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Jan 03
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data privacy in china

Legal Regime of Data Privacy in China: Handle for Foreign Tech Firms

By Other No Comments

Legal Regime of Data Privacy in China

It is no news that business and legal clarity in any country is the crux for a viable business environment and management. But in a recent turn of events, China has failed to provide the same for the companies that operate on its soil.

To corroborate such a claim, Yahoo has recently decided to effectively shut its operations in China. The reason cited for the same was an “increasingly challenging” business environment that is brewing in China. Additionally, the legal environment too has been the source of contention for the company.

The enormity of the deterrent-like legal and business environment can be conjured from the fact that Yahoo has ended a long-standing relationship of about 22 years because of the same.

but has such a scenario not worked in favor of just Yahoo? Apparently not. As a matter of fact, recently, the professional networking platform LinkedIn, which is owned by Microsoft, has stated that this year, it rolls down on the Chinese version of the site.

in fact, in a jolt to China, its video game operator Fortnite, which was China’s biggest gaming company, has too decided to pull out its operations from the Chinese market.

this gives rise to an important question what actually is leading firms to curtail their production and move out of China? What environmental or legal factors are contributing towards such abrupt departure of companies from Chia?

It turns out that the pulling out or downsizing of firms is due to the strict data privacy laws that have been put in force by the Chinese government. It is to be noted that the Data privacy laws emphatically specify how the data is to be collected and stored by the companies, affectingly directing them to function and perform in a certain manner.

China has been trying to mitigate the storage of data of its users by the company, so much so that it had rolled out the Personal Information Protection law that lays down the standards for the storage of data.

Additionally, it also effectively and emphatically restricts the amount of information that is actually allowed to be collected by the companies.

Unlike various other countries, where not much restriction is placed on companies to obtain consent from its users, China has been making the operations of the companies difficult through its hardcore rules of consent.

Even though the topic of data privacy has been a blazing issue that has been raised by the world stage, China has been the first country to stringent crack down on companies for violating its user privacy.

In addition to the aforementioned restrictions, the law has also made it mandatory for the companies to provide the users with an option of opting out of data sharing.

but what are the discrepancies that arise for the company that abides by such laws? It is to be noted that through the introduction of such stringent, crippling laws, the costs of compliance have increased. In addition to higher costs, the companies have also started to feel the threat of regulatory uncertainty that China is providing.

Thus, given that more is at stake than what can be gained by sticking in the market, the foreign companies have decided to opt-out of China.

What adds to the discrepancy is the fact that the law makes non-compliance penal in nature. Thus, this could lead the companies to pay up to a whopping 50 million yuan or 5% of the yearly revenue for the violation of the law.

china data protection lawThough, it is to be noted that the laws introduced to effectively prevent the misuse of the user’s data, such laws have effectively led to the curtailment of business in China.

But has the motive of China been on the basis of welfare for its citizens? Probably not and perhaps that is the biggest flaw of the program. This is merely due to the reason that the law effectively does not stop the government from accessing the citizen’s personal information. Thus, the people in China will remain under surveillance, but under the government’s surveillance.

but does the new obsessive surveillance scheme has to do anything with the trade war? Probably not. Given the rising tensions between US and China, one can emphatically maintain that the new regulatory regime has also been affected by US’s various restrictions that were inflicted on Huawei and other Chinese tech companies.

lastly, it is to be noted that the newer policy is an added stringent measure to China’s already existing “Great Firewall”. The great firewall effectively uses laws and technologies to enforce censorship on social media content that it doesn’t consider feasible according to Chinese laws.

It is no news that social media networks like Twitter and Facebook have already been facing increased scrutiny under Chinese laws due to the Great Firewall for a long time.

china personal information protection lawThus, given the enormity of discrepancy and nonaccommodative environment that is brewing in China, it is perhaps time that China starts deep introspection of its laws that are not helping the business environment.

This gains all the more important given the fact that the Chinese economy was severely crippled by the pandemic. Thus, a nonaccommodative business environment will only add to the existing woes of the Chinese economy and it is time that China revises its stance on its data privacy laws.

 

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Jan 03
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corporate borrowers in india

Large Corporate Borrowers in India Return to Banks as Economy Shows Revival

By Corporate Law, Others No Comments

Why Corporate Borrowers in India Return to Banks?

Given the uncertainty that has been imposed by the pandemic on the countries around the world, lower bank credit is the most visible consequence of it.

According to the reports, bank credit to industry has been mute for quite some time now, having fallen 1.7% in the year to date. But under current circumstances and a growing economy, bankers are highly expecting a revival in corporate loan growth. ‘

This can be emphatically possible due to the economy opening up, demanding a higher flow of credit in the market. What would make this a strong business case is the act that high recovery will guarantee high economic prospects in the future, which will ramp up the need for capital expenditure in the economy and hence higher borrowing.

talking about performances of different kinds of loans in the market, chunky industrial loans, which effectively make up about 30% of non-food credit, witnessed mild reactions and demand in the financial year 2021.

This severely underscored a trend among companies to conserve cash. On the other hand, retail credit demand in the economy expanded emphatically. What makes this expansion surprising is the fact that it expanded through the period of episodic lockdowns and curbs that were placed by the authorities on mobility.

but given the gloom that the banking sector had witnessed in the financial year 2021, higher growth prospects are making analysts believe that credit demand will now pick up.

the corporate borrowers in indiaA fact that is backed by an organization of consequence carries weight. Hence, to add weightage to the argument stated above, the Japanese leading investment bank, namely Nomura. Has strategically stated that growing optimism in the market and abundant liquidity should boost loan demand in the future.

with the high performance of the retail sector, what other sectors will encounter loan growths in the future? It is to be noted that other than the retail sector, the manufacturing and services sector will encounter growth and liquidity.

If the last, unconventional year is to be scrutinized, uncertainty had provided that better judgment of the investors and had forced the infrastructure and various sectors to close down in the economy.

This had severely affected the business environment, which in return has exhibited muted credit demand from traditionally asset-heavy industries. But this gives rise to a pertinent question with heavy stimulus running through the economy and lower interest rates, shouldn’t investment and spending be on the rise?

The answer is more complicated than a layman might anticipate it to be. Instead of undertaking newer investments in the market and emphatically adding more debt to their balance sheets, several companies in the asset-heavy sector effectively and strategically sought to deleverage.

corporate business loansThis was done by harnessing cash flows in the economy to heavily improve their debt profiles, which had been faltering throughout the pandemic.

But was the pursuit to improve the debt profiles of the companies the only reason for the enactment of such a plan of action? It is to be noted that a good business practice is that when two motives can be achieved through one strategy, one should go for it and what certainly can be better than that?

And that is what had motivated the companies and corporations to go along with the plan to deleverage. It is to be noted that the better, debt-free profiles of the corporations should now encourage many companies to add debt to their portfolio as they undertake expansion of capital. Thus, with improved profiles, the extra room has been created for undertaking more expansion in the future.

Thus, one can effectively argue that after undergoing a strenuous and arduous phase of deleveraging over the past few years, the companies will be in a better position for re-leveraging. In fact, as a matter of fact, Indian financiers have emphatically and effectively saddled themselves with ample liquidity also known as capital buffers to tap the emerging opportunity.

Another reason that had led to smaller bank credit growth was the cheaper rates in overseas and the local bond markets that were looked upon by the companies as their source for their short- and medium-term funding needs.

What corroborates the claim that the loans will be on the rise is the fact that the banks are already seeing an uptick in demand from city gas, road projects, and renewable energy projects. Thus, given that one is witnessing such a strong demand even when the econom6 is struggling with a newer variant, one can definitely anticipate higher demand for loans in the future.

corporate term loanin totality, it can be stated that industry growth will emphatically emerge as a key driver to boost credit growth in the economy. Though, a word of caution is necessary that states that though India will witness an increase in loan demands, lags would still be prevalent.

This merely will be due to fact that the economy can be highly unpredictable mainly due to covid variant mutations and unorganized consumer and investors’ confidence. Though, even though lags might fraught the process, government spending and revival in consumer demand can be the potential triggers.

 

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Jan 03
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e-commerce regulations in india

India’s E-commerce Regulatory Contradictions: P2B Regulatory Blind Spot

By Others No Comments

India’s E-commerce Regulatory Contradictions

Despite excessive e-commerce regulations in India, one can emphatically maintain that much is yet to be rectified. This needs to be specifically done in the P2B sector also known as the platform to the business model.

Owing to regulatory lacuna or void, several allegations have been registered regarding unfair trade practices. Allegations against E-marketplaces have surfaced which involve allegations like skewed placements and ranking, self-preferencing, and opacity and regulations in terms of the use of consumer data.

Thus, given the fact that the e-commerce sector is garnering more and more important, it is quite crucial that regulatory rules are played attention to.

Given the unprecedented last year, the domestic e-commerce market in India has flourished. One might even say that the digital revolution had been ushered by the onset of the pandemic.

this was mainly due to the fact that many individuals were forced to return to their home environment where the usage of e-commerce platforms and digit platforms became an inevitability.

In fact, the increased internet access and high smartphone penetration have fastened the process of digitalization of India. On the other hand, an immediate push for “digital India” by the Modi government has also contributed to the digitalization of India.

the e-commerce regulations in indiaIf the statistics are to be scrutinized, the pandemic inflicted woes on India’s retail sector that had shrunk by a significant 5 percent. But on the other hand, this opportunity was relished by the e-commerce sector which recorded a growth of a staggering 5 percent. This significantly had ramped up the valuation of the sector to a total valuation of $38 million.

If you are an avid online shopper, chances are you have increasingly heard about e-marketplaces. It can be rightfully stated that e-marketplaces can be seen as the new emerging trend in the Indian market. It is to be noted that – marketplaces connect sellers and business users with consumers but virtually.

E-marketplaces have garnered much popularity and have been presenting a tough fight to the physical retail sector that is still recuperating from the aftereffects of the pandemic. with the fall of the physical marketplaces and due to the variety of perks that were being offered by the e-commerce sector, such as massive discounts, home delivery, variety of products, etc. e-marketplaces have garnered much attention.

The tech giants that had the most to gain were namely Flipkart, Amazon, and food delivery aggregators namely Zomato and Swiggy.

As aforementioned, due to the stiff competition being provided by the e-commerce sector, there has been a growing unease for business users that sell their services offline.

Due to this trend, various allegations have surfaced like that of extremely unfair practices and trade which have been undertaken by presenting deep discounting and preferential treatment of platforms for its own offerings.

These allegations gain importance since the state of competition in the Indian e-commerce market tells the story of the concentration of immense power in the hands of a handful of e-marketplaces.

The unfair practices and growing share of a handful in the market have made it unavoidable for small businesses to partner with them. This is usually due to the fact that various small businesses want to set their foot in the market.

This detestable attribute has put the e-commerce giant in an indispensable position. This is due to the fact that the circumstances have arguably accorded them the status of being ‘gatekeepers’ within the sector.

On top of it, owing to the vast bargaining power imbalances that have cropped up into the system, the business is at a severe disadvantage to not be able to negotiate with such e-marketplaces giants. Thus, this has led to the practice of unfair practices and unfair treatment in the sector.

e-commerce rules and regulations indiaTalking about the regulation of the e-commerce sector in India, it is to be noted that e-commerce in India does not pertain to a particular sector. Due to this analogy, different aspects of e-commerce are particularly regulated by various other regulators in a particularly fragmented manner.

Now one might argue that various e-commerce regulations are in places like the Competition Act, passed in 2002, or the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and the consolidated Foreign Direct Investment Policy, that have been significantly drafted for the convenience of the sellers. But it is a fact that all the aforementioned laws are quite toothless in the face of seller woes.

To put the analogy in perspective, it is sagacious to anise the Competition Act, 2002. According to the law, it is to be noted that it allows for significant and effective intervention only if the unfair practices are carried out by some ‘dominant’ entity.

It is due to this detestable attribute that various entities that actually relishing the fruits are left scot-free. Given the nature of the Indian e-commerce market, it is concentrated with a few big players, and not by a clear dominant player.

india e-commerce regulationIt is due to this attribute that the Competition Commission of India has been not been effectively and significantly be able to intervene in regulating such oligopolistic concentrations that are much more crippling in nature.

Thus, the need for regulation is immense in the Indian e-commerce sector given the character of the market. Thus, newer regulations and alterations to the existing ones are the need for the hour. But will the government take cognizant of the e-commerce regulations is it something we’ll have to wait and watch?

 

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Jan 03
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regulation of cryptocurrency in india

India Must Regulate Cryptocurrencies in Consumer Interest

By Others No Comments

The Regulation of Cryptocurrency in India

Call it the world’s greatest invention or the contentious asset of worry, you cannot deny the fact that cryptocurrency has wrapped investors around their fingers.

The fancy of the investors is quite justified given the high returns they earn in comparison to other assets in the market. Of all the investors around the world, Indian investors particularly have been largely invested in the concept.

According to the reports, the Indian Crypto asset industry witnessed tremendous, exponential growth over the last five years.

In fact, one can argue that the popularity of the asset had touched such heights, that authorities and great personalities have joined the debate. It is no news that financial literacy in India is mainly a farfetched concept, with many having little to no knowledge about it. But given the statistic, still more than 15 million Indians effectively now hold digital currencies.

Given the humungous support that has been received by the contentious digital asset, cryptocurrencies, like any other financial asset, also need to be regulated.

This needs to be emphatically done to effectively protect consumer welfare and to highly promote innovation as well.

the regulation of cryptocurrency in indiaCertainly, if you are a finance enthusiast or a market spectator, chances are that you know that the government is not particularly kind to the digital member of the financial asset family.

In fact, one can quite rightly describe the government’s demeanor towards cryptocurrency as belligerent.

But even given the central’s tough arduous stance on the digital asset, crypto assets, no matter what, are likely to form the basis of future forms of the internet. In fact, this is quite evident as the world of cryptocurrency in India is growing at an appreciable, astronomical pace.

For the crypto investors, recent weeks have been a roller-coaster ride.

This is due to the fact that the popularity of the crypto comes at a time when New Delhi is specifically aiming to introduce a bill to regulate the asset.

Her, it is worthy of mentioning that experts argue that the crypto market will be the future of the financial sphere in India.

Therefore, one can conclude that India, in future and present terms, is well placed to capitalize on this due to its burgeoning private crypto market. Given the aforementioned argument, it would be extremely unwise to place a ban on private crypto assets.

This will apparently lead to a significant revenue loss to the government. As a matter of fact, if the government even tries to censor the private currency, there are emphatically high chances of clandestine activities to be conducted and to force the nascent industries to operate illegally.

Thus, in lieu of normalcy, it is highly advised that a balanced regulatory approach be followed. It is imperative that the regulatory approach should effectively addresses concerns of money laundering, regulatory certainty, fiscal stability, and investor protection.

This all should be achieved while strategically preserving innovation. This suggestion garners all the importance due to the fact that the financial health of the economy and citizens is not too sound at the moment, any immediate, crippling regulation will certainly lead to financial shock in the economy, something that India can ill afford at the moment.

As a matter of fact, adoption of such a technique should not be an arduous task for the government as most of the aforementioned regulatory necessity to address the policy concerns related to crypto-assets, namely foreign exchange management, investor protection, tax evasion, and money-laundering and tax already exists in the financial legislation. What the need of the hour is the need for adaptation to accommodate an emerging technological paradigm.

Talking about an effective crypto regulatory framework, it should specifically include innovation-friendly, technology-neutral, and consistent to effectively and emphatically harness the full potential of India.

In fact, the prerequisite demand for a consistent, emphasizing framework is that it must lay down clear definitions to strategically and smartly identify the relevant regulatory bodies.

This will systematically help in clearing the ambiguity around the framework structure and operations of the government with respect to crypto. It is no news that in the finance world, one thing that is most certainly detested is uncertainty.

cryptocurrency regulation in indiaThus, clarity on the laws and propaganda of the government is needed. It should also provide crypto asset service providers with safe harbor–protection from liability for the actions of investors on their platform.

Finally, one cannot deny the fact that where there are profits there is avarice for higher incomes and thus a high propensity for conduction of illegal activities.

To address this irregularity or inconsistency, the Government should emphatically adopt a co-regulatory approach.

In the co-regulatory approach, various other regulatory authorities and associations like RBI, SEBI, and the Ministry of Finance should be brought into the picture for sharing responsibility for oversight and regulation.

But is supervision and scrutinization by the regulatory authorities enough? To monitor the private players, incentivizing industry whistleblowing is important.

legal cryptocurrency in indiaThis is necessary as the players within the crypto-market will work to keep a check on each other’s activities, which will emphatically reaffirm the government’s idea of regulation.

Thus, given the aforementioned arguments, it is quite imperative for the government to alter its stance to ban private currency in the market. In order to avoid clandestine, illegal activities, the government will have to be mindful of the investors’ choices and decisions as well.

 

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Jan 03
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global minimum tax deal

India May Have to Withdraw Equalization Levy if Global Minimum Tax Deal Comes Through

By Other No Comments

Withdrawal of Equalization Levy & Global Minimum Tax Deal

India may have to bid farewell to the equalization levy or the digital service tax or either give a commitment to not implement such laws in the future if the global minimum tax deal materializes and comes through.

The amount of support that the global minimum tax is garnering around the world is humungous with a total of 136 countries, including India agreeing to effectively implement global tax norms. The primary motive behind the implementation of such a norm is that it will emphatically ensure that multinationals pay taxes wherever they operate. The rate of global minimum tax has been set to a minimum 15% rate.

However, there is a catch. The implementation of the deal requires various countries around the world to remove all digital services tax. In addition to this, there is a need for commitment at the world stage that other similar measures will not be introduced in the future.

the global minimum tax dealThe two-pillar solution

It is to be noted that a two-pillar solution has been suggested at the world’s stage. The proposed deal’s first pillar pertains to matters of reallocation of an additional share of profit to the market jurisdictions. Secondly, the second pillar consists of topis of minimum tax and is subject to tax rules.

Though India has embraced the two-pillar policy with announcements of arriving at the specifics of the two-pillar taxation policy that has been proposed at the G-20. In fact, according to the reports, the talks are in the last stage of finalizing.

The curious case of taxmen and taxpayersequalization levy india

The minimum tax regime brings out with it some interesting observations, on which taxpayers and taxmen had their eyes laid on.

It is to be emphatically noted that the proposed two-pillar solutions agreed to redistribution of $125 billion taxable profits annually with 15 percent minimum tax in order to counter safe tax havens which have been offering enticing offers to the companies in order to evade taxes.

Though the scheme brings about enormous benefits for the developed countries, developing countries cannot state the same. It is to be noted that global minimum tax will effectively make tax competition amongst various nations rather unfeasible. This will be due to narrowing down any such opportunities to the rarest circumstances.

Various developing countries like India depend on their indigenous tax structure to attract foreign investments in their economy. This was true for India through its equalization levy that led to various messy battles with Cairn energy.

Though, it is worth noting here that in finally reaching the Two-pillar solutions, the framework has effectively tied up several loose ends, with a strategic roadmap for implementation. According to the final solution drafted, it effectively offers a 25 percent share in supernormal profits, exceeding 10 percent. These sought to be reallocated to market countries.

It can be emphatically stated that the implementation and initiation of two pillar solutions ought to be effectively reckoned as an enduring overhaul of the centuries-old international tax regime that was receding and unfair to many.

Though one can argue that Pillar 1 and Pillar 2 will help secure a more certain and stable tax regime for multinationals and governments, underdeveloped countries look at the equally level competition that might be unjust to some.

Given the pandemic, international and foreign investments are of the essence, thus, perhaps with the implementation of the global minimum tax, the countries might see the implementation of other incentives to attract investments and corporations in the economy.

India’s case of equalization levy

If this is to be scrutinized in the light of the Indian economy, one is unsure about the impact of the implementation of the global minimum tax. Given the fact that India is leaning towards indigenous production and is strategically focusing on export promotion, one can state that implementation of the global minimum tax won’t lead to an upheaval in India’s tax system.

However, it is worth remembering here that India too is in its nascent stage of growth and is recuperating from the aftereffects of the pandemic that has ravaged the economy.

During the pandemic, the government had effectively reduced its corporate tax rates by heavy margins in order to attract companies while facing cutthroat competition from Vietnam.

Thus, cannot in absolute truth state that India will remain unaffected by the implementation of the global minimum tax, which means doing away with its equalization levy.

Another given detestable impact of the same is the fall in the monetary tax that India gained through the implementation of the equalization levy till the new tax regime comes into place.

According to the reports, India made a hefty amount of Rs, 4000 crore in equalization levy, that it will have to give up due to the implementation of the global minimum tax.

global minimum tax agreementTherefore, India has rejected the US’s idea to provide credit in lieu of an equalization levy. Thus, India will only roll down on its existing equalization levy until a new tax regime comes into place. Thus, the equalization levy is here to stay till 2023-24.

Thus, given the aforementioned arguments, India is currently balancing its interests both as an importer and an exporter of services, goods, and capital. The deal will definitely prevent a race to the bottom amongst many countries.

 

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Jan 03
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insolvency resolution process

IBC is The Best Bet For Timely and Effective Resolution

By Corporate Law, Banking No Comments

The Effective Ways of Corporate Insolvency Resolution Process

Given the plight of the banking industry in India, IBC is well deservedly called epochal legislation. The legislation has been hailed for bringing a paradigm shift in the manner of resolution of stressed assets and companies. The high rate of recovery, compared to its peers has made it the most influential legislation to mitigate the NPA disaster in India.

The unwarranted criticism

However, it is to be noted that every coin has two sides to it. This too has its side of criticism that is not much appealing as its appreciable side. In recent times, the IBC has effectively encountered numerous criticisms.

These have been in relation to high haircuts which emphatically indicates lesser recovery than admitted claims.

These have been especially accrued by the lenders, which has caused substantial loss to companies and recovery of assets. To top it all, the IBC has also been encountering higher liquefication compared to resolution.

corporate insolvency resolution processCertain critics have come up with claims of lenders, on average, realizing only around 40% of their total admitted claim.

In fact, to add to the unwarranted drama, the IBC has also encountered various criticisms of individual cases having a recovery rate of a mere 20 percent. To state that such claims and criticisms are unwarranted would be an understatement.

This is mainly due to the fact that the claims are being made on the basis of average IBC cases, which effectively is not taking into consideration the high rate of recoveries made in cases that affect this average.

But what poses an obvious threat is that in some cases IBC has seen recovery as low as 6%. Also, to add to the narrative and to corroborate the fact that high liquidation is an issue, around 75% of the companies have faced liquidation effectively.

But one thing that such criticism has shown is that such claims have heavily focused on primary two categories namely, lesser resolution than liquidity and higher haircuts.

Thus, such assertions point towards the fact that IBC has emphatically turned out to be an instrument of losing public money or causing harm to the assets. Broadly, one can argue that IBC has not been able to provide the maximum utility for which it was strategically devised.

But it is to be noted that the recovery rate under IBC has really been appreciable compared to its peers. However, as one can scrutinize, the critics have failed to appreciate the fact.

One argument that the critics need to pay attention to is the fact that IBC has been emphatically successful in facilitating the recovery of debts and it should be strategically be ascertained by comparing the realized amount with the value of assets of a company under stress, rather than making a comparison by comparing the realized amount with the admitted claims.

ibc resolution processWhat fact can be conjured as absurd is that to presume that IBC ought to facilitate the realization of all admitted dues of lenders, and to be the panacea of all economic difficulties of an economic unit, without taking into consideration the value of the assets of a company?

In fact, if the aforementioned argument is taken into consideration, IBC’s data shows that it has even realized around 186% of the liquidation value of the assets of the companies.

In fact, if the same report is to be scrutinized, it is released that more than 25% of the companies have actually realized more than twice the liquidation value. Thus, with such re[ports, can one still assert the aforementioned claims? Probably not.

Revolutionary legislation

Given the aforementioned arguments, one can definitely not claim that the IBC has gone stale. In fact, in this context, IBC has revolutionized the recovery mechanism for the Indian banking sector so much so that its constitutional validity has been successfully defended by the present government recently before the Supreme Court.

Thus, one can feel optimistic about the recovery rate in the future that will, in all probability, increase further. This will be effective due to the fact that the lenders are now likely to initiate insolvency proceedings against the guarantors of the companies.

To counter the second unwarranted argument of excess liquidation over resolution, it is the need to be emphatically noted here that the companies that were increasingly facing liquidation were actually already defunct at the time of initiation of the insolvency resolution process.

For that matter, given the data that 35% of the companies were actually able to get a new life under law through successful resolution cannot be overlooked.

liquidation process under ibcHence, in totality, it needs to be stated that the banking industry or even the critics for teat matter must not shy away from accepting that the IBC has been a groundbreaking resolution that is ushering the banking sector towards insolvency jurisprudence. This is definitely in line with the global best practices if the statistics are to be realized and scrutinized.

 

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Jan 03
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resolution applicants

Hard Bargain For Resolution Applicants

By Cases No Comments

Insolvency Resolution Plan and Resolution Applicants

 

In the case of Ebix Singapore Pvt vs. Committee of Creditors of Educomp Solutions Ltd., the government has granted its judgment.

The judgment has bargaining provided the much-needed clarity which was highly overdue on the contentious status of resolution applicants that comes under the Insolvency and Bankruptcy Code 2016.

The judgment has been provided for the series of events after the resolution plan has been approved by the Committee of Creditors. This is the time between the approval by the COC and the pending approval of the National Company Law Tribunal.

The apex court took a solemn view of the case and emphatically maintained that once a plan is effectively approved by the COC, it significantly becomes binding on the resolution applicant.

This means to say that the judgment and the approval of COC are all binding and it is little or no scope left for withdrawal, even while the plan is underway for approval from NCLT. Thus, it can be rightly stated that this effectively gives more executive powers to the Coc.

resolution planThough it is no news that the process is fraught with many inefficiencies and delays, the similarities have emphatically been acknowledged by the supreme court too. In fact, various reasons for such odious delays have been projected.

These include late bids that do not offer potential valuation or price or perhaps there can be various detestable bottlenecks in the corporation itself which can lead to delay in acknowledgment of the Corporate Insolvency Resolution.

If the delays are to be scrutinized in the light of the legal framework, it can be noted that multiplicity of litigation too fraught with the effectiveness of a case. Additionally, tenacity to grant approvals in light of the spirit of the Code too is an emphatic re3asons that adds to the arduous list of factors that delay the time crucial resolutions.

corporate insolvency resolution processHowever, even though these reasons were acknowledged by the supreme court, it still emphatically maintained that these do not serve a purpose for the applicant to break free or effectively seek an exit from an approved resolution plan by COC.

The case that ushered the change.

According to the reports, the Supreme court was effectively dealing with a batch of 3 appeals. These were significantly filed by successful resolution applicants.

If the nature of the applications is to be scrutinized, the successful resolution applicant had sought emphatically beseeched for the withdrawal or at least modification of their resolution plans.

This appeal was being made for a plethora of reasons which effectively included reasons like an empathic impact of such investigations on the mighty resolution plan and financial hardship.

Additionally, the appeal was also based on the delay in the approval of the resolution plan. It was during this particular case when the apex court had held the demand of the applicant as inadmissible so as to be withdrawn or modified when Coc had already approved it.

T5his gives rise to a pertinent question given the intricacies of the resolution plan, what does this emphatically means for the stakeholders? It is to be noted that stakeholders are an important force that is invested in the resolution scheme.

With a wrong judgment and step, it is the stakeholders that have the most to lose. Thus, with the latest judgment, it can be stated that the Supreme court has bonded the faith and the destiny of the stakeholders to the resolution plan devised by the COC. This emphatically distinguishes the resolution plan from the bilateral contract.

Is modification allowed if circumstances are altered?

insolvency resolution processTaking a stern stance, the apex court has maintained that the framework would not allow withdrawals or modifications of resolution plans, even if the applicant applies for the same.

Thus, absolute power to discretion to the COC has been granted. However, under section 12A, withdrawal of insolvency proceedings is allowed.

This can be effectively carried out by following the procedure that is mentioned in detail under the section. Though there is a catch in this breather that has been provided under the procedure. ‘

A resolution applicant cannot unilaterally withdraw or modify the resolution plan. It would require successful negotiations between the applicant and the COC for the application of modification to the resolution plan.

Additionally, it is noteworthy to mention here that the COC should be willing to opt for a re-negotiation.

Thus, overall, immense power has been accorded to the COC to draft a well-suited resolution plan, keeping in mind the valuation and interests of the shareholders.

Also, another characteristic of the judgment that needs to be highlighted is that the judgment has provided much need clarity in the process.

Until now there was significant ambiguity in withdrawal and modification rights in terms of the resolution plan it was waiting for NCXLT approval.

But with the recent judgment, more clarity has been provided during the intervening period when a plan is effectively pending its approval from the NCLT.

However, have all the doors been closed for successful withdrawal and modification? It is to be noted that if the latest judgment is to be scrutinized, the apex court has emphatically left one door open.

This door has been left open for the legislature to successfully introduce a mechanism that will effectively permit the withdrawal of resolution plans. However, this will be opted for only when the committee will find or decipher a legitimate reason.

In a series of events to not make the judgment too red-handed, the supreme court has also immensely reflected on the suggestion to provide a 45 days timeline.

The 45 days timeline will be provided to invite various legitimate comments and claims from regulators or authorities.

This will be provided before a resolution plan is approved by NCLT. According to experts, this will emphatically expedite the approval process and plans of resolution plans.

Thus, one can quite rightly state that with clarity and certainty that has been infused into the proceedings and process, faster resolution and efficient decisions are on the table.

The only question remains will the clarity ease the woes of the industry or will it exacerbate the same? It is something only future resolution strategy can answer.

Tags: insolvency resolution plan, corporate insolvency resolution, insolvency resolution, corporate insolvency resolution process, financial hardship, insolvency resolution process, resolution applicants, fast track insolvency resolution process

Jan 03
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gst reforms

GST Could See Major Overhaul; Reducing Tax Slabs, Pruning Exempt List on Table

By Economy, Others No Comments

GST Reforms and Tax Exemption

GST is all set for a major overhaul. The government might be contemplating paying greater attention to major GST reforms of the Goods and Services Tax structure.

A great haul is waiting for the GST as the administration will effectively complete its five years in July next year. This will be the year when the state’s compensation will end. Thus, the government is contemplating restructuring tax slabs and reducing exemptions.

According to the reports, the consumer can witness a new system that may be characterized by three major tax rates that can probably cover most of the items for the current four, i.e., 5%, 12%, 18%, and 28%. This will be emphatically done to simplify the structure and generate profits.

The states’ loss of funds

It is to be noted that a feasible plan is being drawn out for the states that would be facing the fall of revenue that they have gathered all these years for their functioning.

Though, it is to be noted that the center will effectively compensate the state for loss of income due to the strategic implementation of the five-year GST. Thus, one can state that the states’ will be significantly worried about the end of this compensation as the states are concerned about a significant reduction in their revenue.

gst collection

In a recent turn of events, the Federal Finance Minister Nirmala Sitharaman “intentionally or unknowingly” had reduced the effective GST-based tax rate from 15.5% to 11.6% of the initial earnings neutrality due to multiple tax cuts since the launch of the GST in July 2017.

 

The plan to strategically renew the revenues of the states

The mere reason for the revision of the tax slabs that have been set up for review is that both the state and center policymakers want to endorse the slab review to address revenue issues that might materialize after the completion of 5 years.

tax exemptionIn order to compensate for the lost revenue, the suggestions and propositions for the inclusion of the list of items for both goods and services that are currently tax-exempt are being explored. Thus, effectively removing the tax exemption list can heavily increase the GST base. This will help not only to increase revenue but also keep the overall tax rate at a reasonable level.

In order to incorporate a less intricate tax system and to increase the revenue for the states, options for effectively merging the 5% and 12% taxes to create one rate are being explored by the authorities.

In fact, exploration of strategic plans to create slab regimes of 18% and 28% of the merged rates are also on the table for discussion.

GST reforms throughout the years, is the loss of revenue a surprise?

GST, according to the experts has been a landmark tax reform. Though, it has come under fire for its prior overestimation of revenue collection which really didn’t materialize.

But during the pandemic, the country saw a substantial increase in the revenues of the state and center, which had worked well for the government’s functioning during the pandemic. but was this increase in GST collection really a perennial source?

The answer is an emphatic no. though the estimated revenue projections have gone down in recent years, during 2021, pent-up demand had effectively led to the whopping collection of GST. On top of that, commodity prices too had resulted in a record increase in GST collections in recent months.

Therefore, the increase in the GST collection wasn’t really a permanent source of income for the state and thus, a certain loss of the same shouldn’t get the government by surprise.

But indefinitely, the loss of revenue will be an issue that needs to be considered. Another implication of such high GST collection is also that covid-related concerns have subsided, and thus consumption demand is increasing.

gst structureMaking the tax system less intricate

Apart from the four major tax slabs aforementioned, 0.25% and 3% effectively apply to jewelry and precious metals. It is no news that the GST web is a complicated one with many commonly used items exempt from GST.

This creates a complex system that is emphatically prone to classification disputes and leaks. According to the report, the GST does not usually tax nearly 150 goods and over 80 services, which leads to humungous complexity in deciphering which articles are exempt and which are not.

Thus, the strategic rationalization of the GST structure is important and the need of the hour and the government can start with the major haul it is preparing.

As aforementioned, the GST collection in recent months had shown promising results. Thus, it might be a good time to simplify the pricing structure. On another note, rationalization is also needed as multiple exemptions, and rates need to converge to two or three pricing structures.

In totality, it is highly recommended that the focus should not be merely or solely on raising the effective tax rate, but on further expanding the tax base. This should be achieved by keeping taxation moderate.

Furthermore, it is to be noted that from a tax policy perspective, it’s emphatically important to remove barriers which are in the form of restrictions on the application of GST based on packaging size, price, capacity, etc., and input credit billing.

Therefore, GST may actually see a large overhaul which will include a reduction of tax slabs, and pruning of the tax exemption list.

Tags: gst collection, gst structure, tax exemption, gst exemption, gst tax system, gst rate structure, exemption under gst, gst tax exemption, gst tax structure

Jan 03
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google antitrust case

Google Antitrust Case

By Cases, Others No Comments

What is The Google Antitrust Case?

Another lawsuit awaits Google and its characteristics are quite similar to many that have been enacted against it. According to reports, state attorneys general are emphatically again undertaking the task of going after Google.

Google mainly remains in news for majorly two things. Firstly being the biggest user of user’s data and hence attracting unwanted attention from the legislators and secondly due to its burgeoning power as a search engine which can materialize into something quite unhealthy for its competitors.

Amongst many other times, this time the legislators are behind the search engine with an antitrust lawsuit. This time, legislators argue that the company effectively abused its power over app developers. This has been done through its Play Store on Android.

If the history of antitrust lawsuits against Google is to be scrutinized, the latest case marks the fourth antitrust lawsuit against the giant that has been lodged against the company by the U.S. government enforcers in the period of the past year.

antitrust caseThe latest antitrust case against google mainly focuses on the Play Store, which touches the very essence of Google’s business that is becoming more likely like Apple’s. It is to be noted that the Apple App Store has been battling legal challenges.

It has emphatically drawn lawmakers to question whether Apple unfairly charges its developers for payments. Additionally, allegations have been raised that whether it favors its own apps much moreover those of its rivals.

The case- anticompetitive tactics

Various allegations have been made against Google, the gravest of which states that it has emphatically and effectively used anticompetitive tactics.

According to the charge sheet, anti-competitive tactics have been used to extract almost up to 20 percent commission from consumers. It sits to be noted that these are those customers who particularly purchase digital content and subscriptions on their Android phones.

It has been pointed out that the biggest discrepancy lies in the fact that the app developers are forced to use Google’s software for distribution as they do not have much choice.

lawsuits against google

This has been mainly due to the fact that in part Google has emphatically targeted potentially competing for app stores. Meanwhile, if the story of the consumer’s side is to be scrutinized, it has been stated that consumers have fewer or options as Android is the only operating system that is available on many handsets.

According to the statistics, Google Play Store largely distributes over 90% of Android apps in the U.S. Thus, it can be deciphered that no other Android store has even over 5 percent of the market share.

Such a claim can be corroborated by the fact that even the plaintiffs in the case have alleged it. In fact, in a recent turn of events, Samsung, the largest and the top manufacturer of Android phones too was roped in.

Plaintiffs have maintained that Google has arduously tried to “buy off” the Samsung company by enticingly offering many incentives to turn its Galaxy app store into an effective “white label” for its Play Store.

It is to be noted here that similar cases in the past have occurred too. Alleging, Google had also tried and thwarted past efforts by Amazon to effectively and significantly use its own distribution store on Android.

Thus, given all the aforementioned discrepancies that have been analyzed and have been brought to the table, it can be stated that Google’s durable monopoly power specifically in the markets pertaining to in-app purchases and Android app distribution is not quite based on competition on the merits.

This, consequently means that such monopoly has been maintained or rather has been created through artificial technological conditions. In addition to technological conditions, Google has also made effective use of contractual conditions it has invariably imposed on the Android ecosystem.

google lawsuitGoogle’s defense

In Google’s defense, it has been stated by its representatives that they find it quite incongruous that state attorneys general have particularly chosen to file a lawsuit against a system that actually provides more choice and openness than any other players in the market. Thus, the recent lawsuit has been dismissed on the ground of being considered meritless.

But is the latest lawsuit the only one being carried out against google at the moment? No. it is to be noted that Google is fighting the battle on two fronts. The other battleground consists of the lawsuit from the Department of Justice and several states.

In the other lawsuit, it has been alleged that Google has exclusionary contracts to effectively ensure the prominent default status for its apps on various devices. These exclusionary contracts have been drawn from manufacturers that have particularly used its Android mobile operating system.

In fact, it may come as a surprise to many, but another lawsuit, this time by a group of Republican attorneys, has been ongoing that effectively focuses on Google’s advertising technology business.

This has also alleged that Google has entered an anticompetitive agreement with another social media giant namely Facebook.

But what makes the latest lawsuit quite striking for the plaintiffs to go after Google? It is to be noted that great harm is being inflicted on the consumers due to a lack of innovation.

Given the monopoly status that Google is enjoying, it has absolutely no incentive to offer a better service to its customers.

It is no news that healthy competition fosters great innovation that is needed for the welfare of the customers, but in the current scenario, Google is sacrificing both at the altar of the monopoly that it is relishing. It is also mainly due to the fact that no other app stores and developers particularly have channels available to reach the public.

Thus, with the latest lawsuit, will the competition be restored in the domain, and can will the plaintiffs be able to prevent Google from engaging in similar conduct in the future? Perhaps we’ll have to wait and watch.

Tags: antitrust case, google antitrust, lawsuits against google, antitrust lawsuits against google, antitrust lawsuit, antitrust case against google, google lawsuit, google antitrust lawsuit, google antitrust suit

Jan 03
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global minimum tax

Global Minimum Tax: A Blessing or a Curse?

By Economy, Others No Comments

Explaining The Global Minimum Tax System

The global Tax system has been a hot topic for the countries for years, so much so, that the group of Seven nations, namely, France, Italy, Canada, Germany, Japan, the United Kingdom, and the United States, effectively agreed on 2021 to promote a new global tax regime.

It is to be noted that the newer global tax regime would help solve the twin goals of the tax scheme. Firstly, to effectively make large transnational corporations and companies pay more tax while operating in tax havens or where they conduct their economic activities, and secondly to severely mitigate the attractiveness of tax havens for the multinational companies in pursuit to escape paying taxes.

The need for such a tax regime to mitigate the attractiveness of the tax havens is due to the fact that transnationals effectively often try to establish their tax homes in countries with low corporate income tax rates, in order to escape the high tax regimes in their own countries.

Thus, the proposed tax regime will help in transferring transnational companies’ profits from their home countries to the countries in which they make sales.

Additionally, it is to be noted that the newer tax regime will emphatically help set a global minimum tax rate of 15% for companies and multinationals all around the world.

global tax regimeIt is worth noting here that the newer global tax regime is being pushed forward by wealthy economies that have systematically agreed to the global minimum tax proposal. These include the G7 and G20 members that are particularly wary of seeing profits made within their borders going untaxed or escaping the grasp of western tax systems.

To talk about the monetary loss that is accruing to western countries due to operations of multinationals through safe havens stands at a whopping $500 billion, which is effectively lost in revenue each year. This corroborates the fact that the western economies are quite inclined toward restoring their lost profits over the decades.

The full story?

This gives rise to a pertinent question is the problem of a non-existential global tax system only limited to monetary losses for the counties? Perhaps, there is more to the story than what meets the eye.

It is to be noted that of the annual revenue that is lost to tax havens, around $200 billion is lost by less-developed countries as well.

global minimum corporate taxDeveloping countries: a boon or curse?

Given the fact that even underdeveloped countries have much to lose, will these countries join the race to mitigate such discrepancies? Not quite amicably.

This is due to the fact that various tax havens like the Cayman Islands would continue to offer enough incentives and exemptions to effectively and emphatically retain investments in its economy, which are needed to drive its economic growth.

Thus, such practices will be prevalent even if the government will adhere to an international minimum rate. Thus, this will significantly lead to the reduced effect of a minimum tax regime being crafted by the wealthier countries.

But given the incentive of the less developed countries do not to adhere to the global minimum tax, the more important question that arises is whether joining the race makes any sense for less-developed countries?

Though, according to the reports, there is effectively no guarantee that a global minimum rate of 15% would anyway shift investments from current tax havens to less-developed countries. Thus, the developed county’s proposal may partially bear fruits.

Though, the developing economies cannot be chastised or criticized for not adhering to the regime as they face enormous pressures to attract foreign capital for growth. Thus, they effectively cannot be faulted for this desire.

Though, it is to be noted that though finance might seem like the most viable and tantalizing option to grow, more effectively basic infrastructure, sound fiscal policies, and conditions, stable government, etc. play a larger role.

global corporate taxThus, if the larger implication of the global minimum tax policy is to be scrutinized, it can be stated that it will at least contribute to the process of elimination of the temptation for other less-developed countries to systematically join the race to the bottom. In fact, according to the reports, we might even encounter beneficial changes in policies in the current tax havens.

Thus, given the aforementioned arguments, one can effectively argue that the minimum tax regime will bore well for the developed countries in order to attain its lost revenues but for the developing economies, the answer remains more complicated.

With the tantalizing benefits of investments in the economy that are presented to the developing countries, it is quite arduous to make a stance about the feasibility of the global minimum tax regime. With much more to lose, in terms of infrastructure, revenues, labor utility, etc. one can argue that the case for the developing countries is quite delicate and complex.

Thus, in totality, it can be maintained that the minimum tax regime has immense advantages for some well not much for others. Thus, it is a boon for the developed countries but for undeveloped countries, it is too soon to tell.

Tags: global tax regime, global tax, global minimum corporate tax, international tax, global corporate tax, g7 global tax, world tax, minimum global tax, global minimum tax deal, global tax system