Category Archives: regulatory updates

National Medical Devices Promotion Council under the Department of Industrial Policy and Promotion (DIPP)

The Union Minister of Commerce and Industry and Civil Aviation, Suresh Prabhu, on 14 December 2018, announced the setting up of a National Medical Devices Promotion Council (“Council”). Though the medical devices industry has been growing steadily, it is primarily import driven. Thus, the setting up of the Council would perhaps spur domestic manufacture in the sector.

This is an announcement and we look forward to information / notification when the Council is  set up and the processes announced are implemented.

The Council would be headed by the Secretary of the DIPP. Further, it would have representatives from the health care industry and quality control institutions. Institutions such as Andhra Pradesh MedTech Zone, Visakhapatnam would provide technical support to the Council.

The Council will have the following objectives:

  • Act as a facilitation, promotion and developmental body for the Indian medical device industry.
  • Hold periodic seminars, workshops to garner views of the industry and understand the best global practices in the sector.
  • Simplify the approval processes for the medical device industry.
  • Enable the entry of emerging interventions and support certificates for manufacturers to reach levels of global trade norms and facilitate India to become an export driven market.
  • Support the dissemination and documentation of international norms and standards for medical devices by capturing the best practices in the global industry.
  • Drive a robust and dynamic Preferential Market Access (PMA) policy by identifying the strengths of the domestic manufactures and discouraging unfair trade practices in imports.
  • Undertake validation of Limited Liability Partnerships (LLPs) and such other entities within MDI sector which would add value to the industry strengths in manufacturing to gain foothold for new entrants.
  • Make recommendations to government based on industry feedback and global practices.

Available at: http://pib.nic.in/newsite/PrintRelease.aspx?relid=186385

Advertisements

Cash compensation for the unemployed under Employees’ State Insurance Act

A benevolent measure has been introduced by the Government to support the unemployed for certain periods.

The Employees’ State Insurance Corporation (“ESIC”) in furtherance of the Employees’ State Insurance Act, 1948 (“Act”), has provided a welfare measure for qualified employees under section 2(9) the Act to seek cash compensation for being rendered unemployed. This compensation can be sought by the employees after the passage of 3 (three) months from the date of being rendered unemployed upto a maximum period of 90 (ninety) days in a lifetime. The employees can seek this compensation in one or more periods provided that the following conditions are met:

  1. the employee should have competed two years of insurable employment,
  2. the employee should have contributed not less than 78 (seventy-eight) days in each of the four consecutive contribution periods immediately preceding to the claim of relief,
  3. the relief does not exceed 25% of the average earning per day,
  4. unemployment should not have been as a result of any punishment for misconduct or superannuation or voluntary retirement,
  5. the identity of the employee would be determined from the ESIC database subject to the employee having a verified Aadhar Number,
  6. The employee furnishes his/ her claim in Form AB-1 provided with the notification duly forwarded by his last employer to his/her allotted Branch Office.

For the purpose of determining the average earning per day, the same shall be equivalent to the total amount of wages received during the four consecutive contribution periods divided by seven hundred and thirty (730) days.

The welfare measure would be deemed to be effective from 1 July 2018 and shall become due for payment after three months. Moreover, the welfare measure is introduced by the ESIC for a term of 2 (two) years on a pilot basis.

Source: http://egazette.nic.in/WriteReadData/2018/193738.pdf

Key changes on Companies (Amendment) Ordinance, 2018

The Ministry of Corporate Affairs (the MCA) on 2 November 2018, has notified the Companies (Amendment) Ordinance, 2018 (Ordinance) in order to amend provisions under the Companies Act of 2013. The following are the major changes brought about by the ordinance.

  Provision Amendment
Insertions
1. Section 10A

The Company incorporated after commencement of this Ordinance and having share capital shall not start business or borrow unless:

i.    The Director shall file declaration, within 180 days from date of incorporation of the Company with the Registrar that every subscriber to the company to the memorandum has paid the value of shares agreed to be taken by him.

ii.   The Company has filed verification of its registered office with the Registrar.

·   Any default with the above provisions will make the company liable for penalty to the tune of INR 50,000/- and every officer in default will be punishable for Rs. 1000/day up to maximum of INR 1,00,000/-.

·   Failure to file the declaration gives reasonable cause to the Registrar that the company is not carrying out is business and he can initiate action for removal of the name of company from register of companies.

2 Sub-section 9 to Section 12

Now empowers the Registrar to initiate action for removing the name of company from the register of companies, when it is found, on physical verification of registered office caused by the Registrar, that the company does not have a registered office capable of receiving and acknowledging all communications and notices on behalf of the Company.

3 sub-section (2) to Section 86

Penalizes anyone who wilfully supplies false or incorrect information or knowingly suppresses any material fact required to be register under Section 77 (Duty to register charges), and such person shall be liable for action under Section 447(Punishment for fraud).

Changes to provisions of Fines / Penalties / Adjudicating authority
4 Substitution of sub-section 5 of Section 92

The amended provision provides that if any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of INR 50,000/- and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of INR 5,00,000/-

5 Substitution of Section 117(2)

In case of failure of a Company to file resolution with the time period (i.e. 300 days from the date of event), the Company shall be liable to a penalty of INR 1,00,000/- and in case of continuing failure, INR 500/- per day up to INR 25,00,000/- maximum, with the Officer in default (including the liquidator of the company) being penalized for INR 50,000/- and in case of continuing failure, INR 500/day up to INR 5,00,000/-. Subject to the maximum prescribed, the penalty for continued failure of INR 500/- per day has been introduced.

6 Substitution of sub-section 3 of Section 137

The old provision provided that if a Company fails to file financial statements with the Registrar it shall be punishable with fine from INR 1,00,000/- to INR 5,00,000/-. Such offence has firstly been made a penal provision and secondly, new penalty of INR 1,00,000/-and in case of continuing failure, with further penalty of INR 100/- for each day after the first during which such failure continues, subject to a maximum of INR 5,00,000/- has been inserted.  The provision for imprisonment has been done away with.

7 Sub-Section 2 of Section 157

If the company fails to furnish the Director identification Number, it shall be liable to penalty of INR 100/- per day for each day after the first during which such failure continues, subject to a maximum of  INR 1,00,000/-, and every officer of the company who is in default shall be liable to a penalty of not less than INR 25,000/- and in case of continuing failure, with further penalty of INR 100/- for each day after the first during which such failure continues, subject to a maximum of INR 1,00,000/-. Provisions for imposition of daily penalties of INR 100/- have been introduced.

8 sub-section (1) under Section 164

The new ground of disqualification of director: the amended provision provides that if a director does not comply with the number of directorships under Section 165(1) that is, maximum ten public companies and maximum twenty in other companies he/she shall suffer disqualification in accordance with section 164 of the Act.

9 Section 441 Compounding of Offences:

·  Firstly, the pecuniary jurisdiction of Regional Director for compounding of offence under section 441(1)(b) has been enhanced from INR 5,00,000/- to INR 25,00,000/- and

· Secondly, it has clarified that offences which are punishable with imprisonment only or with imprisonment and fine shall not be compounded.

10 Section 446B

The Amendment has provided lesser penalties for one-person companies or small companies i.e.  penalty which shall not be more than one half of the penalty specified for non-filing of annual return u/s 92(5), non-filing of resolutions u/s 117(2), and subsection 3 of Section 137 for filing of financial statements of foreign subsidiaries.

Source:

The Companies (Amendment) Ordinance, 2018

http://www.mca.gov.in/Ministry/pdf/NotificationCompanies(Amendment)Ordinance_05112018.pdf

Authors: Ms. Ayushi Singh and Mr. Ashwin Bhat

Making Markets Work for Affordable Healthcare – Policy Note

The Competition Commission of India on 28-29 August organized a technical workshop on ‘Competition Issues in the Healthcare and Pharmaceutical sector in India’, as a follow up to this workshop on 24/10/2018 the CCI issued a policy note titled ‘Making Markets Work for Affordable Healthcare’. The primary focus of this policy note is to provide and create a pro-competition market in the healthcare industry.  It has been observed that pharma/healthcare suffer with information asymmetry the note stated.

The press note enumerates various problems related to the pharma/healthcare industry (in four distinct categories) which prohibit the industry from becoming pro-competition.

Below is a summary of the issues and possible solutions discussed by the CCI under the policy note:

Role of intermediaries in drug price build up:

  1. High trade margins and closed and connected distribution channels. Further the self-regulation by trade associations contribute towards high trade margins.
  2. A larger and wider public procurement and distribution system of essential drugs can circumvent the high trading prices. Initiatives like Pradhan Mantri Jan Aushadhi Pari Yojna  are an excellent example of the same.
  3. Using electronic means of trading in drugs with appropriate safeguards would encourage transparency and spur competition in the market among all stakeholders.

Quality perception behind proliferation of branded generics:

  1. The Indian pharmaceutical market is dominated by branded generic drugs which are expensive in nature. The reason being, brand identity and the quality of these branded drugs. The note clearly states in this regards “However, it is also equally possible that the brand proliferation is to introduce artificial product differentiation in the market, offering no therapeutic difference but allowing firms to extract rents”.
  2. The note with regards to the quality of the drugs states that regulatory bodies must ensure consistent application of statutory quality control measures by each drug manufacturer.
  3. It also mentions that the problem of artificial product differentiation may be addressed through ‘a one-company-one drug-one brand name-one price’ policy.

Vertical arrangements in healthcare services:

  1. In-house pharmacies of super speciality hospitals are insulated from competition; generally the inpatients are not allowed to buy drugs or any product from outside pharmacies.
  2. The note also focuses on how all accredited (NABL) pathological labs shall maintain quality standards in terms of infrastructure, equipment, skilled manpower.
  3. Last but not the least the note states that there is no framework that ensures and governs portability of patient’s e-health records. This causes a lock-in situation for all the patients and makes it really hard for them to switch between medical service providers.

Regulation and competition:

Due to presence of various regulatory bodies at centre and state level, regulating the pharmaceutical industry has resulted in multiple standards for the same products. A mechanism under the aegis of CDSCO can be formalized to negate this issue also there should the new drug approval should be time bound.

Further the policy discusses two other issues related to the healthcare industry: (i) shortage of healthcare professionals in the country owing inter alia to high cost of medical education and (ii) inadequacy in health insurance.

Source: https://www.cci.gov.in/sites/default/files/press_release/PressRelease.pdf

 

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2018

The Insolvency and Bankruptcy Board of India, vide its notification dated 5 October 2018 amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by notifying the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2018.

The key changes brought through this amendment are as follows:

  • Omitted the meaning of dissenting financial creditors as given in Regulation 2 (1) (f) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
  • Removal of the requirement under Regulation 21(3) (b), for the notice of the meeting of committee of creditors to state that the vote of the members of committee should not be taken unless all the members are present at such meeting.

Amendments in the voting process of the committee of creditors

  1. Amendment of Regulation 25 (5) has been brought to provide for the detailed voting procedure by electronic means in case a member is not present for a meeting. The amended regulations now also provide for the circulation of minutes to the authorized representatives in addition to the creditors. The authorized representative is obligated to circulate the minutes of meetings received by it, to the creditors in a class and announce the voting window at least twenty-four hours before the window opens for voting instructions and keep the voting window open for at least twelve hours.
  2. Addition of sub-regulation 1A to Regulation 26 which provides that the authorized representative shall exercise the votes either by electronic means or through electronic voting systems as per voting instructions received by him from the creditors in the class.

Resolution Plan

  1. Substitution of sub-regulation (1) of Regulation 38 which now provides that the mandatory content of the resolution plan shall provide that the amount due to operational creditors under a resolution plan must be given priority in payment over financial creditors. Earlier the provision provided for specifying the insolvency resolution process costs providing that the insolvency resolution process costs will be paid in priority to any other creditors;
  2. Omission of Regulation 39 (1) (b), the requirement of providing an undertaking by the prospective resolution applicant that he shall provide additional funds to the extent required is no longer required.
  3. Omission of sub-regulation (3A) of Regulation 39, the committee is no longer required to specify the amounts payable from resources in the contents of the resolution plan, while approving the same.
  4. Addition of regulation 39A, which provides for preservation of records. It states that the Interim Resolution Professional or the Resolution Professional shall preserve physical and electronic copy of the records relating to corporate insolvency process of the corporate debtor as per the record retention schedule that the Insolvency and Bankruptcy Board may communicate in consultation with the Insolvency Professional Agencies.

Sources

  1. https://ibbi.gov.in/webadmin/pdf/whatsnew/2018/Oct/CIRP%20Amendment-5.10.2018_2018-10-05%2023:21:24.pdf
  2. https://ibbi.gov.in/webadmin/pdf/legalframwork/2018/Aug/Insolvency%20and%20Bankrutpcy%20Code,%202016%20(31%20of%202016)%20upto%20date%20amendment%2017.08.2018_2018-08-19%2013:27:42.pdf.
  3. https://ibbi.gov.in/webadmin/pdf/legalframwork/2017/Oct/CIRP%20Regulations%20-%20after%202nd%20Amendment_2017-10-24%2017:32:27.pdf.

Enhanced disclosure requirements for Credit Rating Agencies

SEBI vide its circular dated 13 November 2018 has tightened the norms for Credit Rating Agencies (CRAs) by enhancing the levels of disclosures required to be made by the CRAs under the SEBI (Credit Rating Agencies) Regulations, 1999 (CRA Regulations). As per the recent circular, the following changes have been brought about:

  1. Under an earlier circular dated 1 November 2016, SEBI had prescribed the standard format for press releases put out by CRAs regarding rating action. Now, specific disclosures must be made in the press release;
    • with respect to rating factors where support from a parent/group/government entity is expected, the name of such entities and the rationale for such expectation to be mentioned.
    • when subsidiaries or group companies are consolidated to arrive at a rating, the names of all such companies, along with the extent of consolidation and rationale for the same to be disclosed.
  2. The above-mentioned press release must also contain a specific section on ‘Liquidity’ with parameters like liquid investments or cash balances, access to unutilised credit lines, liquidity coverage ratio, adequacy of cash flows for servicing maturing debt obligation, etc.
  3. Disclosure of any linkage to external-support for meeting near term maturing obligations must also be made by CRAs.
  4. CRAs may review their rating criteria with regard to assessment of holding companies and subsidiaries in terms of their inter-linkages, holding company’s liquidity, financial flexibility and support to the subsidiaries, etc.
  5. In monitoring of repayment schedules, CRAs to analyse the deterioration in the liquidity conditions of the issuer and also take into account any asset-liability mismatch.
  6. CRAs may treat sharp deviations in bond spreads of debt instruments vis-à-vis relevant benchmark yield as a material event.
  7. CRAs to publish their average one-year rating transition rate over a 5-year period, on their respective websites, calculated as the weighted average of transitions for each rating category, across all static pools in the 5-year period. This shall be adhered during the half-yearly internal audit of the CRAs under the CRA Regulations.
  8. CRAs to furnish data on sharp rating actions in investment grade rating category to Stock Exchanges and Depositories for disclosure on website on half-yearly basis, within 15 days from the end of the half-year (31st March/ 30th September).

Link to source:

https://www.sebi.gov.in/legal/circulars/nov-2018/guidelines-for-enhanced-disclosures-by-credit-rating-agencies-cras-_40988.html

Basic Cyber Security Framework for Primary (Urban) Cooperative Banks (UCBs)

The Reserve Bank of India (RBI) on October 19, 2018 issued a set of guidelines for Basic Cyber Security Framework for Primary (Urban) Cooperative Banks (UCBs). Such a framework was issued by the RBI as a measure to enhance security of the UCBs in light of the increasing number and impact of cyber security attacks on the financial sector including banks. [1]

  1. Board Approved Cyber Security Policy
  • All UCBs need to immediately put in place a Cyber Security policy, duly approved by their Board/Administrator, giving a framework and the strategy containing a suitable approach to check cyber threats depending on the level of complexity of business and acceptable levels of risk.
  • On completion of the process, confirmation of same within 3 months must be sent to the Department of Co-operative Bank Supervision.
  • The Cyber Security Policy should inter alia encapsulate the following concerns:
  • Preventing access of unauthorised software.
  • Network Management and Security.
  • Secure Configuration.
  • Anti-virus and Patch Management.
  • Secure mail and messaging systems.
  • The IT framework/framework must be reviewed periodically by the Board or its IT subcommittee in order to identify vulnerable areas and put in place a suitable cyber security system to address the issues after assessment.
  1. Cyber Crisis Management Plan
  • The Cyber Crisis Management plan, prepared by CERT-In (Computer Emergency Response Team – India maybe referred to by the UCBs for guidance.
  • UCBs should promptly detect any cyber intrusions (unauthorised entries) so as to respond/recover/contain impact of cyber-attacks, especially those offering services such as internet and mobile banking, RTGS/NEFT/SWIFT, credit and debit cards etc.
  1. Organizational Arrangements
  • UCBs should review the organisational arrangements so that the security concerns are brought to the notice of suitable/concerned officials to enable quick action.
  • UCBs should actively promote among their customers, vendors, service providers and other concerned parties an understanding of its cyber security objectives.
  • UCBs, as owners of customer sensitive data, should take appropriate steps in preserving the Confidentiality, Integrity and Availability of the same, irrespective of whether the data is stored/in transit within themselves or with the third party vendors; the confidentiality of such custodial information should not be compromised in any situation.
  • UCBs to put in place suitable systems and processes across the data/information lifecycle. UCBs may educate and create awareness among customers with regard to cyber security risks.
  1. Supervisory reporting framework
  • UCBs should report immediately all unusual cyber security incidents (whether they were successful or mere attempts) to Department of Co-operative Bank Supervision giving full details of the incident.
  • UCBs are advised to implement basic Cyber Security Controls and report the same to respective Regional Offices of Department of Co-operative Bank Supervision on or before March 31, 2019.

Source: http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11397&Mode=0

https://rbidocs.rbi.org.in/rdocs/content/pdfs/63NT19102018_A1.pdf

[1] http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11397&Mode=0.