Tag Archives: novojuris

Prevention of Sexual Harassment of Women at Workplace – VIDEO SERIES

Junior Partner Ms. Sohini Mandal appeared on the Prathibha Sastry Show talking about the Sexual Harrassment of  Women at Workplace (Prevention, Prohibition and Redressal)  Act 2013 (POSH). She also talks about her experience in conducting Internal Complaints Committee procedures.

The Prathibha Sastry Show brings together Entrepreneurial, Adventurous and Innovative men and women in a quest to enable women to dwell deeper on the events that shape their life. An attempt to bring them into focus and enhance not just their life, but also that of those who will watch them share their stories.

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“By Default” –  Consent By Default and Business Models

In 2003, Eric Johnson and Don Goldstein conducted a survey where the people were given two default choices, (i) people were informed that default was; not to be an organ donor (Opt-in) and (ii) other set of people were told that the default was; to be an organ donor (Opt-out). The results of this survey were surprising, in the first default choice where people had to opt-in to be an organ donor, only 42% of people opted-in or choose to become an organ donor. Whereas when people had to opt-out and make a decision that they do not want to be an organ donor, only 12% of people opted-out, 82 % of people choose to remain as organ donors.

All the major countries in European Union have laws and regulation relating to organ donation and it is exciting to see that countries with default opt-out option have an average of 97.55 % of organ donors. Below is a chart which clearly shows the difference between the numbers of organ donors in countries where default is opt-out and the numbers of organ donors in countries where default is opt-in.

Explicit Consent (opt-in, gold) and presumed consent (opt-out, blue)[1]

This study demonstrates one fact that presumed consent accompanied with an option of opting out works far more efficiently and sticks to people and develops adherent behaviour in people.

But the primary question that has to be answered here is that “why do default rules stick?”

Before moving ahead and answering this question let’s take another example to understand the realms applicability of default rules in modern day businesses.

Default rule setting has aided a company to capitalise subscription-based business model and rule the OTT entertainment segment all across the globe. Netflix in India, provides its services on a subscription-based model where a subscriber gets the first month service free of cost and the subscriber has to pay only from the second month. The FAQ section on the Netflix website says “Try us free for 1 month! If you enjoy your Netflix trial, do nothing and your membership will automatically continue for as long as you choose to remain a member.”

Folks in the industry call it as “Negative option marketing”, where people accept a free product are automatically enrolled as members of the subscription plan which carries a monthly fee.

Recently ‘Paytm’ a mobile pre-paid instrument in India introduced an option where a user can automate the process of respective bill payments. A user may now fix a date for bill payment, the Paytm wallet will by default pay the bill on that particular day until a person opts-out.

The point is default rules or settings make life easier and more efficient. There are so many use cases – Think of SaaS automated renewal, think of moving from free to paid services etc.

Default rule sticks because it is an efficient mechanism of making people do something or not to do something. Default rules tends to stick due to power of inertia, it exploits and thrives on basic human tendencies such as forgetfulness or perhaps procrastination or is it laziness. People generally like things which does not require much of an effort. Or is it perhaps because someone else has to take a decision? “the preferred approach is to select the default rule that reflects what most people would choose if they were adequately informed”.[2]

Default rules have existed even in law. For example, copyright ownership rests with the employer, in the employer-employee relationship, unless otherwise specifically agreed upon. The Hindu Succession Act, 1956 has some default settings unless and until a person executes a Will.

With the new General Data Protection Regulations (GDPR) which becomes effective end May 2018 in European Union, the active consent, ie. Active opt-in from a data subject is required to use personally identifiable information. This sure has wide repercussions in various business models.

Have you thought of using the power of default setting in your business? Do you see use-cases where you can use the power of default setting in your business? It is also perhaps time to stop and think through the default settings you may have used earlier in your business.

Author: Manas Ingle, is an Associate with NovoJuris Legal.

[1] Eric Johnson and Don Goldstein, Science Mag, VOL 302, November 21, 2003. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324774.

[2] N.Craig Smith . Smart Defaults: From Hidden persuaders to adaptive helpers.

REGULATORY UPDATE: MCA ISSUED NOTICE INVITING COMMENTS/SUGGESTIONS ON INTEGRATION OF NAME RESERVATION WITH SPICE E-FORM UNDER COMPANIES ACT, 2013

The MCA in view of simplifying the process of name reservation for the Companies, it has issued the Consultation Paper on the integration of Name reservation with SPICE e-form under the Companies Act, 2013. In this regard, it has invited the stakeholders to send their suggestions for further simplification of processes of name reservation with SPICE e-form under the Companies Act, 2013 intended at simplification of company incorporation processes in order to bring more clarity and simplicity in ease of doing the business process.

The suggestions/comments on the Consultation Paper along with justification, in brief, may be filed online at comments.nameintegration@mca.gov.in on or before 5 November 2017.

ARRESTS IN CONNECTION WITH INVESTIGATION BY SERIOUS FRAUD INVESTIGATION OFFICE

NOTIFICATION OF THE COMPANIES (ARRESTS IN CONNECTION WITH INVESTIGATION BY SERIOUS FRAUD INVESTIGATION OFFICE) RULES, 2017.

The MCA vide its notification dated 24 August 2017 has notified the Companies (Arrest in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 which stands effective from 24 August 2017.

Key highlights:

  • Where the Director, AdditionalDirector or Assistant Director of the Serious Fraud Investigation Office (herein after referred to as SFIO) investigating into the affairs of a company other than a Government company or foreign company has, on the basis of material in his possession, reason to believe (the reason for such belief to be recordedin writing) that any person has been guilty of any offence punishable under section 212of the Act, he may arrest such person; Provided that in case of an arrest being made by Additional Director or Assistant Director, the prior written approval of the Director SFIO shall be obtained.
  • The Director SFIO shall be the competent authority for all decisions pertaining to arrest.
  • An arrest register shall be maintained in the office of Director, SFIO and the Director or any officer nominated by Director shall ensure that entries with regard to particulars of the arrestee, date and time of arrest and other relevant information pertaining to the arrest are made in the arrest register in respect of all arrests made by the arresting officers
  • The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to arrest shall be applied mutatis mutandis to every arrest made under this Act.

Source: http://www.mca.gov.in/Ministry/pdf/companiesArrestsconnectionSFIORule_25082017.pdf

 

NOTIFICATION OF THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL (AMENDMENT) RULES 2017.

NOTIFICATION OF THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL (AMENDMENT) RULES 2017.

The MCA vide its notification dated 23 August 2017 has amended Rule 63 of National Company Law Appellate Tribunal Rules 2016  notified on 21 July 2016 regarding Appearance by Authorised Representative, as under:

  • Subject to provisions of section 432 (Right to Legal Representation) of the Companies Act 2013, a party to any proceedings or appeal before the Appellate Tribunal may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any other person to present his case before the Appellate Tribunal.
  • The Central Government, the Regional Director or the Registrar of Companies or Official Liquidator may authorise an officer or an Advocate to represent in the proceedings before the Appellate Tribunal.
  • The officer authorised by the Central Government or the Regional Director or the Registrar of Companies or the Official Liquidator shall be an officer not below the rank of Junior Time Scale or company

Source: http://www.mca.gov.in/Ministry/pdf/NCLATAmendmentRules2017_25082017.pdf

CLARIFICATION ON DEFINITION OF “JOINT VENTURE”

MINISTRY OF CORPORATE AFFAIRS (MCA)

CLARIFICATION ON DEFINITION OF “JOINT VENTURE” FOR THE PURPOSE OF EXEMPTION FROM APPOINTMENT OF INDEPENDENT DIRECTORS BY CERTAIN UNLISTED PUBLIC COMPANIES

The MCA vide its notification dated 5 July 2017 had inserted Rule 4(2) and amending Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 to exempt the unlisted public company which is a joint venture, a wholly owned subsidiary or a dormant company from appointing independent directors.

Further for the purpose of availing exemption under Rule 4(2) as such a term is not defined in the Companies Act, 2013, stakeholders and other professional institutes had sought for clarifications with regard to the meaning of “Joint Venture”.

In view of the above, MCA vide its circular dated 05 September 2017 has clarified that the term “Joint venture” would mean a joint arrangement, entered into in writing, whereby parties that have joint control of the arrangement, have rights to the net assets of the arrangements. The usage of the term is similar to that under the Accounting Standards.

Source: http://www.mca.gov.in/Ministry/pdf/GeneralCircular_05092017.pdf

Insolvency & Bankruptcy Code- Protection FROM Creditor or Protection FOR Creditor

Background

The Insolvency and Bankruptcy Code, 2016 (“Code”) was notified effective 28 May 2016 with an aim amongst many others, to complete insolvency resolution process in time bound manner, to revive the entity and to ensure/safeguard the value of creditors (specifically unsecured creditors) and to protect the entity itself from coercive action of creditors (with an introduction of moratorium period). This legislation is very much needed, along with the rigour that it propounds.

The Code gives powers to creditors (both operational creditor & financial creditor) to drag the corporate debtor to the National Company Law Tribunal (the Adjudicating Authority) for insolvency resolution process in cases of default of payment. However, in the absence of specific opportunity to the corporate debtor to address the very reason for such default, the intent of the Code appears to below-sided towards creditors.

Should the corporate debtors be given an opportunity to be heard?

Position of Corporate Debtor under the Code

The existing procedure under the Code in case of operational creditor being an applicant involve a notice of dispute being issued against the corporate debtor, following which a time period for response is given to the corporate debtor to prove the existence of a dispute. After the mandated time period of 10 days has been exhausted, the operational creditor files an application. Following the filing of an application, there is a limited period of 14 days, following which the same has to be admitted by the NCLT.In case of financial creditor being an applicant to the insolvency process, an application would be made to Adjudicating Authority and a copy of such application would be sent to the corporate debtor.

Upon application being accepted by the Adjudicating Authority, there is a time period of 30 days within which the insolvency resolution professional is appointed by the creditors to put together all the relevant material in this regard and call for a meeting of various creditors.

The insolvency resolution professional (IRP)  is the individual who is proposed by the resolution applicant (i.e. creditor) and appointed by the Adjudicating Authority. A corporate debtor does not and cannot have any role in such appointment. IRP works to protect the interest of creditors and provides for a revival plan to protect the interest of the creditors.

Upon IRP being appointed, the IRP takes charge of the running of the business. The corporate debtor cannot make any management decisions.The resolution plan is then placed before the committee of creditors, and if more than 75 percent of the creditors approve, then the plan is approved. If not approved, the company goes into liquidation.

It may be noted that once an application is filed by the creditor, the Code rides excessively on the word of the corporate creditor.While there are few judicial precedents in which the Court has ruled that the Adjudicating Authority has to adhere to the principle of natural justice while deciding applications, the point of emphasis remains that the Code by itself does not provide any recourse for the corporate debtor to raise the grievance. It is for the Adjudicatory Authority to make ways for the corporate debtor to represent himself. Moreover, there is no structured procedure laid down for a fair hearing to be given to the corporate debtor.

Possible Remedies for safeguarding the rights of the corporate debtors against the frivolous threats of the creditors.

A corporate debtor who has intimate knowledge of the business, technical and professional experience of running the business should also be heard in appointing an IRP. An IRP who is not experienced in running a particular business or does not have the intimate knowledge required of the industry may cause damage, which perhaps can be evaluated prior to appointing the IRP.

Considering principles of natural justice, a right must be provided to the corporate debtor to be heard and present its side of the facts. It would be essential to have a provision in the Code to provide that opportunity to the debtor. With the rise of frivolous threats from many stakeholders a business has – employees, small value (amount) vendors, it helps in stopping frivolous threats.

Author: Ashwin Bhat