Contract Manufacturing - Press Note 4

The question of whether contract manufacturing constitutes “manufacture” from a foreign investment perspective is an oft debated topic in the manufacturing fraternity and many businesses have struggled with this issue for years.

“Contract manufacturing” refers to manufacturing undertaken through a third party and has a range of benefits for the principal manufacturer, including economic efficiency, scale, operational efficiencies and flexibility. For instance, if a specialised set of equipment or skills is required to manufacture a certain product, the principal manufacturer can use the facilities already available with a third party to manufacture these products, instead of investing its capital in creating these facilities for itself. Contract manufacturing also enables a principal manufacturer to utilise a contract manufacturer’s existing supply chains, linkages and labour force. If a principal manufacture has a cyclical manufacturing business, using the facilities of a third party may be more beneficial than making capital investments that may lie idle for large parts of the year. In light of these benefits, contract manufacturing as a business model is one that is preferred by many entities in the manufacturing business.
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Surveillance in the Post-Puttaswamy Era - Right to Privacy

In 1997, the Supreme Court of India (Supreme Court) pronounced its judgment in the case of People’s Union for Civil Liberties (PUCL) v. Union of India (SC, 1997) (PUCL Case), which laid the groundwork for the right to privacy in the context of telephonic surveillance (i.e. wiretaps) and constitutional freedoms.

This article analyses the Supreme Court’s stance on the right to privacy in the PUCL Case, which was upheld in the 2017 landmark judgment by the nine-judge bench in KS Puttaswamy v. Union of India (SC, 2017) (Puttaswamy Case) that declared privacy a fundamental right. The applicability of the right to privacy has recently received further validation in the context of wiretaps in the October 2019 judgment in Vinit Kumar v. Central Bureau of Investigations and Ors (Bom HC, 2019) (Vinit Kumar Case), wherein the Bombay High Court outlined the ambit of the State’s power to surveil its subjects particularly on matters that do not fall within the category of ‘public emergency’ or ‘in the interest of public safety’.
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To Bet or Not to Bet - Sports Betting Laws in India

As the society changes, the law cannot remain immutable”

– Justice D P Madon

They say cricket is not a game, it is a religion. In 2019, the India – Pakistan ICC World Cup match saw a viewership of 229 million within India itself[1]. The importance of cricket as a unifying force cannot be debated and needn’t be proved; what is rather interesting is the ancillary impact a simple match of cricket can have on an economy, such as India.

Economic exploitation of cricket is widespread globally: it includes broadcasting rights, sponsorship and merchandising, to name a few. However, another prevalent and illegal exploitation in the form of betting takes precedence over all of the above, for the simple reason that due to the nature of the transaction, the said consideration paid, is officially taken out of India’s financial system and put into a parallel industry, which remains untaxed and unregulated.
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Companies (Amendment) Act, 2019

Commitment to social causes is best done voluntarily. Accordingly, corporate social responsibility (CSR) was originally introduced in Section 135 of the Companies Act, 2013 (Companies Act), in keeping with global best practices, to provide a framework to encourage companies to meaningfully contribute to communities.

The framework was premised on the principle that companies would contribute the prescribed amount in good faith and the requirement ‘to explain’ any failure to contribute, in their board report, was considered a sufficient disincentive to ensure compliance.[1] 
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Corporate Criminal Liability - Directors

Criminal liability encompasses two elements: actus reus (guilty act) and mens rea (guilty mind). There is no dispute that a company is liable to be prosecuted for criminal offences. However, the company being an artificial person cannot have the requisite mens rea, hence the question whether a company could be prosecuted for an offence for which the mandatory sentence is imprisonment.

The law has evolved from the position that a company cannot be prosecuted for offences that require imposition of a mandatory imprisonment[1], to the position that the mens rea of the ‘alter ego’ of the company (i.e. the person or group of people that guide the business of the company) will be imputed to the company as laid down by the Supreme Court in Iridium case [2].
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Superior Orders Defence - Corporate Fraud

The past few years have seen a marked increase in regulatory investigations and enforcement action into fraud. This increased scrutiny brings into focus the liability of the individuals involved in the fraud and the extent to which such individuals are liable.

Typically, when the company has committed fraud, persons who are responsible for the actions of the company – the ‘directing mind and will– are held liable. In contrast, where a fraud is committed on the company and/or its shareholders, it involves identifying both, the officers at whose behest, or for whose benefit, such actions were undertaken, as well as persons who executed the fraud. 
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US DOJ Guidance Document : Corporate Compliance

On April 30, 2019, the US Department of Justice (DOJ) published a guidance document, “The Evaluation of Corporate Compliance Programs” (Guidance), aiming to provide greater transparency into its prosecution decisions. While the Guidance is primarily meant for the consumption of prosecutors considering an investigation and/or bringing charges against a corporation, it provides valuable insight for compliance conscious entities that are proactively looking to develop and further strengthen their corporate compliance programme (CCP).

The Guidance complements the principles set out in the Justice Manual, which describes specific factors that prosecutors must take into consideration, including inter alia, the adequacy and effectiveness of the corporation’s compliance programme at the time of both the offence and the charging decision, and the corporation’s remedial efforts to implement an adequate and effective corporate compliance programme or to improve an existing one. Additionally, the US Sentencing Guidelines advise that consideration should be given to whether the corporation had in place at the time of the misconduct an effective compliance programme to calculate the appropriate criminal fine.
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Framework for OFAC Compliance Commitments

The past year has witnessed a massive increase in sanctions-related enforcement activity and has indeed caused a stir in the global sanctions landscape. Under the new administration, the US re-imposed all nuclear-related sanctions on Iran, culminating in the largest ever single set of sanctions designations to date.

With the heightened global regulatory environment and the aggressive stance of enforcement agencies, it has been made rather clear that sanctions laws can no longer be ignored. Moreover, in an attempt to bring clarity to compliance expectations of the sanctions regime in the US, on May 02, 2019, the Office of Foreign Assets Control (OFAC) published the Framework for OFAC Compliance Commitments (Framework). The Framework sets out OFAC’s key considerations for evaluating the efficacy of a sanctions compliance programme (SCP) and in turn determining whether mitigation of civil monetary penalties ought to be granted.
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Shares with Differential Voting Rights

The Securities Exchange Board of India (SEBI) has recently circulated a consultation paper on Differential Voting Rights (DVRs). Issuance of shares with differential voting or dividend rights is not a novel concept for India. It has been around since 2000 and a few listed companies, like Tata Motors and Pantaloons, have issued shares with differential voting / dividend rights.

However, ever since, SEBI amended the Listing Regulations in 2009, to state that listed companies are not permitted to issue shares with ‘superior rights’, there have hardly been any takers for this instrument. SEBI’s current proposal appears to be an attempt to breathe some life into such instruments by providing more flexibility in structuring the terms of such issuances, albeit with some checks and balances.  
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data protection indian insurance regulations

In the first part of this two part series we discussed about the regulatory frameworks governing insurance companies and insurance intermediaries. In this part we will look at the guidelines applicable to both insurance companies and insurance intermediaries which includes cyber security and ecommerce guidelines.

Guidelines Applicable to Both Insurance Companies as well as Insurance Intermediaries

In addition to the previously-mentioned regulations, the IRDAI has also issued certain guidelines pertaining to data security and protection that are applicable to both insurance companies as well as insurance intermediaries. These are the Guidelines on Information and Cyber Security for Insurers[i] (Cyber Security Guidelines) and the Guidelines on Insurance E-Commerce[ii] (E-commerce Guidelines) and have been discussed below.
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