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SHANTI ACT, 2025 | CALIBRATED LIBERALIZATION IN NUCLEAR ENERGY TO SECURE INNOVATION, DECARBONIZATION & DIVERSIFICATION OF ENERGY SOURCES

Promotional banner for the SHANTI Act, 2025 by JSA Advocates & Solicitors, featuring nuclear power plant cooling towers in the background and portraits of partners Amit Kapur, M. Arun Kumar, and Sugandha Somani Gopal.

Intorduction

The newly enacted Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, 2025 (“SHANTI Act” or “Act”) has repealed and replaced the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010 (“Existing Laws”), and has introduced a consolidated legal framework governing the promotion, development and regulation of nuclear energy. The Act seeks to remove barriers which have held back growth in India’s nuclear power generation. The Act seeks to attract domestic and foreign investment; promote R&D and innovation with a proportionate allocation of risk to global suppliers of nuclear equipment and fuel; within an institutional framework which safeguards Indian citizens, secures safety systems, and provides effective enforcement through the specialized mechanism.

The Act removes ambiguities that existed in the past laws regarding potential multifarious jurisdiction over claims and liability regime, now according statutory recognition to Atomic Energy Regulatory Board (“Board”), with nuclear damage claims adjudication vested with the Claims Commissioner and the Nuclear Damages Claims Commission, whose appeals shall lie before the Appellate Tribunal for Electricity. It excludes jurisdiction of civil courts over such matters and gives an overriding effect to the Act over all other laws and instruments.

Interestingly, the ambit of SHANTI Act extends beyond power generation to include the application of nuclear technology in healthcare, food, water and agriculture, with the objective of providing a clearer and more predictable regulatory environment. The Act permits foreign direct investment of up to 49% (Forty Nine Percent) in specified nuclear activities under the automatic route, thereby unshackling the public sector monopoly over this domain.

To achieve India’s target of 100 gigawatts of nuclear power capacity by 2047, the SHANTI Act allows eligible private companies and incorporated joint ventures to apply for licences to construct, own, operate and decommission nuclear power plants and reactors. At the same time, it preserves sovereign control over strategic and safety-sensitive activities, including uranium enrichment, spent fuel management, heavy water production, radioactive substances and radiation-generating equipment.

The key differences between the Existing Laws and the SHANTI Act are outlined below.

 

KEY DIFFERENCES AT A GLANCE

Entry into the Nuclear Sector

Under the Existing Laws, nuclear power generation was effectively restricted to the Union Government and government-controlled entities.

In contrast, Section 3 of the SHANTI Act introduces a comprehensive licensing regime for nuclear facilities and activities. It expressly permits a wide category of persons including Government departments and institutions, government companies, any other company, a joint venture among any of the aforesaid, and any other person specifically permitted by the Union Government by notification, to apply for licenses to build, own, operate or decommission nuclear power plants or reactors and to undertake related activities such as the fabrication of nuclear fuel (comprising conversion, refining and limited enrichment of uranium-235 upto threshold value notified by the Union Government), transportation and storage of nuclear fuel or spent fuel, and the import and export of nuclear fuel or spent fuel, prescribed equipment, and nuclear-related technology or software. Where licensed activities involve potential radiation exposure, a separate safety authorisation is also required.

Companies outside India not allowed

Private companies incorporated outside India are not permitted to operate under the SHANTI Act. Section 2(9) of the SHANTI Act defines “company” by reference to Section 2(20) of the Companies Act, 2013, and expressly excludes companies incorporated outside India. It would appear that foreign investors will have to route their investments through a company incorporated under Indian laws.

Sovereign control over critical nuclear materials

Section 3, most importantly, draws a clear line around strategic nuclear functions, reserving certain activities exclusively for the Union Government or its wholly owned entities. These include uranium enrichment or isotopic separation, spent fuel management including reprocessing and waste handling, and the production and upgrading of heavy water, unless specifically notified otherwise. However, it permits licensed private entities to engage in the fabrication of nuclear fuel, including conversion, refining and enrichment of uranium-235, but only up to a threshold value notified by the Union Government.

Further, while licensed private entities are permitted extensive operational activities in relation to nuclear facilities under Section 3, the provision also ensures continued governmental supervision and control over nuclear materials and safety-critical aspects. Source material and fissile material, whether produced domestically or imported, remain under the surveillance and accounting control of the Union Government; spent fuel is required to be safely stored for the prescribed cooling period before being delivered to Union Government for its subsequent management; and heavy water used in nuclear facilities is required to remain under the supervision of Union Government for purposes of accounting, and must be returned to the Union Government after the intended use.

Section 5 complements this framework by retaining sovereign ownership and control over uranium and thorium at the upstream stage. It mandates that the exploration, mining and decommissioning of mines containing uranium and thorium may be carried out only by the Union Government or its controlled entities, and that all uranium and thorium mined or extracted vest in the Union Government and cannot be sold, transferred or otherwise disposed of without prior approval.

Read together, Sections 3 and 5 reflect a calibrated allocation of rights and responsibilities under the SHANTI Act, designed to facilitate participation while maintaining robust oversight and safeguards.

Exemption for Research and Innovation

Under the Atomic Energy Act 1962, Section 14 required licensing for all activities involving prescribed substances and plants, with no exemption for research activities.

Section 9 of the SHANTI Act allows persons to carry out research, development, design and innovation in matters related to nuclear energy and radiation for peaceful use without a licence, except for activities exclusively reserved for Union Government or having national security implications, provided adequate safety and security is ensured. The relaxation of licensing requirements for non-strategic research is expected to spur greater investment in nuclear R&D by universities, research institutions and private enterprises.

 

Liability of the Operator

Section 6 of the Civil Liability for Nuclear Damage Act, 2010 sets out a two-tier liability framework. Firstly, it caps the maximum liability for each nuclear incident at the rupee equivalent of 300 million  Special Drawing Rights (“SDRs”), with the Union Government empowered to take additional measures where the compensation payable exceeds this amount. Secondly, it fixes operator-specific liability limits directly in the statute, based on broad categories of installations: INR 500 crore for nuclear reactors having a thermal power of 10 (Ten) megawatts or above, INR 300 crore for spent fuel reprocessing plants, and INR 100 crore for research reactors below 10 (Ten) megawatts, other fuel cycle facilities and the transportation of nuclear materials.

Even though Section 13 of the SHANTI Act retains the same overall incident cap of 300 million SDRs, however, it restructures the manner in which the operator liability limits are determined. The Second Schedule of the SHANTI Act sets out differentiated operator liability amounts linked to the thermal capacity of nuclear installations, ranging from INR 100 crore for smaller reactors, certain fuel cycle facilities and transportation activities to INR 3000 crore for large reactors above 3,600 (Three Thousand Six Hundred) megawatts to INR 100 crore. This approach enables a closer alignment between operator liability exposure and the scale and risk profile of the installation.

It is to be noted that SDR are an international reserve asset created by the International Monetary Fund, the value of which is determined and allocated by it to its member countries.

Under the SHANTI Act, the operator shall not be liable in case of nuclear damage caused by nuclear incident due to a grave natural disaster of an exceptional character or an act of armed conflict, hostility, civil war, insurrection or terrorism. The operator will not be liable for damages in “under construction nuclear installation itself and any other nuclear installation including a nuclear installation under construction, on the site where such installation is located, any property on the same site which is used or to be used in connection with any such installation; or the means of transport upon which the nuclear material involved was carried at the time of nuclear incident.”

 

Liability of the Supplier

Under Section 17 of the Civil Liability for Nuclear Damage Act, 2010, the operator was granted a broad statutory right of recourse, including against suppliers where a nuclear incident resulted from defective equipment, materials or sub-standard services. This statutory right operated independently of contractual arrangements, meaning that supplier liability could arise even in the absence of an express contractual provision, and potentially extend beyond the commercial risk allocation agreed between the parties.

Section 16 of the SHANTI Act addresses concerns relating to ambiguity by restricting the operator’s right of recourse to 2 (Two) limited circumstances: (a) in cases where it is expressly provided for in a written contract, or (b) where the nuclear incident results from an individual’s intentional act to cause nuclear damage. In practical terms, this shifts supplier liability back into the contractual domain, where risk is typically managed through negotiated provisions such as liquidated damages clause under which liability for defects or delays is capped at a specified percentage of the contract value, as also nuclear liability insurance. By aligning statutory recourse with contractual risk allocation, the SHANTI Act is set to bring greater predictability to supplier exposure and align India’s nuclear liability framework with international best practice.

 

Liability under Nuclear Liability Fund

Under Section 7 of the Civil Liability for Nuclear Damage Act, 2010, the Union Government was required to establish a Nuclear Liability Fund for the purpose of meeting a part of its liability in specified circumstances, including to cover situations where the liability for nuclear damage exceeded the operator’s liability cap under the said act, or where such liability arose due to events referred to in Section 5(1)(i) and (ii) of the said Act, including grave natural disasters, armed conflict, hostilities or similar extraordinary events. Such Nuclear Liability Fund was earlier established by charging such amount of levy from the operators.

Section 14 of the SHANTI Act, 2025 places the residual liability beyond the Second Schedule on the Union Government, thereby limiting the scope of exposure for operators.

 

Patents for nuclear and radiation technologies

Under Section 20 of the Atomic Energy Act, 1962, patents were prohibited for all inventions relating to atomic energy, with mandatory disclosure to the Union Government, restrictions on filing patent applications outside India, and government ownership of inventions developed in government establishments or under government contracts.

In contrast, Section 38 of the SHANTI Act permits the grant of patents for inventions relating to the peaceful uses of nuclear energy and radiation, while continuing to bar patents for inventions linked to activities reserved for the Union Government or those involving national security or sensitive concerns.

 

Statutory Status of Atomic Energy Regulatory Board

The Atomic Energy Regulatory Board, which previously functioned under Section 27 of the Atomic Energy Act, 1962, will continue under the SHANTI Act, 2025.

Under Section 17 of the Act, the Board is accorded statutory recognition, as it is deemed to be constituted under the SHANTI Act rather than merely by an executive action of the Union Government.

 

Penalties

Under the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010, penalties were imposed directly for contraventions or non-compliance, without a structured statutory investigation framework.

In contrast, the SHANTI Act introduces a preliminary investigation mechanism under Section 29, enabling the Union Government or the Board to investigate complaints, nuclear or radiological events, reviews of statutory returns, or findings arising from inspections conducted under Section 28, before any enforcement action is taken.

Further, while Section 39 of the Civil Liability for Nuclear Damage Act, 2010 provided for imprisonment and/or fines for violations; Section 70 of the SHANTI Act replaces this with a graded monetary penalty regime. Violations under the Act are categorised as severe, major, moderate or minor, with penalties calibrated accordingly and the maximum penalty extending up to INR 1 crore for severe breaches.

 

Dispute Resolution  

Under the Existing Laws, there was no structurally tiered statutory dispute resolution mechanism. Disputes were largely addressed through contractual arrangements, including arbitration, with recourse to courts in accordance with general law.

In contrast, the SHANTI Act introduces a dedicated regulatory and dispute resolution mechanism. Under the SHANTI Act, orders and directions issued by the Board may first be subject to review by the Board, in accordance with the prescribed procedure. Further, licensees or holders of safety authorisation who are aggrieved by any order or decision of the Union Government or the Board may seek redressal before the Atomic Energy Redressal Advisory Council, established under Section 47 of the SHANTI Act.

The appellate structure is further strengthened under Section 51 of the SHANTI Act, which designates the Appellate Tribunal for Electricity, established under Section 110 of the Electricity Act, 2003, as the appellate authority against orders of the Council. Decisions of the Appellate Tribunal for Electricity may thereafter be challenged before the Supreme Court of India, thereby creating a clear, multi-tier statutory dispute resolution framework within the nuclear regulatory regime.

 

CONCLUSION

The SHANTI Act, 2025 represents a decisive shift in India’s nuclear regulatory framework enabling regulated private sector participation while retaining sovereign control over strategic and safety-sensitive activities. It provides a clearer licensing and liability regime, refined operator and supplier liability structures, statutory recognition of the Atomic Energy Regulatory Board, and a graded enforcement and dispute resolution framework, to address long-standing legal and commercial concerns that have limited private and foreign investment in the sector. The Act adopts a risk-based regulatory approach, allowing the Union Government to grant licensing exemptions for low-risk activities where the associated risk is insignificant, while retaining broad powers to grant, suspend or revoke licences and to assume control in national emergencies.

Its focus on research development and innovation with a much clearer and stronger regulatory regime augurs well for the future of Indian nuclear power programme. It should be a welcome framework for serious and credible investors and suppliers, while keeping opportunistic players out.

 

The co-authors are:

Amit Kapur
Partner

M. Arun Kumar
Partner

Sugandha Somani Gopal
Partner

Jaskiran Kaur
Principal Associate

Kopal Kesarwani
Associate

Anjali Dhingra
Associate

 

JSA Analysis | SEBI Board Meeting – December 17, 2025 | Outcome

SEBI logo displayed on the exterior wall of a modern glass office building, partially framed by palm leaves.

The Securities and Exchange Board of India (“SEBI”) in its board meeting held on December 17, 2025, approved significant regulatory reforms across the capital market regime aimed at simplifying compliance, enhancing clarity, and promoting ease of doing business among other things. The approved measures will be implemented through subsequent notifications. Key highlights of the proposed amendments include the following:

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

  • The requirement of lock-in of shares at the time of Initial Public Offer (“IPO”)
    Regulation 17 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“SEBI ICDR”), which mandates a six-month lock-in on pre-issue share capital held by non-promoter shareholders (other than exempt categories), has been amended to account for shares which cannot be locked-in such as shares pledged prior to an IPO. Accordingly, depositories will be permitted to mark such securities as “non-transferable” for the relevant lock-in period while such shares remain pledged. Further, upon invocation or release of the pledge, the shares shall be automatically subjected to lock-in for the remaining period.
  • Requirement of Abridged Prospectus.
    SEBI has approved the introduction of a draft abridged prospectus at the Draft Red Herring Prospectus (“DRHP”) stage, in addition to the requirement of an abridged prospectus at the Red Herring Prospectus (“RHP”) stage. Regulations 34, 131 and 255 along with Part E of Schedule VI of the SEBI ICDR will be rationalised to standardise and simplify disclosures in the abridged prospectus. Consequently, it has also been proposed to dispense with the requirement to prepare a separate offer document summary in the DRHP and RHP, subject to consultation with the Central Government.

 

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

  • Amendment to regulation 39 of SEBI LODR for dispensing with Letter of Confirmation
    Regulation 39 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR”), has been amended to dispense with the requirement of issuing Letters of Confirmation (“LoC”) in respect of investor service requests involving cases where securities certificates are held in physical form, including issuance of duplicate certificates, transmission, and transposition etc. Pursuant to the amendment, subject to due diligence, Registrars and Share Transfer Agents (“RTAs”) or listed entities, shall directly credit the securities to the investor’s demat account.
  • Amendment to Regulation 40 of SEBI LODR for facilitating Transfer of Physical Securities
    According to the Regulation 40 of SEBI LODR, transfer of securities held in physical mode was discontinued with effect from April 01, 2019. SEBI has approved allowing holders of original physical share certificates and the original transfer deeds (executed prior to April 1, 2019) to lodge the securities during a specified window, subject to conditions set by the SEBI and due diligence by RTAs/listed companies. Cases involving disputes or fraud are excluded from such relaxation.
  • Aligning the timeline for transfer of unclaimed amount by an entity having listed non-convertible securities with Companies Act, 2013
    Regulation 61A of the SEBI LODR requires that any interest/dividend/redemption payment on listed non-convertible securities, unclaimed for 30 days shall be transferred to an escrow account within seven days, and unclaimed amounts in the escrow account for seven years shall be transferred to the Investor Education and Protection Fund (“IEPF”)/ Investor Protection and Education Fund (“IPEF”). This regulation did not prescribe maturity of the non-convertible securities as a pre-condition for transferring unclaimed amounts on such securities. Accordingly, SEBI has approved amendments to the SEBI LODR for transferring such payments for listed non-convertible securities to the IEPF/IPEF only once seven years from the date of maturity of such securities.
  • High Value Debt Listed Entities
    SEBI has approved changes to the regulatory framework governing High Value Debt Listed Entities (“HVDLEs”). The proposed amendment includes:

    • The threshold for identification as an HVDLE has been increased from ₹1,000 crore to ₹5,000 crore of outstanding listed non-convertible debt.
    • Regulation 62L (1) has been amended by replacing the term “income” with “turnover” for determining material subsidiaries.
    • Provisions in relation to board of directors and its committees: Prior shareholder approval by special resolution for continuation of a non-executive director beyond 75 years of age should be sought before the director crosses the age of 75 years. Exclusion of time taken for obtaining regulatory or statutory approvals from timeline for acquiring shareholder approval for director appointment. Nominee directors appointed by regulators, debenture trustees, courts or tribunals are exempt from seeking shareholder approval. Vacancies in board committees must be filled within three months. The board recommendations to shareholders must record explicit rationale.
    • Shareholder approval for sale or disposal of assets by a material subsidiary to another subsidiary within the same group has been dispensed with.
    • Entities emerging from the corporate insolvency resolution process are permitted three-month time to fill key managerial personnel vacancies, subject to the presence of at least one full-time key managerial personnel.
    • A framework has been approved for the appointment, re-appointment, removal and disqualification of secretarial auditors.
    • Provisions relating to related party transactions have been harmonised with provisions as applicable to equity-listed entities, while retaining debt-specific safeguards.

 

SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021

SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“NCS Regulations”) have been amended to permit issuers to offer additional interest or a discount in public issues of debt securities to specified investors (retail, senior citizens, women, armed forces personnel and their widows/widowers). Incentives apply only to the initial allottee and do not continue on transfer or transmission.

 

SEBI (Stock Brokers) Regulations, 1992

SEBI approved the replacement of the SEBI (Stock Brokers) Regulations, 1992 (“1992 Regulations”) with the SEBI (Stock Brokers) Regulations, 2025 (“SB Regulations 2025”). The new regulations will consolidate provisions, update key definitions under Regulation 2(1) of the 1992 Regulations, including clearing member, professional clearing member, proprietary trading member, proprietary trading and designated director. Further, the SB Regulations 2025 also permit electronic maintenance of records, provide for joint inspections, remove obsolete provisions, and position stock exchanges as first-line regulators.

 

SEBI (Mutual Funds) Regulations, 1996

SEBI approved the replacement of the SEBI (Mutual Funds) Regulations, 1996 with the SEBI (Mutual Funds) Regulations, 2026 (“MF Regulations 2026”). The revised framework will consolidate provisions on eligibility of mutual fund sponsors, roles and responsibilities of asset management companies and trustees, prudential investment limits, and valuation norms. The total expense ratio (“TER”) framework has been restructured by introducing a base expense ratio (“BER”), which excludes statutory and regulatory levies. Statutory charges such as Securities Transaction Tax, Goods and Services Tax, stamp duty, SEBI fees, and exchange charges are now to be charged on actuals, over and above the BER, with the TER defined as the aggregate of BER, brokerage, and such statutory or regulatory levies. Brokerage limits have been rationalised and delinked from statutory levies. Further, the additional five basis points expense allowance linked to exit loads has been withdrawn.

 

Measures for regulation of activities of Credit Rating Agency(“CRA”)

SEBI has amended the Credit Rating Agencies Regulations, 1999 (“CRA Regulations”) to allow CRAs to rate financial instruments regulated by other financial sector regulators (“FSR”) even without specific rating guidelines. Appropriate safeguards have been put in place which include segregation and labelling of SEBI-regulated instruments from those under other FSR in reports, press releases, websites, and marketing materials, providing upfront disclosures to new clients and notifying existing clients about activities under other FSRs, and clarifying that SEBI investor protection does not apply to such activities. Any net worth requirements imposed by other FSRs are in addition to SEBI’s requirements, and CRAs must maintain separate grievance mechanisms for activities under different regulators.

 

The co-authors are:

Madhurima Mukherjee, Senior Partner, JSA

Madhurima Mukherjee Saha
Partner

Tisa Padhy
Associate

Adnan Danish
Associate

Mahaveer Singh
Company Secretary

 

Decoding India’s New Labour Codes – A Snapshot

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The most significant overhaul of employment laws takes effect from November 21, 2025After years of deliberation, India has consolidated 29 of its central level labour laws into four comprehensive Codes (“Labour Codes”).

 

The Dual Goal

For Employers

Harmonised compliance, reduced administrative burden, enhanced ease of doing business, and greater certainty in industrial relations.

For Employees

Extended coverage for minimum wages, expanded social security (including gig workers), and better safety standards.

 

The Four Pillars of Reform

Code on Wages, 2019: Consolidates laws on wages & bonus

  • Extended Coverage for Minimum Wages: Applicable to all employees across all sectors, removing wage ceilings.
  • Unified ‘Wages’ Definition: A single definition impacting calculations such as inter alia gratuity, provident fund contributions, bonus payments and retrenchment compensation, necessitating assessment of financial impact for employers. Faster Settlements: Full and final payments must be made within two working days of exit.

 

Industrial Relations Code, 2020: Consolidates laws on disputes & unions

  • Increased Flexibility: Threshold for prior government approval for retrenchment/lay-offs raised to 300+ workers (providing significant personnel management flexibility).
  • Fixed-Term Equity: Fixed-term employees get same benefits (wages, social security) as permanent workers on a pro-rata basis.
  • Grievance Mechanisms: Mandatory grievance redressal committees for establishments with 20+ workers.
  • Re-skilling Fund: Introduction of employer-financed fund for retrenched workers.

 

Occupational Safety, Health & Working Conditions Code, 2020: Regulates workplace safety & conditions

  • Broader Applicability: Applies to establishments employing 10+ workers.
  • Streamlined Licensing: Contractors can obtain a single, pan-India license. Threshold raised to 50 workers.
  • Contract Labour Restrictions: Prohibited in core activities (with exceptions for intermittent/outsourced work).
  • New Financial Implications: Employers must provide annual free health check-ups and end-of-year leave encashment upon employee demand.

 

Code on Social Security, 2020: Regulates social security schemes

  • Recognition of the Gig Economy: For the first time, gig and platform workers are brought under the social security ambit, impacting aggregators.
  • Setting up of Social Security Fund: Aggregators are required to set up a fund for their gig workers, with a mandated contribution of 1-2% of annual turnover of the aggregator.
  • Pro-Rata Gratuity: Fixed-term employees are eligible for gratuity even without completing five years of service.
  • Decriminalisation: Replaces imprisonment with higher monetary penalties for several offences.

 

Immediate Next Steps for Employers:

Ensure Substantive Compliance

Any substantive provisions that are clear and do not depend on the rules for further implementation should, be complied with on priority. For e.g: evaluating the existing wage structures for computing inter alia provident fund, gratuity, bonus and others.

Financial Impact

Recalculate statutory contributions in light of the new definition of ‘wages’ to assess the potential financial impact.

Re-examine employment contracts, policies and practices

Revise and fine tune employment contracts and internal policies to ensure alignment with the Labour Codes.

Exit processes should be streamlined to ensure compliance with separation pay-out timelines and other related requirements.

Compliance Audit

Conduct a compliance audit to identify areas where record-keeping, reporting or display requirements will change (e.g: registers, returns, notices). However, rules may need to be awaited for further clarity.

Stakeholder Communication and Training

Develop and execute a structured communication plan for employees, HR, payroll and management teams to create awareness and avoid disruption.

 

The co-authors are:

Preetha Soman
Partner

Aishwarya Maria Manjooran
Senior Associate

Sneha Mohanty
Associate

 

 

Labour Codes Summary | November 2025

Businessman holding holographic icons of people representing a network or team management concept

Please click here to download the blog as pdf.

Key Changes under India’s New Labour Codes (Enforced on November 21, 2025)

As employment, unemployment and allied fields such as conditions of work, factories, trade union, labour welfare, workman compensation, employer’s liability and social security fall in the Concurrent List of the Indian Constitution, both Central Government and State Governments in India can make laws on employment.

The Central Government has consolidated 29 Central labour legislations on wages, industrial relations, social security and occupational safety, welfare and working conditions into four Labour Codes namely, the Code on Wages, 2019 (“Wages Code”); the Code on Social Security, 2020 (“SS Code”); the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”); and the Industrial Relations Code, 2020 (“IR Code”) and enforced them with effect from November 21, 2025. The Central and State-specific rules under the Labour Codes are expected to be enforced in the coming 45 days.

This facilitates implementation by removing extraneous provisions, providing uniform definitions across legislations, reducing overlapping enforcement authorities, reporting and filing requirements, and thereby reduces the overall compliance requirements and costs for employers. Further, it promotes transparency and accountability in the enforcement of labour laws.

The Wages Code amalgamates 4 existing Central labour laws on wages, namely, the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976.

The SS Code amalgamates 9 existing Central labour laws relating to social security, namely, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; the Employees’ State Insurance Act, 1948; the Maternity Benefit Act, 1961; the Building and Other Construction Workers Cess Act, 1996; the Payment of Gratuity Act, 1972; the Employment Exchange (Compulsory Notification of Vacancies) Act, 1959; the Cine Workers Welfare Fund Act, 1981; the Unorganized Workers’ Social Security Act, 2008; and the Employees Compensation Act, 1923.

The OSH Code amalgamates 13 existing Central labour laws on safety, welfare and working conditions, namely, the Factories Act, 1948; the Plantations Labour Act, 1951; the Mines Act, 1952; the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; the Working Journalists (Fixation of Rates of Wages) Act, 1958; the Motor Transport Workers Act, 1961; the Beedi and Cigar Workers (Conditions of Employment) Act, 1966; the Contract Labour (Regulation and Abolition) Act, 1970; the Sales Promotion Employees (Conditions of Service) Act, 1976; the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979; the Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981; the Dock Workers (Safety, Health and Welfare) Act, 1986; and the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

The IR Code amalgamates 3 existing Central labour laws on industrial relations, namely, the Trade Unions Act, 1926; the Industrial Employment (Standing Orders) Act, 1946; and the Industrial Disputes Act, 1947.

In this blog, we have broadly summarized the key changes introduced by the 4 Labour Codes in short bullet points for ease of understanding.

 

The Code on Wages, 2019

  • “Establishment” defined to mean ‘any place where industry, trade, business, manufacture or occupation is carried on’.
  • Code applies to all establishments for purposes of minimum wages, payment of wages and equal remuneration.
  • Code defines both “worker” and “employee” with former being a subset of the latter.
  • “Employees” to include managerial and supervisory employees.
  • Supervisory staff exercising managerial functions or receiving wages up to INR 15,000 per month to qualify as “worker”.
  • “Wages” to be considered as 50% of total monthly wages for purposes of calculation of employee benefits leading to increased employee costs.
  • Central Government to fix Floor Wage.
  • State Governments to fix Minimum Wage at or above Floor Wage.
  • Minimum Wages likely to be fixed for “workers” and not all “employees”.
  • Employees whose Minimum Wage is not fixed may not be entitled to Overtime Wages.
  • State Governments to fix wage ceiling for statutory bonus.
  • Clawback of Joining/ Retention bonuses and Notice Pay likely to be illegal.
  • Code mandates payment of wages within 2 working days from date of dismissal, retrenchment or resignation.
  • Principal Employer to pay Contractor’s fee in advance for timely disbursement of wages to Contract Labour.
  • Failure by Contractor to pay minimum bonus to contract employees would trigger Principal Employer’s liability.
  • Limitation period for filing of claims by employees enhanced to 3 years.
  • Code to have overriding effect over other laws in force or awards, settlements, agreements or service contracts.

 

The Code on Social Security, 2020

  • “Employee” definition widened to cover maximum employees and workers including Contract Labour and distinguish them basis wage ceiling and employments for eligibility to various social security benefits.
  • “Establishment” defined to include a place where any industry, trade or business, manufacture or occupation is carried on, a factory, a motor-transport undertaking, and newspaper establishment.
  • Establishments required to obtain a registration unless already registered under any former Central labour law.
  • Establishments having employees less than prescribed threshold for Employees’ Provident Fund and Employees’ State Insurance coverage given option of voluntary coverage and subsequently opting out of such voluntary coverage.
  • Revised definition of “wages” may result in lesser take-home salary for employees and higher employer contributions towards social security of employees.
  • Formal recognition of non-traditional paid work arrangements with Gig and Platform Workers.
  • Code provides for registration of gig workers, a specific social security fund for them and formulation of social security schemes related to life and disability cover, health and maternity benefits, old age protection, education, housing, provident fund, etc. tailored to specific needs of gig workers.
  • Code stipulates coverage of gig workers and their families under Employees’ State Insurance framework.
  • “Aggregators” (defined as digital intermediaries or marketplaces for buyers or users of services to connect with sellers or service providers and classified into several categories) mandated to contribute towards social security fund for gig workers @ 1-2% of their annual turnover but not exceeding 5% of annual amount paid or payable by them to their gig workers.
  • Qualifying period of 5 years of continuous service for gratuity maintained for regular employees but reduced to 3 years for working journalists.
  • Fixed-term employees also entitled to receive gratuity on a pro-rata basis.
  • Limitation period of 5 years prescribed for recovery of past Employees’ Provident Fund and Employees’ State Insurance Fund dues from employers.

 

The Code on Occupational Safety, Health and Working Conditions, 2020

  • All establishments (except mines, ports and docks) employing 10 or more workers required to be registered.
  • Employers restricted from employing any employee if establishment is unregistered or its registration is cancelled.
  • Applicability threshold for factories revised to comprise manufacturing processes undertaken by up to 20 workers with aid of power and 40 workers without aid of power – smaller manufacturing units likely to be unregulated by factory-specific provisions.
  • Factories given option to obtain a common license for factory, beedi and cigar work and contract worker engagement (or any combination thereof) or a single license for any of them.
  • More workers included within Contract Labour with inclusion of inter-State migrant workers and revision of “wage ceiling” of supervisory workers to INR 18,000 per month under “worker” definition.
  • Applicability threshold for regulating Contract Labour engagement increased from 20 to 50 Contract Labour.
  • No separate Principal Employer registration needed for establishments engaging Contract Labour.
  • Single Contractor Licence de-linked from Principal Employer with 5 years validity possible if prescribed qualifications/ criteria are met else ‘work-specific contractor licence’ renewable as prescribed obtainable.
  • Contractor’s responsibility for provision of welfare facilities, such as canteen, restrooms, drinking water and first aid to Contract Labour engaged in Principal Employer’s establishment now becomes sole responsibility of Principal Employer without recourse to recovery of costs from Contractor.
  • Mandatory for contractors to issue a letter of appointment and an experience certificate to every Contract Labour.
  • Engagement of Contract Labour in core activities of an establishment permitted only in few circumstances.
  • Central Government to have overriding power to regulate general safety and health of persons residing in India during an epidemic, pandemic or disaster.

 

The Industrial Relations Code, 2020

  • “Industry” definition revised to mean any systemic activity between employer and workers for production, supply or distribution of goods or services for satisfying human wants or wishes that are not merely spiritual or religious, irrespective of whether activity is pursued with a profit motive or has capital investment.
  • Institutions run by organizations engaged in charitable, social or philanthropic service and sovereign activities of the government and domestic service specifically excluded from “Industry” definition with power to Central Government to exclude any other activity.
  • Supervisory employees earning wages up to INR 18,000 per month brought within “worker” definition and thus made eligible for, amongst others, receipt of retrenchment compensation.
  • Grievance Redressal Committee (GRC) to comprise of maximum 10 members instead of 6 with adequate representation of women workers.
  • Limitation period of 1 year prescribed for presenting grievances to GRC.
  • A grievance that remains unresolved by GRC and GRC’s decisions made subject to conciliation proceedings.
  • ‘Industrial Establishment or Undertaking’ defined to mean an establishment where an industry is carried on.
  • Applicability threshold for Certified Standing Orders (CSOs) increased from 100 to 300 or more workers thereby removing CSO requirement for new smaller industrial establishments – industrial establishments having CSOs need to continue with CSOs provided they are not inconsistent with Code.
  • Unless a specific or conditional exemption is granted, Information Technology (IT)/ Information Technology-enabled Services (ITeS) units would need to have CSOs.
  • Fixed-term workers of establishments that need to have CSOs become eligible to fixed-term worker benefits, including gratuity, if they render service for 1 year.
  • Definition of “Strike” expanded to include concerted or mass casual leave by 50% or more workers on a given day.
  • Workers of all industrial establishments required to give 60 days’ advance notice of strike and prohibited from proceeding on strike in first 14 days of such notice. Similar requirements prescribed for employers in relation to lock-outs. The intent is to deter workers and employers from indulging in arbitrary strikes and lock-outs.
  • ‘Negotiating Union/ Council’ to be recognized as ‘Sole Negotiating Body’ for negotiations with employer of industrial establishment on prescribed matters.
  • A registered trade union that is the only trade union in an establishment or has a membership of minimum 51% workers needs to be recognized as ‘Sole Negotiating Body’ of such establishment.
  • In case of multiple trade unions without a single trade union commanding majority, a ‘Negotiating Council’ needs to be constituted by representatives of all major trade unions having at least 20% workers as members to function as ‘Sole Negotiating Body’.
  • To protect interest of workers, a time limit of 90 days’ is introduced for completion of investigation/ inquiry into misconduct by a worker that involves his suspension.
  • Employers need to contribute 15 days’ last drawn wages of each retrenched worker to Worker Re-skilling Fund as an added cost towards retrenched workers.
  • Retrenched workers entitled to receive an amount equivalent to 15 days of their last drawn wages from the Worker Re-skilling Fund within 45 days of retrenchment.

 

As an immediate step, all employers need to modify their existing employment agreements to align them with the new legal requirements. Contractors need to issue appointment letters and experience certificates to their contract employees. Businesses in the services sector need to have CSOs in place and modify all their existing contracts and agreements accordingly or obtain an exemption from the CSO requirement. Managerial employees at senior levels who are currently exempt under some of the existing laws need to be covered under the Labour Codes. Restructuring of employee compensation needs to be undertaken at all levels and the way various employee benefits are computed needs to change. Apart from all this, due to the new operational compliances, new licenses/registrations may be needed, GRC may need to be constituted/ reconstituted, additional occupational health, safety and other welfare measures may need to be undertaken, and almost all workplace policies may need to be modified.

The enforcement of the 4 Labour Codes signals a business-friendly ecosystem in India which will aid in achieving a win-win for corporates and their workforce, boost investors’ confidence and not only attract new foreign players to India but also encourage existing players to expand their Indian operations. Balancing interests of employers and workers will go a long way in enhancing workforce participation as India moves towards achieving its goal of Viksit Bharat 2047.

 

The co-authors for this blog are:

Minu Dwivedi
Partner

Prashaant Malaviya
Associate

Ritwik Ghosh
Junior Associate

Shruti Rana
Intern

 

JSA Blog | Shifting Gears: Merger of Insurance Companies

Current Regulatory Framework

The Insurance Act, 1938 (Insurance Act) permits an amalgamation of or transfer of insurance business between two insurance companies of the same class in accordance with a scheme prepared under applicable law and approved by the Insurance Regulatory and Development Authority of India (IRDAI).

Currently, the Insurance Act prohibits a merger of or transfer of insurance business of an insurance company with a non-insurance company. This restriction was much debated in 2015 during the proposed merger of HDFC Life and Max Life. The said transaction involved an intermittent step merger of Max Life (an insurance company) with its listed holding company Max Financial Services (a non-insurance company), and thereafter a merger of the combined entity with HDFC Life. After much debate, the transaction was rejected by the IRDAI on the technicality that the Insurance Act permits a merger between two insurance companies of the same class. Even though the merger of Max Life (an insurance company) with Max Financial Services (a non-insurance company) was an intermittent step, and the ultimate merged entity HDFC Life would have been an insurance company, the transaction was hit by an embargo under the Insurance Act.

Interestingly, the Chennai bench of the National Company Law Appellate Tribunal in the matter of Insurance Regulatory and Development Authority of India vs. Shriram General Insurance Company Limited1, held that Section 35 of the Insurance Act pertains to merger of or transfer of insurance business between insurance companies, and a merger of an insurance company and a non-insurance company does not fall within the contours of Section 35 of the Insurance Act. The appellate tribunal negated the argument of the IRDAI that Section 35 does not expressly permit a merger of a non-insurance company and an insurance company.

 

Road to Clarity: Proposed Amendments

The Government of India has proposed to overhaul the existing legislative framework, and one such proposal is to permit a merger of or transfer of insurance business from an insurance company to a non-insurance company. If implemented, it will settle the debate and set a clear legislative framework for merger of or transfer of business of an insurance company to a non-insurance company and vice versa. The proposed amendment will also set the path for innovative structures in the market, where exits could be provided to investors investing in promoters of insurance companies. Additionally, non-insurance companies could obtain an insurance license without going through the rigours of a fresh license. Since it is also proposed that insurance companies can undertake businesses other than insurance business, non-insurance portfolios could be acquired by insurance companies by undertaking merger as well as transfer of a business undertaking.

 

Simplification of the Exiting Regulatory Framework

The process prescribed for a merger of or transfer of business of an insurance company under the Insurance Act, read with the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Indian Insurance Companies) Regulations, 2024 (Registration Regulations), is a three-step process. It is prescribed that transacting insurers inter-alia file a notice of intention notifying the IRDAI of the transaction followed by filing an application for seeking an ‘in principle’ approval from the IRDAI. Upon receiving an ‘in principle’ approval, the transacting insurers can file an application to other regulatory authorities including the National Company Law Tribunal, Reserve Bank of India, Securities Exchange Board of India, as applicable. The transaction is further subject to a final approval of the IRDAI after approval(s) from other regulatory authority(ies) is obtained by the transacting insurers. The aforesaid process is cumbersome and does not permit all regulatory authorities to be approached simultaneously. It is recommended that the process of merger of or transfer of insurance business between two insurance companies also be simplified such that there is a single window clearance from the IRDAI. Further, a process of merger or transfer of insurance business between an insurance company and a non-insurance company will also have to be proposed as part of the legislative framework.

 

Conclusion

The merger of insurance companies with non-insurance companies in India will represent a significant shift in the regulatory landscape, fostering greater innovation and ease of doing business. Such mergers could create synergistic benefits and form strategic alliances that could redefine the scope and scale of insurance services, enhancing value for both businesses and consumers.

***

By: Sidharrth Shankar, Partner & Co-Chair Corporate Practice and Shivangi Sharma Talwar, Partner.

 

Setting the stage for Labour Codes implementation

The Government is serious about enforcement of the Labour Codes. It has meticulously planned to kickstart their implementation process soon. This is reflected in its overall strategy to take up Labour Codes implementation plan with rigour in the forthcoming budget to be announced on 1st February 2025. To make this happen, it has bolstered its efforts in getting Delhi and West Bengal to issue their draft rules by 31st March 2025.

The Wages Code and the Social Security Code will be the first two Labour Codes in the series of four Codes to be enforced. This will ensure that the Labour Codes in general and the Wages and the Social Security Codes in particular gain nationwide acceptance.

These two Codes are intended to be enforced in three phases. Large firms (500 employees and above) may take the lead on mandatory statutory compliances in the first year of the rollout followed by mid-size firms (100-500 employees) in the second year and small organisations (100 employees or less) in the third year. Enforcing two Labour Codes instead of all the four Labour Codes together will lessen the overall compliance burden that primarily rests on the employers. Selecting the Wages and the Social Security Codes to be the first two Codes to be implemented will be a game changer. These two Codes largely benefit the workforce including contingent, gig and platform workers. Hence, both the trade unions and employees are likely to extend cooperation and support their employers in implementation of the Labour Codes. This will test the waters and pave the way for modernizing the Indian labour law regime to suit the modern workplace.

Making compliance of these two Labour Codes mandatory in the first phase for the large corporates will not only lessen the regulatory burden of MSMEs and mid to small-sized organisations but lay the essential groundwork for the remaining organisations to follow suit. Additionally, the large corporates will not only be well-equipped to initiate the implementation process but will help in identifying and removing the potential roadblocks sooner.

The understaffing issue, that currently plagues the efficiency of some of the labour departments, will not adversely impact the enforcement process because the authorities will only need to focus on specific category of employers. These employers will essentially be the GCCs, multinational companies and Indian conglomerates who prioritize corporate governance. Further, proposed shift in the enforcement authority’s role from Labour Inspector to Inspector-cum-Facilitator would fast-track implementation of the new provisions, as they would need to provide compliance guidance to defaulting employers and an opportunity to comply instead of prosecuting them in the first instance.

Such labour law reforms will signal a business-friendly ecosystem in India and aid in achieving a win-win for corporates and their workforce. This will in turn act as a catalyst to boost investor confidence and not only attract new foreign players to India but also encourage existing players to expand their Indian operations. Hence, balancing interests of employers and workers is need of the hour and would go a long way in enhancing workforce participation as India moves towards its goal of becoming a USD 5 trillion economy.

***

By: Minu Dwivedi – Partner, Prashaant Malaviya and Purbasha Panda – Associates

Mint BFSI Summit 2025 IPO Surge: Guardrails for Investors

The 2025 BFSI Summit brought together industry leaders, legal experts, financial experts, and regulatory specialists to dissect the unprecedented surge in public offerings. While multiple perspectives were shared within the panel discussing “IPO Surge: Guarvdrails for Investors”, this blog highlights the detailed insights of JSA Partner and Finance Co-Chair, Madhurima Mukherjee who offered a legal and regulatory lens to the conversation.

The key takeaways include her answers to the moderator’s questions, as follows:

The IPO Boom- What Does it Mean for Investors?

India’s IPO landscape has seen record-breaking activity over the past year, signalling robust economic growth and increased market participation. With more companies choosing to go public, the market is becoming denser and more competitive. However, this surge raises a critical question: are adequate guardrails in place to protect investors in this bullish market?

Madhurima emphasized that while the IPO boom is a positive indicator of economic health, it also demands more robust protections. As the market expands, investors need clarity, transparency, and safeguards to navigate this rapidly evolving space.

How is the Industry Balancing Capital Readiness with Regulatory Vigilance?

The need for capital has accelerated reforms within regulatory bodies like SEBI, NSE, and BSE. By integrating AI and streamlining processes, they’ve enhanced ease of doing business, contributing to the IPO surge.

However, while the clearance process for IPOs has become more efficient, Madhurima noted that the journey to prepare a company for an IPO is now more challenging. Increased regulatory vigilance has made the preparatory phase longer and more complex. This heightened scrutiny ensures that only well-prepared companies enter the market, ultimately protecting investors and fostering greater transparency.

Is SEBI Being Overprotective?

One of the questions brought up the topic of whether SEBI’s regulatory framework is overly cautious and seen as overprotective. It was argued that, given the market’s rapid growth and complexity, SEBI’s vigilance is necessary.

From preventing scandals to mitigating volatility, tighter regulations serve as
essential guardrails for a fast-evolving market. While some might see this as overprotection, Madhurima stressed that these measures are vital for maintaining investor confidence and market stability in the long term.

The IPO Process – Faster or Just More Transparent?

While SEBI has expedited its clearance timelines to reduce backlogs, the overall IPO preparation process has not become faster.

Madhurima explained that companies must meet stringent disclosure norms, tick off complex regulatory checklists, and ensure robust compliance before their IPO documents are approved. While this extended timeline may seem like a roadblock, it’s a necessary trade-off for greater transparency, reduced risks, and enhanced investor protection.

Stay tuned for the full summit recording and catch all the insights from the panel.

All information included in this publication has been compiled from sources we believe are credible and reliable and is provided on an ‘as is’ basis, without any independent verification or warranty, express or implied as to the accuracy or completeness of any such information. JSA shall not be liable for any losses incurred by any person from any use of this publication or its contents. This publication does not constitute legal or any other form of advice from JSA. Should you have any queries in relation to the alert or on other areas of law, please feel free to contact us using the following link https://www.jsalaw.com/contact-us/

To read further details, click here or refer to the below document.

 

*In case the document is not visible on the device you are using, please click the link above.

 

Reforms to Rights Issues: A Major Highlight in SEBI’s September 2024 Board Meeting

SEBI logo displayed on the exterior wall of a modern glass office building, partially framed by palm leaves.

In its September 30th, 2024, board meeting, SEBI introduced a major reform by reducing the timeline for rights issues from the existing average of 317 days to 23 days. This change is expected to significantly expedite the capital-raising process for companies, making it faster and more efficient for both issuers and investors.

Rights issues, where existing shareholders are given the right to buy additional shares at a discount, have long been seen as a favourable means of raising funds. However, the existing average timeline is comparatively lengthy, which may be a potential deterrent for companies, as they could be exposed to market volatility and investor uncertainty. The reduction brings various positives and highlights growing reforms in the market.

The Importance of the Reform

This reduction in the rights issue timeline is especially pertinent in today’s fast-growing markets, where the need for liquidity and quick access to capital is critical. Shorter timelines reduce the window for market fluctuations, thereby reducing chances of negative impact on share prices or investor sentiment. Companies, especially those needing immediate funds due to market opportunities or financial constraints, can now complete the fundraising process within a much shorter timeframe, allowing them to respond to market conditions more dynamically, and allow existing shareholders to participate in he continued growth of the issuer.

From an operational perspective, this shift also reduces the administrative burden associated with prolonged fundraising periods. Companies can now streamline their capital-raising process without the risk of their share prices being negatively affected by extended periods.

Implications for Issuers

For companies, the shortened timeline offers a great opportunity to raise funds more quickly, which can be crucial in times of economic instability or rapid market changes. Many companies may find this reform especially beneficial when looking for fast-tracked funding for business expansions, acquisitions, or debt reduction. The reduced timeline also mitigates the risk that prolonged processes might lead to a dilution of stock value or decreased investor confidence.

Moreover, this new framework could make rights issues a more attractive option compared to alternative fundraising methods, such as public offerings or taking on additional debt. Public offerings often involve extensive regulatory compliance, and borrowing can weigh down a company with additional liabilities. In contrast, rights issues, especially under the new timeline, offer a quicker and less cumbersome method of securing capital while keeping shareholder control largely intact.

Benefits for Investors

From an investor’s perspective, the quicker rights issue process reduces the uncertainty involved. Under the existing timeline, investors were often left waiting for extended periods, during which market dynamics could shift unfavourably. Now, with the shortened timeline, investors can make quicker decisions regarding their participation, reducing the risks associated with prolonged market exposure.

The new framework also allows investors to respond more efficiently to a company’s capital-raising needs, encouraging more active participation. Investors may be more likely to take up rights issues now, knowing that the process is quicker.

Boosting Confidence in the Capital Markets

This change is not just about improving efficiency; it’s also about restoring and boosting confidence in the Indian capital markets. Rights issues are a key indicator of market health, and a faster, more streamlined process indicates a more robust, dynamic market environment.

By reducing the timeline, SEBI is also aligning India’s rights issue processes more closely with global standards, making the Indian capital markets more attractive to both domestic and international investors.

Conclusion

SEBI’s decision to reduce the timeline for rights issues is a transformative step towards creating a more efficient and responsive capital-raising environment in India. For issuers, it provides a faster way to secure necessary funds, and for investors, it reduces the uncertainty tied to prolonged processes. This reform reinforces the use of rights issues as a preferred method for raising capital and could serve as a cornerstone for further regulatory developments aimed at modernising India’s capital markets and aligning it to more mature global standards.

SEBI Chairperson Outlines Key Initiatives to Boost and Expedite Capital Formation in India

SEBI logo displayed on the exterior wall of a modern glass office building, partially framed by palm leaves.

In a speech delivered on Friday 2nd August, SEBI Chairperson Madhabi Puri Buch highlighted the regulator’s ongoing efforts to streamline the capital formation process in India, emphasising the importance of efficient fundraising for the growth of the economy.

India has emerged as the fastest-growing market for capital raising, though the overall size of capital raised still lags behind advanced economies. SEBI is taking several steps to facilitate and expedite the capital-raising process, with a focus on simplifying the procedures and reducing timelines for companies, including an AI backed streamlining process for offer documents.

The initiatives discussed involved the following:

 

New ECM Product and Performance Appraisal Agency 

SEBI has introduced a new Equity Capital Market (ECM) product that combines the features of rights issues and preferential allotments. This product is expected to significantly reduce the timelines for capital raising, and will be available to already listed companies without requiring SEBI’s review process. The compulsory appointment of merchant bankers in this process will also be waived.

Traditionally, a rights issue allows current shareholders to purchase additional shares, while a preferential allotment involves issuing shares or convertible securities to a select group of investors.

The Chairperson explained that under the new framework, if a company receives board approval for a rights issue, it will also have the flexibility to allocate shares preferentially to new investors if a portion remains unsubscribed. This aims to make fundraising more flexible and responsive to market conditions, providing companies with a more efficient pathway to secure capital. This will likely be under the framework provided under S. 62(1)(c) of the Companies Act, 2013.

Additionally, SEBI is setting up a framework for registered performance appraisal agencies to provide investors with simplified assessments of various capital market products. This agency will enable investors to compare products and verify claims of performance made by various intermediaries.

Furthermore, the Chairperson highlighted SEBI’s existing supervisory technology (sup-tech) used in document review and inspection activities. There is also a greater focus on implementing regulatory technology (reg-tech) to streamline compliance processes. SEBI envisions reg-tech enabling companies to fulfill regulatory obligations seamlessly, without disrupting their business operations.

 

Streamlining the Approval Process

Addressing the growing demand for market access, the Chairperson noted that while the number of documents requiring clearance has increased, this reflects a healthy trend of more companies seeking to enter the capital markets.

SEBI is focusing on the efficiency of the approval process, particularly in terms of the time taken to clear draft offer documents (Draft Red Herring Prospectus or DRHP). According to current SEBI data, only eight draft offer documents have been pending for more than three months, which is largely due to pending regulatory approvals or significant non-compliance issues.

To expedite the approval process, SEBI has adopted a data-driven approach and is returning documents that fail to meet compliance standards. The return of documents will not be on frivolous grounds; only serious issues such as inconsistencies in reported figures, vague objects for use of IPO funds, or incomplete disclosures will warrant a return. This approach aims to prioritise compliant companies and reduce the backlog of pending approvals.

 

Introducing AI to Simplify Public Offer Documents 

In a move towards technological innovation, SEBI is working on implementing an AI tool for processing offer documents. This tool is expected to significantly reduce the time taken for SEBI’s review of draft offer documents, enhancing the overall efficiency of the capital raising process.

This process said to be “Demystifying the Offer Document”, involves a templated document. Possibly in a tabular or ‘fill in the blanks’ format, it is designed to simplify the disclosure process for companies, requiring them to fill in relevant details while addressing specific complexities or unique aspects in a separate section.

 

Key Performance Indicators (KPIs) and ESG/BRSR Norms

In her speech, the Chairperson also discussed SEBI’s efforts to enhance corporate governance standards.

SEBI is consulting with industry bodies such as ASSOCHAM and FICCI regarding the disclosure of Key Performance Indicators (KPIs). They have outlined its expectations for the KPIs to be disclosed, and the industry’s feedback is awaited.

Additionally, SEBI is planning to strengthen Environmental, and Social Governance (ESG) and Business Responsibility and Sustainability Reporting (BRSR) norms, reflecting a commitment to sustainable and responsible investing.

 

Conclusion

The SEBI Chairperson’s speech highlights the regulator’s aim to introduce proactive, technologically-driven approach to facilitating capital formation in India, ensuring that the capital markets remain transparent, and accessible to a broader range of companies and investors.

 

This blog is authored by Partners – Madhurima Mukherjee Saha and Arka Mookerjee.

Are the Labour Codes Future Ready?

The 4 Labour Codes on wages, industrial relations, social security and occupational safety, welfare and working conditions have been passed in 2019 – 2020 but are pending enforcement. While a few States are yet to frame their draft State-specific rules under one or more Labour Code, the Central Government has already issued the draft Central rules under all the 4 Labour Codes.

The enforcement of the Labour Codes has become essential to adapt the existing standards to the modern workforce, the changing business landscape and evolving focus on legal compliance. If the current ruling party wins the Lok Sabha elections this year, it has plans to enforce the new Labour Codes from 1st April 2025 to sync with the business cycles of enterprises. This would become clearer after the General Elections in June 2024.

With only 10 months remaining in this fiscal year, clarifications are needed on various aspects such as salary thresholds for applicability of the social security laws proposed to be repealed by the Labour Codes; overtime and minimum wage exemptions for white-collar employees performing non-supervisory and/or non-managerial roles; treatment of highly compensated employees or professionals including those designated as consultants; permissible clawbacks; exclusion of stock option plans from the new statutory definition of “wages”; fitness for purpose of the Labour Codes to contemporary, dynamic and flexible work arrangements (including gig and platform work); and issues concerning moonlighting, gender equality, to name a few.

These clarifications will close the loopholes and pave the path for streamlining implementation of the Labour Codes in letter and spirit and aid India Inc. to prepare for the regulatory challenges that lie ahead.

This blog is authored by Partner – Minu Dwivedi and Of-Counsel – Shreya Chowdhury.

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