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Key Legal Amendments and Initiatives in India: FDI in LLPs, Trademark Rules, and Payment of Wages
1. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Second Amendment) Regulations, 2017
The Reserve Bank of India (RBI), in exercise of powers conferred by Section 6(3)(b) and Section 47 of the Foreign Exchange Management Act, 1999, notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Second Amendment) Regulations, 2017. These amendments revise Regulation 5(9) and Schedule 9. Key changes include:
Regulation 5(9): FDI in Limited Liability Partnerships (LLPs)
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Eligibility of Investors:
Foreign capital can now be contributed by a person or entity outside India (excluding Pakistan and Bangladesh) to an LLP under the Foreign Direct Investment (FDI) scheme, except for Foreign Portfolio Investors (FPIs), Foreign Institutional Investors (FIIs), and Foreign Venture Capital Investors (FVCIs). -
Contribution Mechanism:
Foreign capital can be contributed either as capital contribution or through the acquisition/transfer of profit shares in the LLP’s capital structure.
Schedule 9: FDI-LLP Scheme
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Eligible Investments:
The scheme permits capital contributions to LLPs. Investments by way of profit shares are categorized as reinvestment of earnings. -
FDI Conditions:
FDI is allowed under the automatic route for LLPs operating in sectors where 100% FDI is permitted. The automatic route also applies to companies or LLPs making downstream investments in sectors open to 100% FDI. -
Valuation and Pricing:
FDI in LLPs must be valued at fair price as determined by a Chartered Accountant or an approved valuer. Transfer of capital contributions or profit shares between residents and non-residents must comply with the fair price norms. -
Payment Mode:
Payments for capital contributions must be made through banking channels or NRE/FCNR accounts. -
Reporting Requirements:
LLPs receiving FDI must report foreign investments and disinvestment/transfer activities to the RBI.
2. Companies (Transfer of Pending Proceedings) Rules, 2016 – Amendments to Time Period for Submissions
The Central Government has amended the Companies (Transfer of Pending Proceedings) Rules, 2016 under the Insolvency and Bankruptcy Code, 2016.
- Rule 5(1) now allows six months (instead of the previous sixty days) for petitioners to submit required information in cases of winding up proceedings related to an inability to pay debts. This change provides additional time for submitting details necessary for the admission of petitions under sections 7, 8, or 9 of the Insolvency and Bankruptcy Code.
3. Trademark Rules, 2017 – A Boost to Intellectual Property Regime
The Trademark Rules, 2017 came into effect on March 6, 2017, replacing the Trade Mark Rules, 2002. These changes aim to streamline the processing of trademark applications and enhance India’s Intellectual Property (IP) environment. Key changes include:
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Reduction in Trademark Forms:
The number of TM forms has been reduced from 74 to 8 for simplified filing. -
E-filing Incentives:
The fee for online filing has been reduced by 10% compared to physical filing. -
Reduced Fees for Start-ups and Small Enterprises:
Fees for individuals, start-ups, and small enterprises have been cut down to ₹4,500 for e-filing (from ₹8,000 proposed earlier). -
Introduction of Well-Known Trademark Guidelines:
The rules now include clear guidelines for determining well-known trademarks. -
Expedited Processing:
The provisions for expedited processing have been extended to cover the registration stage. -
Electronic Service and Video Conferencing:
The new rules enable the electronic service of documents and allow video conferencing for hearings. -
Adjournment Limitations:
The number of adjournments in opposition proceedings is limited to two per party. -
Simplification of Registered User Procedures:
Registration procedures for Registered Users have been simplified.
These changes are expected to speed up trademark registrations and enhance India’s IP ecosystem.
4. Payment of Wages (Amendment) Act, 2017 – Introduction of Cheque and Online Transfer
The Payment of Wages (Amendment) Act, 2017, which received Presidential assent on February 15, 2017, replaces the Payment of Wages Ordinance, 2016. It amends Section 6 to allow employers to pay wages:
- In Coin or Currency Notes
- By Cheque
- By Credit to Bank Accounts
The amendment also empowers the appropriate Government to specify industries or establishments where wages must be paid by cheque or bank credit. This provides more flexibility in wage payment methods, ensuring smoother transactions and enhancing transparency.
These legal amendments and regulatory updates across multiple sectors—FDI in LLPs, companies’ insolvency proceedings, trademark regulations, and payment of wages—are geared towards simplifying processes, improving efficiency, and fostering a more robust business environment in India. They mark significant steps forward in intellectual property protection, foreign investment, and corporate governance, all of which are crucial for India’s growing economic landscape.
