Regulatory Updates #30: MCA on mediation rules, SEBI tightens delisting norms & more

Bar & Bench will bring to you the latest regulatory and policy updates from different ministries and regulatory authorities. In this edition of the Bar & Bench Regulatory Updates, we analyse the latest updates by the Securities and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs (MCA)..SEBI tightens norms for promoters of delisted companies.In order to ensure, ‘effective enforcement of exit option to the public shareholders in case of compulsory delisting’, SEBI recently issued a circular which further tightens the SEBI (Delisting of Equity Shares) Regulations, 2009 (Delisting Regulations). These new restrictions are in addition to ones already contained in the Delisting Regulations..As per the circular, the promoters of a delisted company, having a positive fair value will be prohibited from pledging or selling their shares, until they provide a viable exit option to public shareholders, including buying them from the shareholders at a fair value. Additionally, corporate benefits, such as dividend rights, bonus shares, or share splits on promoter-held stocks will also be frozen..Also, the promoters and whole-time directors of such delisted companies will not be allowed to become directors of any listed company till the above mentioned exit option is provided..SEBI fixes daily price limits for non-agricultural commodities.To ensure fair price discovery and curb price manipulation on exchanges, SEBI recently fixed daily price limits (DPL) for trading in non-agricultural commodities, thus making trading in commodities safer..DPL had been fixed at 6% in two slabs for steel and a total of 9% for gold, at 3% each in three slabs. For other non-agri commodities, too, it is 9%, with 4% as the initial slab, with a first enhanced slab of 2% and then 3%..However, what’s new is the 15 minute cooling-off period. Just like circuit limits in securities, this cooling-off period is imposed after the ‘first enhanced slab’ is breached. Trading, however, is permitted during the cooling-off period within the previous DPL slab..MCA sets a framework for ‘mediation’ facility.The MCA has published a notification on its website which provides a framework for mediation and conciliation facilities, which will facilitate faster resolution of disputes relating to companies..Among other things, the Companies (Mediation and Conciliation) Rules, 2016, (Rules) enlist qualifications and disqualifications for empanelment as a mediator. The mediator would not be bound by Indian Evidence Act or the code of civil procedure while disposing of the matter but would be guided by the “principles of fairness and natural justice.”.While the Rules prescribe that judicial/ arbitral proceedings will not be resorted to during the course of mediation, it allows either party to initiate such proceedings where “in his, opinion”, such proceedings are necessary for protecting his rights..The role of mediator will be limited to only facilitation of a voluntary resolution of the dispute by the parties, without having power to impose a settlement. The Rules set a three month cap for completion of the process of mediation..The Rules, also ensure privacy and confidentiality of the representations made by either parties..MCA relaxes managerial remuneration rules.Section 197(3) of the Companies Act, 2013 (Act) prescribes that, in case the a public company has not made any profits or has made inadequate profits, the amount paid as managerial remuneration shall not exceed the sums provided under Schedule V of the Act..Being seen as move which gives companies more leg room to decide managerial salaries, the MCA has amended Schedule V of the Act by doubling the limit on managerial remuneration for public companies without or inadequate profits in a particular financial year..Where the effective capital isLimit on managerial remuneration (Rupees) EarlierRevisedNegative or less than 5 crores30 lakhs60 lakhs5 crores and above but less than 100 crores42 lakhs84 lakhs100 crores and above but less than 250 crores60 lakhs120 lakhs250 crores and above60 lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores120 lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores