u m b a i

celebrated the occasion.

Few pics shared here.

NEWSLETTERSeptember 2018

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 briey discuss about the transparent

and self- regulating approach of the

regulators to signicantly enhance the

shareholder's condence.

We continue to highlight certain key

judgements passed by the Hon'ble Court as

wel l as changes in Corporate and

Commerc ia l laws and updates on

Intellectual Property.

Your inputs and feedback are always

welcome and we look forward to our

interactions with you.

This edition brings to our readers a featured article titled “Private Placement

of Securities- Key Amendments”.

“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”

Contents

Private Placement of Securities- Key AmendmentsPage 2

Legal AlertsPage 4

Corporate and CommercialPage 5

IP UpdatePage 8

Recent EventsPage 9

OffbeatPage 10

Welcome to the September Edition of the Clasis Law Newsletter

Ranked amongst the TOP 40 Indian Law Firm, by RSG Consulting Rankings 2017

1

PrivatePlacementofSecurities-KeyAmendments

Amendment in procedural requirements

1 No right of renunciation- The offer letter is required

to be issued to specic 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

signicant 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.

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 Qualied 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 simplied and

penalty for violation of norms of private placement has

been signicantly reduced the disclosure requirements

have been enhanced signicantly.

Some of the key amendments in the requirements are

highlighted below:

2

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 clarication or further information, please contact

Neetika Ahuja Associate Partner E: Neetika.ahuja@clasislaw.com

Swati DhingraAssociateE: swati.dhingra@clasislaw.com

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

claried 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.

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

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.

LegalAlerts

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 modication 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 modication

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

4

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

fullled for the appointment of a managing or whole-

time 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 prot or inadequate prot

without Central Government approval) and Section

III (relating to the remuneration payable by

companies having no prot or inadequate prot

without Central Government approval in certain

special circumstances).

Companies (Prospectus and Allotment of Securities)

Third Amendment Rules 2018

On September 10, 2018, the MCA notied 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.

CorporateandCommercial

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.

Notication 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

prots;

c) Section 198 – relating to calculation of prots;

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.

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

Ac t , 2013 and re la ted mat ters 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 signicant

reduction in compounding cases before the Tribunal. In

addition, the report also touches upon certain essential

elements related to corporate governance such as

declarat ion of commencement of business,

maintenance of a registered ofce, protection of

depositors' interests, registration and management of

charges, declaration of signicant benecial

ownership, and independence of independent

directors.

Some visibility on Crèche facilities under the

Maternity Benet Act, 1961 for establishments in

Karnataka and Haryana

The Maternity Benet Act, 1961 was amended vide the

Maternity Benet (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.

However, in the absence of rules or clarications 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

Benet Rules, 2018 ("Karnataka Rules") which have

been re leased for s takeholder comments .

Furthermore, the state of Haryana has issued a press

release for crèche facilities under the Maternity Benet

Act, 1961 dated 2 August 2018 ("Haryana Rules").

Since the ofcial notication of Haryana Rules is not

available, it cannot be ascertained whether these rules

have come in force as on date.

In addition to providing specications 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 difculties for

employers. However these rules have not yet claried

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.

6

Disclosure regarding constitution of POSH

committee in the Board of Directors report

The Ministry of Corporate Affairs on July 31, 2018 has

notied 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 Identication Number (UIN), Unmanned

Aircraft Operator Permit (UAOP) and other operational

requirements for civil Remotely Piloted Aircraft System

(RPAS).

7

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

prots, more often than not, at the cost of public

health". The Court also mentioned that "drugs are not

sweets.

IPUpdate

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

Interactive meeting of “Friends of South

Africa”

7th September 2018, Mumbai

Clasis Law hosted an event in its Mumbai ofce 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.

RecentEvents

9

Offbeat

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

INTERNATIONAL DAY FOR THE PRESERVATION OF THE OZONE LAYER (WORLD OZONE DAY) on 16 SeptemberOzone 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.

world special days in September

ENGINEERS' DAY.ENGINEERS' DAYThe 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.

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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DISCLAIMER: This publication is not intended to be a comprehensive review of all developments in

the law and practice, or to cover all aspects of those referred to herein. Readers should take legal

advice before applying the information contained in this publication to specific issues or

transactions.

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