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Key considerations of the notified Central Rules under the Labour Codes

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On 8 May 2026, the Ministry of Labour and Employment (“MOLE”) notified the central rules (“Central Rules”) under the 4 (four) labour codes (“Labour Codes”):

  • Code on Wages (Central) Rules, 2026 (“Wage Rules”) under the Code on Wages, 2019 (“Wage Code”),
  • Social Security (Central) Rules, 2026 (“Social Security Rules”) under the Code on Social Security, 2020 (“Social Security Code”),
  • Industrial Relations (Central) Rules, 2026 (“IR Rules”) under the Industrial Relations Code, 2020 (“IR Code”) and
  • Occupational Safety, Health and Working Conditions (Central) Rules, 2026 (“OSH Rules”) under the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”).

 

Notification of the Central Rules precipitates a renewed phase of compliance preparedness for businesses operating across India. In addition to these rules, the MOLE has also issued notifications under the (i) IR Code regarding appointment of and delegation of powers to officers under certain provisions, notification of model standing orders, setting up of re-skilling fund; and (ii) Social Security Code regarding appointment of and delegation of powers to officers under certain provisions, reporting of vacancies to career centres, and framing of medical facilities scheme, amongst others (please refer to details below).

 

Central Rules and their applicability

Several provisions under the Labour Codes have a dependency on the ‘appropriate Government’ to prescribe operational mechanism in terms of implementation and compliance measures. It is important to note that the Central Rules do not apply uniformly to all establishments in India. Applicability depends on whether the Central Government or the relevant State Government is the ‘appropriate Government’ for a particular establishment. In other words, (i) evaluation of the definition of ‘appropriate Government’ under the relevant Labour Code, and (ii) determination of whether the Central Government or the concerned State Government is designated as the ‘appropriate Government’ for that establishment as per such definition, would be relevant in understanding applicability of the Central Rules to a particular business.

For certain sectors—for instance inter alia public sector undertakings, railways, mines, ports, banking and insurance companies, Central Government is defined to be the ‘appropriate Government’. Consequently, the Central Rules are to apply to establishments operating in the above sectors. For other establishments including those operating in certain other sectors—for instance inter alia factories, plantations, newspaper establishments, the relevant State Government is the designated ‘appropriate Government’. For such establishments, rules framed and notified by the appropriate State Government will need to be examined from an implementation and compliance perspective, under the Labour Codes.

 

Key compliances under the Central Rules

Wage Rules under the Wage Code

  • Wage Rules apply to establishments in respect of which the Central Government is the appropriate Government.
  • Where wages are fixed on a time work basis, the minimum rate of wages is to be fixed on a day basis, keeping in mind the criteria which will be specified later by the Central Government by general or special order. The daily rate of wages is to be used as the base for computation of hourly and monthly rates, in the manner prescribed in the Wage Rules.
  • In alignment with the OSH Code, Wage Rules provide that where wage period is regarded on a daily basis, daily working hours will be 8 (eight) hours while the interval of rest will be as prescribed under notifications under the OSH Code. Separately, where wage period is not regarded on a daily basis, daily working hours will be so fixed that weekly working hours do not exceed 48 (forty-eight) hours.
  • Employees are entitled to a weekly rest day, typically Sunday in a 6-day week, or both Saturday and Sunday in a less-than-6-day week. Employees to be provided a substituted rest day where they undertake work on a rest day and accordingly, be paid wages at overtime rate for rest days worked and wages at the rate applicable to previous working day for the substituted rest day.
  • Manner of fixing floor wage has been outlined; Central Government is required to consult with the Central Advisory Board, while taking into account minimum living standard, and such consultation may be circulated to all State Governments for further consultation and comments. Consultation of the Board and comments from State Governments may be considered before fixing the floor wage.
  • Employers to impose a fine or make a deduction for damage or loss only by first issuing a show cause notice. Employees are to be provided with 7 (seven) days to respond, and in the event of no response from the concerned employee, the incidence of penalty must be communicated within 15 (fifteen) days of the deduction.
  • Where total authorised deductions under Wage Code exceed 50 (fifty) percent of wages, excess is to be carried forward and recovered in instalments in successive wage periods, such that recovery on a monthly basis does not exceed 50 (fifty) percent of monthly wages of an employee.
  • In the event of default of minimum bonus by any contractor, principal employer is required to pay minimum bonus to contract labour, upon receipt of written intimation of such default from employees or their registered trade union and confirmation of default thereof.
  • Where an employer intends to make a deduction from wages due to absence from duty, employer should intimate employee—either in writing or electronically—of this intention and invite a response within 7 (seven) days. If, after considering employee’s response a deduction is warranted, employer may proceed. However, if no response is received within 7 (seven) days, employer may proceed with deduction and should inform employee within 15 (fifteen) days from date of such deduction.
  • An accused person seeking to compound an offence may submit an application—electronically or in writing—to the designated gazetted officer. Upon receipt, officer will assess whether the offence is compoundable and, if so, may permit compounding upon payment of 50 (fifty) percent of maximum prescribed fine within 30 (thirty) days. Following payment, a composition certificate is to be issued within 10 (ten) days. If the amount is not paid within stipulated timelines, prosecution will be initiated. Where compounding occurs after prosecution has already commenced, gazetted officer will notify courts in which prosecution is pending and the person against whom the offence has been compounded will get discharged.

 

Social Security Rules under Social Security Code

  • Social Security Rules apply to establishments in respect of which Central Government is the appropriate Government, including establishments having operations in more than one State.
  • Where provisions of Chapter III (Employees’ Provident Fund) or Chapter IV (Employees State Insurance Corporation) of Social Security Code have been made applicable to any establishment by the concerned authority, employer of such establishment may make an application to have such provisions made inapplicable only after completion of 5 (five) years of such coverage. Such application must be made to competent authority in prescribed manner under Social Security Rules, with written consent of majority of employees, and is permissible only if all statutory dues and returns have been fully complied with.
  • Income (from all sources) threshold for dependent parents (including the father‑in‑law and mother‑in‑law of a woman employee) has been limited to INR 14,000 (Indian Rupees Fourteen Thousand) per month, or such other amount as may be notified by Central Government for purposes of being treated as ‘family’ with respect to earnings from the Employees State Insurance Corporation (“ESIC”).
  • For purposes of contribution payable to the ESIC for each wage period, (a) employer’s contribution has been fixed as 3.25 per cent of wages payable to employee; and (b) employee’s contribution is fixed as 0.75 per cent of wages payable to employee, where both contributions are rounded to the next higher rupee.

    Further, with respect to persons with disabilities defined under the Rights of Persons with Disabilities Act, 2016 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, an employer will be exempt from payment of the employer’s share of contribution for a maximum period of 3 (three) years (or such other period as may be notified) from commencement of contribution period, and employer’s share for such period will be reimbursed to the ESIC by Central Government.

  • Funeral expenses payable in respect of a deceased person insured under the ESIC is capped at INR 20,000 (Indian Rupees Twenty Thousand).
  • Entitlement to gratuity for fixed-term employees upon completion of at least 1 (one) year of service has been further clarified by expressly providing that any subsequent period of service exceeding 6 (six) months but less than 1 (one) year will be rounded off to 1 (one) additional completed year for purposes of gratuity computation.
  • Social Security Rules significantly expand and standardise crèche requirements by prescribing detailed infrastructure, staffing of crèche attendant, safety, hygiene, ventilation and operational norms, and regulate common crèche facilities in notified industrial parks and areas, including conditional relaxation of the 1 (one)‑kilometre distance rule by the competent authority. Social Security Rules also introduce a structured framework allowing substitution of crèche facilities with a mandatory crèche allowance through agreement with a recognised negotiating union, council, or majority employees, along with a minimum allowance of INR 500 (Indian Rupees Five Hundred) per month per child. Further, eligibility for crèche allowance is capped at 2 (two) children, except when the number of children exceeds 2 (two) due to second child birth resulting in multiple births. Maternity benefits are to be processed within 48 (forty-eight) hours of receiving proof of delivery.
  • For purposes of depriving a woman of her maternity benefit or medical bonus, or both due to dismissal at any time during her pregnancy, acts constituting gross misconduct have been listed in Social Security Rules—which largely appear to be similar to the previous regime—and which include:
    • wilful destruction of employer’s goods or property,
    • assault at workplace,
    • criminal offences involving moral turpitude,
    • theft, fraud or dishonesty connected with employer’s business or property, and
    • wilful non-observance or interference with safety measures.

      Further, Social Security Rules stipulate that where dismissal of a woman employee during pregnancy or maternity is based on the above prescribed gross misconduct, employer may, by a written order, deprive her of maternity benefit or medical bonus. Any appeal against such dismissal order is to be made in writing to the competent authority, in the manner prescribed.

  • A gig worker or platform worker registered under Social Security Code will cease to be eligible for benefits under applicable social security schemes upon attaining the age of 60 (sixty) years. Eligibility will also cease where the worker is not engaged as a gig or platform worker with any aggregator for a minimum period of 90 (ninety) days, or, where the worker is associated with multiple aggregators, for a minimum period of 120 (one hundred and twenty) days during the immediately preceding financial year.
  • In addition to the above and as a step towards full operationalisation of Social Security Code, some of the other key notifications issued by MOLE on 8 May 2026 under the Social Security Rules relate to:
    • For Chapter IV (Employees State Insurance Corporation): Authorisation of officers to exercise powers of Authorised Officer under the chapter, appointment of officers for various functionalities including to discharge powers of Compounding Officers in relation to establishments covered under the chapter, to exercise powers in relation to providing an opportunity to employers before prosecution for offences under the chapter, and to institute prosecution or accord sanction of prosecution for purposes of offences under the chapter (and other provisions of Social Security Code and the rules, regulations or schemes framed thereunder),
    • For Chapter XIII (Employment Information and Monitoring): Appointment of officers to discharge functions including of the Executive Officer, and sanctioning of prosecution and compounding of offences relating to and under the chapter,
    • Setting the rate of simple interest to 12 (twelve) percent per annum for any contribution or any other amount payable under the Social Security Code,
    • Framing the ‘other beneficiaries and members of their families medical facilities Scheme, 2026’, and
    • Notifying timeline of 90 (ninety) days from the date of notification of the Social Security Rules within which every establishment in public sector and private sector is required to report vacancy to the concerned career centre, and specifying that requirement to report vacancies to career centres is not applicable to vacancies which carry a total remuneration of less than INR 11,000 (Indian Rupees Eleven Thousand) per month.

 

IR Rules under the IR Code

  • IR Rules apply to establishments in respect of which Central Government is the appropriate government. However, in case of contract labour disputes, the ‘appropriate Government’ will be determined by the entity which has control over the concerned industrial establishment where such dispute arises from.
  • Detailed modalities governing constitution, composition, and functioning of works committee, along with procedural framework for grievance redressal through grievance redressal committees, are now prescribed under the IR Rules.
  • IR Rules provide separate model standing orders for industrial establishments in sectors such as mines, manufacturing and service, and prescribe procedures for certification, authentication, and submission of draft standing orders, including joint submissions by similar industrial establishments.
  • IR Rules require employers to issue a notice of change in prescribed form for any modification in service conditions under the third schedule to IR Code. IR Rules requires display of notice prominently on the notice board or main entrance of an establishment, and uploading the same on designated portal, where applicable. It also permits issuance, service, and maintenance of such notices electronically.
  • IR Rules provide for detailed procedures regarding conciliation proceedings, with conciliation officers encouraging parties to come to fair and amicable settlement of dispute and preparing a report with prescribed details in both situations—where settlement is arrived at and if settlement fails.
  • Notices of strikes and lockouts by employees and employers respectively are required to be issued in prescribed formats, with a copy to the Secretary, Ministry of Labour and Employment.
  • For retrenchment of any worker employed in industrial establishment, lay-offs and closure of industrial establishments, there are certain processes that need to be considered under IR Rules, for instance, certain forms are prescribed to effectuate this.
  • For retrenchment of any worker employed in industrial establishment, employer will be required to transfer an amount equivalent to 15 (fifteen) days of last drawn wages of such retrenched worker to a fund, to be used to transfer to each of the retrenched workers to enable them to use such amounts for re-skilling. By way of MOLE’s notification dated 8 May 2026, while Central Government has set up a fund to be called “worker re-skilling fund”, practical implementation and compliance modalities are yet to be seen.
  • IR Rules prescribe detailed procedure for compounding of offences, with serving of notice by officer notified by Central Government to the accused.
  • In addition to the above and as a step towards full operationalisation of IR Code, some of the key notifications issued by MOLE on 8 May 2026 under IR Rules relate to:
    • appointment of officers to exercise functions of appellate authority on certification of standing orders, and appointment of certifying officers and conciliation officers under IR Code,
    • notification of model standing orders (separate for mining, manufacturing and service sectors),
    • appointment of officers for holding inquiries and imposing penalty in certain matters under IR Code, and
    • setting up of fund called the worker re-skilling fund.

 

OSH Rules under the OSH Code

  • OSH Rules apply to establishments in respect of which Central Government is the appropriate government.
  • A single registration requirement is prescribed under the OSH Code for covered establishments. Establishments that have applied for a registration under the OSH Code will be deemed to be registered within 7 (seven) days from the date of submission of a complete application on the Shram Suvidha Portal and will receive an auto-generated certificate of registration.
  • OSH Rules prescribe the format in which appointment letters are required to be issued to all employees; containing specific information such as inter alia type of employment, universal account number and/or insurance number (if available), labour identification number of the establishment, category of skill of employee, broad nature of duties to be performed, maternity benefits available in case of women employee, etc.
  • Maximum working hours for a worker has been limited to 48 (forty-eight) hours in a week. Further, workers are only permitted to undertake 144 (one hundred forty-four) overtime hours in any quarter of a year.
  • OSH Rules prescribe that overtime wages are required to be paid at twice the rate of the workers’ wages at the end of each wage period for any work done beyond (a) 8 (eight) hours in a day, for daily wage workers; and (b) 48 (forty-eight) hours in a week, for all other workers. For calculating overtime wages, fraction of an hour between 15 (fifteen) to 30 (thirty) minutes will be counted as 30 (thirty) minutes, and any time beyond 30 (thirty) minutes will be rounded off and counted as 1 (one) hour.
  • Employers of dock work, building or other construction work will arrange to conduct annual medical examination for employees who have completed 40 (forty) years of age, free of cost.
  • Establishments having 500 (five hundred) or more workers are required to constitute a safety committee consisting equal number of representatives from workers and employers, not exceeding 20 (twenty). Tenure of such safety committee will be for 3 (three) years and an employer is required to take action and implement recommendations of the safety committee within 15 (fifteen) days from the date of receipt of such recommendations.
  • OSH Rules prescribe specific health, safety and working conditions relating to hygiene and cleanliness; ventilation, temperature and humidity; artificial humidification; precaution against dust, noxious gas, fumes and other impurities; potable water; lighting; overcrowding; latrine and urinal accommodation; and treatment of waste and effluents for: (a) factories, (b) mines, (c) building or other construction work, (d) industrial premise for manufacture of beedi or cigar, (e) motor transport undertaking, (f) dock work, and (g) plantation.
  • Similarly, common welfare provisions such as washing facilities; bathing places and locker rooms; canteen; sitting arrangement; first-aid and medical appliances; ambulance room; shelter and rest room; crèche facilities; appointment of welfare officers; and mock drills are prescribed for different categories of workplaces with varying threshold applicability under the OSH Rules.
  • All employers are required to issue wage slips in electronic form to their employees—a requirement similar to what has been prescribed under the Wage Rules.
  • Registers and records are required to be maintained for at least 5 (five) years for purpose of production to inspector-cum-facilitator during inspections.
  • Annual returns are required to be filed electronically with local inspector-cum-facilitator of the jurisdiction on or before the last day of February following the end of each calendar year.
  • OSH Rules prescribe special conditions to be undertaken by establishments for facilitating employment of women at night i.e. after 7 P.M. and before 6 A.M. These conditions include inter alia obtaining written consent from women employees, pickup and drop from the woman employee’s residence, provisions of CCTV surveillance, etc.
  • OSH Rules prescribe conditions for obtaining contractor license, including obtaining a single license for contractors operating in more than one State, or in the whole of India.

 

This blog is authored by Sonakshi Das, Lijin Varughese, Mayank Jain, Devika Sreekumar, and Shreeya Sucharita.

 

GIFT City – Analysis of Year 2025 Legal Updates

Banner featuring two professionals in formal attire with the names Rajul Bohra and Saurabh Sharma displayed on a grey background, promoting GIFT City – Analysis of Year 2025 Legal Updates.

Introduction

The year 2025 marked a pivotal chapter for GIFT IFSC, with the International Financial Services Centres Authority (‘IFSCA’) driving significant regulatory evolution. Through targeted amendments and comprehensive frameworks, IFSCA enhanced operational flexibility, investor protection, and global integration, positioning GIFT IFSC as a premier hub for cross-border finance, attracting fresh capital flows and institutional participation. Key changes included greater flexibility in aircraft and ship leasing to support domestic manufacturing, stricter cybersecurity and governance requirements, and new regulatory frameworks for capital market intermediaries, TechFin entities, ancillary service providers, and Global In-House Centres with streamlined registrations through SWIT. Market infrastructure reforms, the launch of the Foreign Currency Settlement System, and increased flexibility in fund management and ESG frameworks further strengthened transparency, competitiveness, and long-term market development.

These strides underscore 2025’s focus on transparency and competitiveness. Now, we go on to highlight some of the most important changes.

 

A Quick Recap of 2025

Guided by IFSCA’s vision to make GIFT IFSC a global finance leader, significant major updates were introduced across leasing, funds, markets, payments, and services contributing to increased market activity and investment inflows.

 

1.1. Amendment to Aircraft Lease Framework[1]

In February 2025, IFSCA issued a landmark amendment to the Aircraft Leasing Framework, significantly expanding the operating flexibility for IFSC-based aircraft lessors. While the core restriction on acquiring assets from Indian residents for purely domestic operations remains, the amendment introduces key carve-outs, permitting arm’s-length acquisitions, first-time import sale-and-leaseback transactions, and direct purchases from Indian aircraft manufacturers. This marks a shift from a restrictive regime to a more facilitative one, while still preserving regulatory safeguards.

Practically, this change aligns GIFT IFSC’s leasing ecosystem with India’s “Make in India” aerospace agenda. It lowers sourcing costs, improves transaction efficiency, and enhances access to domestic manufacturing, while leveraging IFSC advantages such as tax neutrality, SWIT approvals, and proximity to IBUs. Although implementation challenges remain around arm’s-length verification and timelines, the amendment is expected to drive FDI, strengthen ancillary aviation services, and position GIFT IFSC as a global aircraft leasing hub.

 

1.2. Amendment to the Ship Leasing Framework[2]

In 2025, IFSCA amended the Ship Leasing Framework to address practical inefficiencies faced by IFSC-based lessors under the earlier regime. The original framework, while comprehensive, imposed rigid currency and documentation requirements that limited flexibility, particularly in a volatile global shipping and forex environment. The amendment updates operational norms and relaxes currency-related constraints, allowing invoicing and payments in permitted foreign currencies and enabling the use of SNRR accounts, alongside simplified documentation for ship lease agreements.

These changes significantly improve ease of doing business for both financial and operating leases, aligning GIFT IFSC with global maritime finance practices. For stakeholders, the amendments enhance liquidity management, speed up settlements, and reduce compliance friction, strengthening GIFT IFSC’s position as a competitive maritime leasing hub. While multi-currency compliance will need careful monitoring, the reforms firmly support GIFT IFSC’s ambition to lead in sustainable and globally integrated maritime finance.

 

1.3 Transition to Fund Management Regulations, 2025[3]

In April 2025, IFSCA issued detailed transition guidelines for the Fund Management Regulations, 2025, marking a decisive shift towards a more mature and flexible alternative investment regime in GIFT IFSC. The earlier 2022 framework imposed relatively high entry barriers, including a USD 5 million minimum corpus for VC and Restricted Schemes, short PPM validity periods, limits on FME self-investment, and rigid requirements for open-ended schemes. These constraints often slowed fund launches and capital raising, particularly in uncertain market conditions.

The 2025 framework addresses these challenges by lowering minimum corpus requirements, extending PPM validity, permitting higher self-investment by FMEs with appropriate safeguards, and allowing open-ended schemes to begin operations with a smaller initial corpus. The transition mechanism further minimises disruption by enabling older and even expired PPMs to migrate smoothly under the new rules through SWIT with reduced or waived fees. Together, these measures enhance GIFT IFSC’s competitiveness, support innovation and employment in fund management, and create a balanced regime that promotes growth while maintaining investor protection.

 

1.4 Insertion of Third-Party Fund Management Services[4]

In 2025, IFSCA amended the Fund Management Regulations to allow FMEs in GIFT IFSC to manage third-party funds, expanding their business beyond self-managed schemes. FMEs must obtain IFSCA authorisation, be incorporated under approved structures, and appoint a full-time principal officer for each scheme. They also need to maintain additional net worth requirements to ensure investor protection.

This amendment enhances governance, accountability, and investor confidence while enabling FMEs to broaden their services and create employment opportunities. For GIFT IFSC, it stimulates activity in fund management, attracts clients, and strengthens the overall investment ecosystem, though timely regulatory approvals will be key for smooth implementation.

 

1.5. Capital Market Intermediaries Regulations, 2025[5]

On 17 April 2025, IFSCA notified the Capital Market Intermediaries Regulations, 2025, creating  a comprehensive framework to regulate the burgeoning ecosystem of intermediaries in GIFT IFSC’s capital markets, a quantum leap from ad-hoc circulars to codified governance. The framework defines categories such as Research Entities and ESG Rating/Data Providers, with clear entry criteria including experienced Principal Officers, dedicated Compliance Officers, and minimum net worth requirements, all vetted through SWIT. It mandates ongoing compliance, segregation of research/advisory functions, and alignment with global standards.

This professionalises GIFT IFSC’s capital markets, supports informed trading, legitimises ESG research, and fosters innovation while maintaining stability. The regulations attract top-tier intermediaries, promote FDI, create jobs, and strengthen synergies across funds, broker-dealers, and rating agencies, positioning GIFT as a transparent, globally competitive capital markets hub.

 

1.6 Amendment to Regulatory Framework for Global Access in IFSC

In 2025, IFSCA strengthened the Global Access Framework (GAF) to provide a clear regime for Global Access Providers (GAPs), broker-dealers, and clients accessing international markets via GIFT IFSC. The framework defines key terms, sets authorisation procedures, prescribes ‘fit and proper’ criteria for GAPs, lists allowed client categories and products, and establishes operational obligations, including minimum net worth requirements for GAPs and broker-dealers.

A key amendment in September 2025 (Clause 39) addressed practical challenges in client fund handling by allowing GAPs and Introducing Brokers to open client accounts with IFSC Banking Units or authorised Payment Service Providers. This improves settlement speed, reduces costs by 20–30%, and enhances investor access and protection. The reform promotes seamless cross-border market participation, attracts high-net-worth investors, supports employment in trading and tech services, and integrates with GIFT’s banking and fund ecosystem, reinforcing its position as a global financial hub.

 

1.7 Framework on Stewardship Code[6]

In October 2025, IFSCA introduced the Stewardship Code for FMEs, institutional investors, AIFs, and retail funds in GIFT IFSC to strengthen investor protection, promote responsible oversight of investee companies, and drive sustainable value. Entities are now required to adopt a stewardship policy aligned with seven core principles: sustained engagement, responsible activism, transparent voting, conflict management, collaboration, timely disclosures, and staff training. Policies can follow IFSCA’s model or recognized international standards, with reporting via SWIT and periodic effectiveness reviews.

The framework enhances governance and accountability in GIFT IFSC, attracting long-term institutional investors such as pension and sovereign funds. Improved stewardship is expected to uplift investee company performance, boost investor confidence, support collaborative reforms, and generate employment in advisory and training services. Proportionality measures ensure smaller entities are not overburdened, though clear review metrics will be critical to prevent superficial compliance.

 

1.8 Foreign Currency Settlement System Launched by Hon’ble FM[7]

On 7 October 2025, Finance Minister Nirmala Sitharaman launched the Foreign Currency Settlement System (FCSS) at GIFT IFSC, approved under the Payment and Settlement Systems Act, 2007. Initially for USD transactions, FCSS allows IBUs to settle foreign currency deals locally rather than via slow overseas correspondent banks, reducing settlement times from 36–48 hours. CCIL IFSC Limited operates the system, with technology by IFTAS and Standard Chartered Bank (IFSC) as the first local settlement bank.

FCSS strengthens GIFT IFSC by enabling faster, safer, and more cost-efficient foreign currency settlements. It reduces reliance on overseas banks, lowers transaction costs, supports expansion to other currencies, and enhances integration across GIFT’s financial ecosystem, promoting efficiency and growth in cross-border finance.

 

1.9 IFSCA (Global In-House Centres) Regulations, 2025[8]

In December 2025, IFSCA notified the Global In-House Centres (GICs) Regulations, replacing the 2020 framework with a comprehensive regime for GICs in GIFT IFSC. The regulations define Financial Institution Groups (FIGs), permissible business models, and the SWIT-based registration process, while requiring key personnel to meet ‘fit and proper’ standards and mandating full-time principal and compliance officers in IFSC. GIC services are restricted mainly to non-resident group entities, with India-related revenue capped at 10%, ensuring export-oriented operations and new value creation. IFSCA can inspect, enforce, grant relaxations, and provide clarifications, and existing GICs have 90 days to transition.

These regulations are expected to attract major banks and global firms, enabling faster setup, boosting high-skilled finance and technology jobs, and strengthening GIFT’s banking and fund management ecosystem. Clear governance, compliance, and foreign-currency operational norms enhance oversight, while potential improvements in SWIT renewal processes could further ease doing business. Overall, this positions GIFT IFSC as a hub for global treasury, shared services, and high-value group operations, supporting long-term growth and international competitiveness.

 

Way Forward

As GIFT IFSC moves into its next stage of development, the focus is expected to shift from expanding regulations to ensuring their effective implementation and strengthening market activity. Key areas include leasing, fund management, TechFin, and capital markets, supported by SWIT efficiencies and capacity building within regulated entities. Maintaining high standards of compliance, cybersecurity, and governance will underpin stability and investor confidence, while attracting global capital and improving liquidity in secondary markets. Continuous cooperation with regulators, industry participants, and professional service providers will be critical to ensuring GIFT IFSC remains a transparent, resilient, and globally competitive financial centre.

 

This update is authored by our Partners, Rajul Bohra and Saurabh Sharma.

 

[1] Circular bearing number F. No. 172/IFSCA/Finance Company Regulations/2024-25/02, https://www.ifsca.gov.in/Document/Developments/revised-framework-on-aircraft-lease_new_final04032025100638.pdf

[2] Circular No. F. No. 496/IFSCA/FC/SLF/2025-26/01, https://www.caalley.com/ifsc25/revision-circular-07-04-202507042025081210.pdf

[3] Circular No. F. No. IFSCA-IF-10PR/1/2023-Capital Markets/7, https://www.caalley.com/ifsc24/accredited-investors-in-ifsc25012024021313.pdf

[4] Fund Management Regulations, 2025, https://ifsca.gov.in/CommonDirect/GetFileView?id=d09c93fc98191af1801a5914f31809ee&fileName=85-ifsca-fund-managemnet-regulations-202519022025125910.pdf

[5] International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2025, https://ifsca.gov.in/CommonDirect/GetFileView?id=d09c93fc98191af1801a5914f3190bcd&fileName=ifsca-cmi-regulations-202517042025051646.pdf

[6] Framework on Stewardship Code (FSC), https://ifsca.gov.in/CommonDirect/GetFileView?id=47a297ad49aaae8fa365313a911cc138&fileName=Circular_for_Framework_on_Stewardship_Code_in_IFSC_20251023_0701.pdf

[7] Hon’ble Finance Minister launches the Foreign Currency Settlement System, https://ifsca.gov.in/CommonDirect/GetFileView?id=2a38901cd710ed10d1660d1c301ae08e&fileName=Press_Release_FCSS_IFSCA_20251007_0332.pdf

[8] Global In-House Centres, https://ifsca.gov.in/Common/PreviewPdf?id=38fea9cc5969551d78bf00e670e2eeee&fileName=268967_20260101_0255.pdf

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

Please click here to download the update as PDF.

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.

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