MCA notifies the Companies (Incorporation) Sixth Amendment Rules, 2019
The Ministry of Corporate Affairs (“MCA”) through a notification has notified the Companies (Incorporation) Sixth Amendment Rules, 2019, (“Amendment Rules”) whereby Form INC-32 (“SPICe”) replaces the earlier Form INC.12 with respect to Section 8 Companies.
Key Highlights of the Amendment Rules
· According to the Amendment Rules, in order to incorporate a company under Section 8 of the Companies Act, 2013 (“Act”) without an addition of “Limited” or Private Limited” to its name, an application is to now be made in the SPICe form. Section 8 companies are companies formulated with charitable objects.
· This application is to be accompanied with the relevant documents and the “memorandum” of the Company, instead of the “draft memorandum” that was previously expected in the Companies (Incorporation) Rules, 2014.
· However, private limited companies that would want to convert into a Section 8 company will still need to make an application as per the format prescribed in Form INC-12.
· The Amendment Rules will come into effect from August 15, 2019.
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The SPICe form has been introduced to help incorporate a company electronically, among other things, through a single application and also helps in fast track incorporation of a company. Since the establishment of SPICe, it has enabled businesses to be registered and incorporated in a simplified manner while also providing a digital platform for the same, therefore going a long way in simplifying the incorporation process for prospective Section 8 companies.
Madras HC: No exploitation of Ilaiyaraja’s songs without his consent
In the case of Ilaiyaraja v. B. Narsimhasn, the Madras High Court (“Madras HC”) passed a judgment whereby the songs of Ilaiyaraja, a renowned music composer, were prohibited by the Madras HC from being exploited or monetized through online radio channels, concerts, TV reality shows among others without his prior consent.
In the current dispute, a licensing agreement was entered into between the Agi Music and Ilaiyaraja’s late wife, in whose favour Ilaiyaraja had assigned his copyright, in 2007 stating that Agi music would be allowed to publish, print and sell over 3800 of Ilaiyaraja’s music compositions, on the payment of royalties.. No specific time period was mentioned in the agreement but AgiMuisc continued to exploit the musical work beyond 2012. Ilaiyaraja thus objected to the use of his music without the payment of royalties, contending that in the absence of a specific time period, 5 years would be the default period of the license agreement which would terminate on 2012.
The Madras HC, on hearing both parties, ruled in Ilaiyaraja’s favour, declaring that according to the Copyright Act (“Act”), if no specific period was mentioned, then the default period to be considered would be no more than 5 years and Agi Music would not have rights to the composition for a period longer than that.
The Madras High Court conclusively ruled that the film producer’s rights over sound recordings in a film are distinct from the copyright of a musical composer over his musical work. The music composer would remain the author and first owner in respect of his musical work however a sound recording, which is a complex arrangement of various elements of music, would be claimed by the producers.
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In this case, the Court also highlighted the ‘moral rights’ of an author of a work, which are special intrinsic rights that an author holds over his work, irrespective of any contractual restriction. These rights recognize the creator of a work as the author, and forbids any distortion or mutilation of such work by any other party.
At the same time, it is also true that film producers undertake a huge risk when it comes to production of cinematograph films. As a recognition of this enormous responsibility, the statute vests the copyright of the entire film as well as the sound recordings in them. However these sound recordings contain separate copyrights in themselves, and do not deprive the music composers of their individual copyright over the musical work.
A sound recording is made, based on the assignment of musical work of the music composer. Therefore while the finished product of the sound recording belongs to the film producers, the musical work which is a constituent of such a sound recording, has a unique copyright of its own.
These observations made by the Madras High Court go a long way in securing the rights of musical composers whose work, over the years, have been unjustly exploited in such a way that they were unable to enjoy the fruits of their own labour.
RBI releases prudential framework for resolution of stressed assets
The Reserve Bank of India (RBI) has released the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019(“Directions”) to provide a framework for early recognition, reporting and time bound resolution of stressed assets, coming into force with immediate effect.
The regulations applicable to banking, non-banking and financial entities aim to work in consonance with the Insolvency and Bankruptcy Code, 2016 for initiation of insolvency proceedings against specific borrowers.
Under these regulations, a lender is required to recognise and review the borrower’s account within 30 days from default in repayment. After classifying the stressed assets into the categories mentioned in the Directions, the lenders can devise a resolution strategy including the nature and implementation of the resolution plan within these 30 days (Review Period). The lenders may choose to initiate legal proceedings for such recovery as well.
The framework also provides for inter-creditor agreement between the lenders and the ways to implement their resolution plans. Such resolution plans must be implemented within 180 days form the end of Review Period, failing which the lenders are liable to make additional provisions as a percentage of the total outstanding amount.
Furthermore, there are regulations laid down for restructuring of the debt on account of borrower’s financial difficulties, including asset classification of the Non-Performing Assets (NPAs) and extension of additional finance under the resolution plan by the lenders. The provisions make any borrowers guilty of committing fraud/wilful default ineligible for such restructuring facilities.
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Stressed assets can generally be described as loans extended which are not repaid in due time by the borrower, thus, committing a ‘default’. The above regulations while exhaustive in nature also provide for enough scope for the lenders to initiate the recovery process within reasonable amount of time taking into account the several steps involved in such recovery and resolution planning. Following the Supreme Court’s order striking down the earlier RBI circular on stressed assets for its arbitrariness, this framework is seen as a welcome move aiming to protect the interests of the lenders and consequently, the economy of the country in whole.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.