Mansukhlal Hiralal & Company

Purvi Asher – Partner -MHCO India’s startup ecosystem has matured rapidly over the last decade. Founders are building businesses across artificial intelligence, ecommerce, fintech, health technology, logistics, renewable energy, and digital services with ambitions extending beyond domestic markets. Yet while startup formation continues to increase, long term survival remains uncertain. Many ventures fail within early growth phases despite promising products and strong market opportunities. Conversations surrounding startup failure frequently focus upon inadequate funding, weak product market fit, or competitive pressure. Such factors certainly influence outcomes. However, an overlooked issue often exists beneath visible business challenges. Early business structuring. Decisions made during formation stages involving ownership models, governance systems, incorporation methods, contractual frameworks, intellectual property allocation, and compliance planning frequently shape whether startups remain sustainable over time. Business structuring should therefore be understood as more than procedural formality. Increasingly, it functions as a survival mechanism. Startup Stability Depends Upon Systems Rather Than Ideas Alone Innovative ideas may attract investors and customers, yet sustainability usually depends upon internal systems. Startups often experience pressure once operations expand beyond small founding teams. New employees arrive. Investors seek transparency. Clients require contractual certainty. Regulators impose obligations. Businesses without organised frameworks may struggle responding to such complexity. Long term survival frequently depends upon whether operational foundations evolve alongside growth. Businesses built with stronger systems generally absorb uncertainty more effectively. Founder Disputes Commonly Begin During Informal Stages Several startups originate through friendships, shared ambitions, or professional partnerships. During early stages, founders often avoid detailed discussions regarding equity, authority, voting rights, or exit mechanisms. Optimism replaces documentation. Problems emerge when businesses gain commercial value. Questions arise concerning ownership percentages, strategic control, and future rewards. Formal agreements addressing founders’ roles, vesting structures, dispute resolution processes, and shareholder rights help reduce ambiguity. Startups maintaining internal clarity frequently preserve continuity during expansion. Equity Allocation Influences Future Organisational Health Poorly structured equity arrangements may create long term instability. Founders contributing unevenly over time may continue holding disproportionate ownership. Early team members occasionally receive informal promises without legal recognition. Such situations often produce tension during fundraising or scaling phases. Organised equity structures support transparency and fairness. Sustainable businesses usually establish ownership expectations before disputes arise. Governance Culture Begins Earlier Than Most Entrepreneurs Expect Governance is often associated with large corporations. In practice, governance habits begin during startup formation. Decision making procedures, financial approvals, reporting standards, and accountability systems shape organisational culture from inception. Businesses dependent solely upon founder personalities may encounter operational disruption during periods of growth. Structured governance encourages continuity beyond individuals. Long term resilience often reflects procedural discipline established early. Compliance Neglect May Become a Hidden Threat Regulatory issues rarely appear immediately. Startups occasionally postpone compliance responsibilities while prioritising growth. Tax obligations, corporate filings, contractual requirements, labour considerations, and sector specific regulations may receive limited attention. Problems accumulate gradually. Consequences often surface during investment rounds, acquisitions, audits, or disputes. Businesses integrating compliance awareness into early operations generally avoid costly corrective measures. Preventive legal planning supports stability. Financial Separation Protects Business Continuity Founders frequently finance operations through personal resources during initial stages. Without organised systems, personal and business finances become intertwined. Such arrangements may appear manageable temporarily. Growth increases complexity. Financial forecasting, accounting discipline, and risk assessment become difficult where boundaries remain unclear. Structured businesses often maintain stronger financial visibility. Survival frequently depends upon informed decision making supported by reliable records. Intellectual Property Ownership Influences Enterprise Value Modern startups derive considerable value from intangible assets including software, trademarks, proprietary processes, designs, and content systems. Ownership ambiguity surrounding such assets creates vulnerability. Questions involving creators’ rights or assignment mechanisms occasionally emerge during fundraising and acquisitions. Businesses organising intellectual property allocation early often preserve stronger control over enterprise value. Protection of intangible assets increasingly contributes to long term sustainability. Hiring Growth Requires Organised Foundations Businesses intending to scale eventually require teams. Recruitment introduces employment agreements, confidentiality obligations, compensation frameworks, and operational policies. Informal businesses may struggle maintaining consistency during expansion. Structured organisations generally manage workforce growth more effectively. Employees often prefer environments demonstrating procedural clarity and long-term stability. Team retention influences continuity. Continuity influences survival. External Crises Often Expose Structural Weakness Economic downturns, funding shortages, legal disputes, or sudden market changes frequently test startups. Businesses with documented processes and defined responsibilities tend to respond more effectively because internal systems support decision making during uncertainty. Startups lacking structure may experience confusion precisely when stability becomes essential. Organisational preparedness often determines resilience under pressure. Investors Examine Organisational Maturity Alongside Potential Investment decisions increasingly involve detailed legal scrutiny. Investors review ownership structures, governance practices, compliance histories, and contractual arrangements before deploying capital. Operational maturity influences confidence. Startups with organised foundations frequently navigate due diligence more efficiently. Early structuring therefore affects access to future capital. Capital access may influence long term survival. Strategic Partnerships Depend Upon Legal Readiness Partnerships with vendors, distributors, technology providers, and institutional clients often require contractual certainty. Counterparties commonly evaluate legal identity and organisational reliability before engagement. Businesses lacking formal structures may appear less prepared despite possessing innovative products. Organised foundations strengthen commercial credibility. Opportunities occasionally depend upon readiness rather than capability alone. International Expansion Requires Early Preparation Indian startups increasingly enter global markets during early stages. Cross border operations involve contractual obligations, taxation considerations, intellectual property concerns, and regulatory expectations. Businesses with organised structures generally navigate international complexity more effectively. Preparation reduces friction. Long term survival increasingly depends upon ability to operate across multiple jurisdictions. Entrepreneurs Are Beginning To Think Beyond Immediate Growth A noticeable shift has emerged among founders. Businesses are increasingly designed with future investment, acquisition opportunities, international expansion, and institutional growth in mind. Such ambitions require durable structures. Interest surrounding company formation in India often reflects awareness among founders that organisation supports sustainability rather than merely fulfilling procedural requirements. Business Survival Often Depends Upon Foundations Built Before Growth Arrives Rapid growth can create an illusion of stability. Businesses may achieve visibility while lacking internal systems capable of supporting complexity. Expansion unsupported by structure may produce vulnerability. Long term survival frequently depends upon governance quality, ownership clarity, compliance discipline, and operational organisation. Rising interest in business setup in India illustrates growing recognition among entrepreneurs that sustainable enterprises require preparation from inception. Conclusion Startup survival in India depends upon far more than innovation, ambition, or funding. Businesses operate within environments shaped by regulatory obligations, commercial relationships, market volatility, and operational pressure. Early business structuring influences how effectively startups respond to such challenges. Strong foundations cannot guarantee success. Weak foundations, however, may increase exposure to avoidable risk. As India’s entrepreneurial ecosystem evolves, founders increasingly recognise sustainable businesses are rarely built through momentum alone. Enduring enterprises often begin with organised systems established long before growth becomes visible.  

Purvi Asher, Partner - MHCO India’s startup ecosystem has entered a phase of maturity where growth is no longer limited to early-stage innovation. Expansion, scalability, and global integration now define the trajectory of modern startups. Entrepreneurs are not only building businesses for local markets but are also positioning their ventures for international reach. Several economic, regulatory, and technological factors are shaping this evolution. This article explores the key trends influencing business expansion within India’s startup ecosystem and how these developments are creating new opportunities for entrepreneurs. Strong Economic Momentum and Market Depth India continues to demonstrate strong economic resilience. Its expanding middle class and increasing purchasing power have created sustained demand across sectors. Startups benefit from access to a large and diverse consumer base. Urban markets are witnessing rapid digital adoption, while rural markets are gradually integrating into the digital economy. This dual growth pattern offers startups the opportunity to scale across multiple segments. The expanding consumer base also supports innovation. Businesses are able to test and refine products in varied market conditions, which strengthens their competitive position. Regulatory Reforms Supporting Business Growth Government reforms have played a crucial role in shaping the startup ecosystem. Policies aimed at simplifying compliance and encouraging entrepreneurship have improved the ease of doing business. Digital platforms have streamlined processes related to registrations, filings, and approvals. Entrepreneurs exploring company formation in India now experience greater efficiency and transparency. Regulatory clarity has reduced uncertainty and improved investor confidence. This has contributed to increased participation from both domestic and international stakeholders. Rise of Sector Specific Innovation India’s startup ecosystem is witnessing diversification across sectors. While technology remains dominant, other industries such as healthcare, fintech, edtech, and renewable energy are experiencing significant growth. Sector specific innovation allows startups to address unique challenges and create tailored solutions. This approach enhances scalability and market relevance. The growth of deep technology ventures is particularly notable. Startups are investing in artificial intelligence, blockchain, and data analytics to build advanced solutions. Such innovation attracts global investors and strengthens India’s position as a technology driven economy. Expansion Beyond Metropolitan Cities Startup activity is no longer confined to major cities. Tier two and tier three cities are emerging as new hubs for entrepreneurship. Improved infrastructure and digital connectivity have enabled this shift. Lower operational costs and access to untapped markets make these regions attractive for expansion. Startups can establish operations in smaller cities while serving national and global markets. This trend also contributes to inclusive economic growth. It creates employment opportunities and promotes regional development. Entrepreneurs are increasingly recognising the potential of these markets and incorporating them into their expansion strategies. Growth of Digital Infrastructure Digital transformation continues to shape business expansion in India. High internet penetration and widespread smartphone usage have created a robust digital ecosystem. Online platforms enable startups to reach customers across geographies. Digital payments and e commerce have simplified transactions and improved accessibility. Government initiatives aimed at digitalisation have further strengthened infrastructure. These developments support innovation and enable startups to scale efficiently. The integration of technology into business operations has become essential for growth and competitiveness. Increased Access to Funding and Investment Access to capital has improved significantly in recent years. Venture capital firms, private equity investors, and angel networks are actively investing in Indian startups. Global investors are showing increased interest in India due to its growth potential and market size. This has resulted in higher funding volumes and improved valuation of startups. Government backed funds and incentives have also supported early-stage ventures. These initiatives provide financial stability and encourage innovation. The availability of funding enables startups to expand operations, invest in research, and enter new markets. Focus on Scalable Business Models Startups are increasingly adopting scalable business models to support expansion. Technology driven platforms allow businesses to grow rapidly without proportional increase in costs. Subscription based services, digital marketplaces, and platform economies are gaining popularity. These models enable efficient resource utilisation and long-term sustainability. Scalability also enhances investor appeal. Businesses with clear growth potential are more likely to attract funding and strategic partnerships. Entrepreneurs are focusing on building flexible and adaptable models to navigate changing market conditions. Legal Structuring and Corporate Governance As startups expand, legal structuring becomes critical. Proper corporate governance ensures compliance with regulatory requirements and builds credibility. The preference for private limited company registration in India reflects the need for structured business operations. This form of entity offers advantages such as limited liability and ease of investment. Legal compliance is essential for maintaining investor confidence and avoiding disputes. Startups must adhere to statutory requirements and maintain transparent records. Professional guidance can assist in managing legal obligations and ensuring smooth operations during expansion. Globalisation and Cross Border Expansion Indian startups are increasingly exploring international markets. Global expansion provides access to new customers, partnerships, and revenue streams. Cross border operations require careful planning. Businesses must consider regulatory requirements, cultural differences, and market dynamics. Intellectual property protection and compliance with foreign laws are essential for successful expansion. Startups must adopt a strategic approach to manage risks and ensure sustainable growth. India’s growing reputation as a startup hub enhances its global standing and attracts international collaboration. Emphasis on Sustainability and Responsible Growth Sustainability has become a key consideration for modern businesses. Startups are integrating environmental and social responsibility into their operations. Investors are increasingly prioritising businesses with sustainable practices. This shift influences funding decisions and market perception. Startups focusing on clean energy, waste management, and sustainable products are gaining traction. This trend reflects a broader movement towards responsible business practices. Sustainability not only addresses environmental concerns but also creates long term value for businesses. Challenges in Business Expansion Despite significant opportunities, startups face several challenges during expansion. Regulatory compliance can be complex, particularly for businesses entering multiple markets. Competition is intense, requiring continuous innovation and differentiation. Access to skilled talent may also vary across regions. Infrastructure limitations in certain areas can affect operations. However, ongoing reforms and investments aim to address these challenges. Entrepreneurs must adopt a strategic approach and remain adaptable to overcome these obstacles. Future Outlook of India’s Startup Ecosystem The future of India’s startup ecosystem remains promising. Continued economic growth, technological advancement, and policy support are expected to drive expansion. Emerging technologies will create new opportunities for innovation. Startups will play a key role in shaping industries and addressing global challenges. Collaboration between government, industry, and academia will further strengthen the ecosystem. This integrated approach supports sustainable growth and development. India is likely to remain a leading destination for entrepreneurship and investment in the coming years. Conclusion India’s startup ecosystem is undergoing a transformative phase. Key trends such as digitalisation, regulatory reforms, and access to funding are shaping business expansion. Entrepreneurs are leveraging these developments to build scalable and innovative ventures. While challenges exist, the opportunities for growth are substantial. A strategic approach, supported by legal compliance and market understanding, is essential for success. As the ecosystem continues to evolve, startups in India are well positioned to achieve global impact.

India has emerged as a dynamic destination for entrepreneurship, supported by policy reforms, digital infrastructure, and a growing investor ecosystem. However, regulatory compliance for new companies remains one of the most complex aspects of starting and scaling a business. New companies often face a dense legal framework involving multiple authorities, evolving regulations, and procedural requirements. A clear understanding of these challenges is essential for founders who aim to build a compliant and sustainable business. This article examines the key regulatory hurdles new companies encounter in India, along with practical legal insights to manage compliance effectively. Understanding the Legal Landscape for New Businesses India follows a structured regulatory regime governed by various central and state laws. The legal framework includes company law, taxation law, labour law, environmental norms, and sector specific regulations. The primary legislation governing incorporation and corporate governance is the Companies Act, 2013. New businesses must interact with multiple regulatory bodies such as the Ministry of Corporate Affairs, Income Tax Department, Goods and Services Tax authorities, and sector regulators. Each authority imposes compliance obligations which may overlap or change over time. This creates a layered compliance environment which often confuses first time entrepreneurs. Regulatory Compliance for New Companies The concept of Regulatory Compliance for New Companies refers to adherence to statutory requirements from the stage of incorporation to ongoing operations. Compliance is not limited to registration. It extends to financial reporting, taxation filings, governance practices, employee welfare norms, and disclosures. Failure to comply can result in penalties, legal proceedings, reputational damage, and even business closure. Therefore, compliance must be viewed as a core business function rather than a procedural formality. Key Regulatory Challenges Faced by New Companies Complex Incorporation Procedures The process of incorporating a company in India has improved through digital platforms. Yet, new founders often struggle with documentation, selection of business structure, and regulatory approvals. Choosing between a private limited company, LLP, or other structures requires legal clarity and strategic foresight. Many startups underestimate the importance of drafting accurate incorporation documents such as Memorandum and Articles of Association. Errors at this stage may create complications in governance and investor relations later. Multiple Registrations and Licences Beyond incorporation, businesses must obtain various registrations depending on their operations. These include GST registration, Shops and Establishment licence, Professional Tax registration, and sector specific licences. For instance, a fintech startup may require approval from the Reserve Bank of India, while a food business must comply with FSSAI regulations. The need to deal with multiple authorities increases administrative burden and delays operational readiness. Taxation and GST Compliance India’s tax regime presents one of the most challenging aspects of regulatory compliance. New companies must understand corporate tax obligations, GST filings, TDS deductions, and advance tax payments. GST compliance involves regular return filing, invoice matching, and reconciliation. Frequent amendments in GST rules often create confusion. Startups with limited resources may struggle to maintain accurate records, leading to penalties. Labour Law Compliance Employment regulations in India are governed by a mix of central and state laws. These include laws relating to wages, social security, workplace safety, and employee benefits. New companies must comply with requirements such as Provident Fund contributions, Employee State Insurance, and gratuity provisions. Failure to adhere to labour laws may result in legal disputes and financial liabilities. Compliance becomes more complex when businesses expand across multiple states due to varying state regulations. Corporate Governance and Reporting Obligations Once incorporated, companies must maintain proper governance practices. This includes conducting board meetings, maintaining statutory registers, filing annual returns, and financial disclosures. Many startups overlook governance during early growth stages. However, investors and regulators expect strict compliance. Non-compliance may affect funding opportunities and valuation. Data Protection and Privacy Regulations With increasing digitalisation, data protection has become a critical compliance area. Companies handling personal data must ensure secure processing, storage, and usage. India is moving towards a stronger data protection regime. Startups in technology, ecommerce, and fintech sectors must adopt privacy policies, consent mechanisms, and cybersecurity measures. Any data breach may attract regulatory scrutiny and loss of customer trust. Environmental and Sector Specific Regulations Certain industries such as manufacturing, infrastructure, and pharmaceuticals require environmental clearances and regulatory approvals. Compliance with pollution control norms and waste management rules is mandatory. Startups entering regulated sectors must understand industry specific laws from the beginning. Delays in obtaining approvals may disrupt project timelines and increase costs. Frequent Regulatory Changes India’s regulatory environment evolves continuously to align with economic and technological developments. While reforms aim to improve ease of doing business, frequent changes create uncertainty. New companies must stay updated with amendments in tax laws, corporate regulations, and sector policies. Lack of awareness may result in inadvertent non-compliance. Practical Strategies to Manage Regulatory Challenges Addressing regulatory challenges requires a proactive and structured approach. Founders should focus on building a compliance framework from the early stages of business. Engaging legal and financial experts helps in interpreting complex laws and ensuring accurate filings. Technology driven compliance tools can streamline documentation and reporting processes. Regular internal audits also assist in identifying gaps before they become serious issues. Entrepreneurs planning to setup a company in India should conduct thorough legal due diligence. This includes evaluating regulatory requirements specific to their industry and location. Similarly, those looking to register a startup company in India should align their business model with compliance obligations from the outset. Early planning reduces risks and enhances operational efficiency. Importance of Compliance in Building Investor Confidence Investors place significant importance on regulatory compliance. Startups seeking funding must demonstrate transparency, proper governance, and adherence to legal norms. Due diligence conducted by investors often reveals compliance gaps. These gaps may delay funding or reduce valuation. A well-maintained compliance record signal’s reliability and long-term sustainability. Role of Government Initiatives The Government of India has introduced several initiatives to ease compliance for startups. Programmes such as Startup India aim to simplify procedures, reduce regulatory burden, and promote innovation. Online portals for company incorporation, GST registration, and tax filings have improved accessibility. However, effective utilisation of these platforms requires awareness and proper guidance. Entrepreneurs can refer to official government resources such as the Ministry of Corporate Affairs and GST portal for accurate and updated information. Conclusion Regulatory compliance is an integral part of doing business in India. While the legal framework ensures accountability and transparency, it also presents challenges for new companies. Understanding the complexities of regulatory compliance for new companies allows founders to make informed decisions and avoid legal pitfalls. For entrepreneurs planning to register a startup company in India, early awareness of compliance requirements becomes equally important. A structured compliance strategy, supported by professional advice and technology, can transform compliance from a burden into a strategic advantage. Businesses that prioritise compliance from the beginning are better positioned to scale, attract investment, and build long-term credibility in the market. Authored by: Bhushan Shah, Partner The views expressed in this update are personal and should not be construed as any legal advice. Please contact us for any assistance.

The Securities and Exchange Board of India (SEBI), vide an adjudication order (Order) dated 21 February 2025 penalised Axis Securities Limited (Axis Securities) for several non-compliances with various regulatory circulars applicable to them. Brief Background and Facts: The SEBI inspection revealed several non-compliances related to enhanced supervision reporting, stock reconciliation, client fund settlements, passing on exchange penalties, improper handling of client securities, inadequate grievance redressal, discrepancies in PEP reporting, and excessive exposure in margin trading. Alleged Violations: The Show Cause Notice (“SCN”) outlined various violations thereafter confirmed in the Order. These alleged violations were: Discrepancies in Enhanced Supervision Reporting: Axis Securities had allegedly reported incorrect information in their enhanced supervision reports to the exchanges. Specifically: (a) An amount of ₹50 Lakhs was reported as collateral, when it was actually a deposit towards Base Minimum Capital (BMC) in NCDEX. (b) A Bank Guarantee of ₹1 Crore was reportedly double-reported in October 2022. Discrepancies in Stock Reconciliation: Reconciliation of weekly holding statements (WHS) submitted by Axis Securities to the Stock Exchanges with the actual stock lying in DP accounts as on 30 November 2022, revealed mismatches: (a) Stocks (ISIN – 13, Quantity – 11,174, Value – ₹0.37 Crores) were reported in the WHS but were not found in DP holdings. (b) Stocks (ISIN – 122, Quantity – 3,38,388, Value – ₹3.09 Crores) were not reported in the WHS but were present in DP holdings. (c) Investment of Axis Securities in Max Life Insurance Company Ltd. (Quantity – 1,91,88,128, Value – ₹242.21 Crores) in its proprietary account was not reported in the WHS. Improper Client Fund Settlement: Axis Securities had failed to settle clients’ funds and securities on a monthly/quarterly basis according to the preferences obtained from clients. Furthermore, the retention statements were not sent to the clients along with the statement of accounts. Passing on Exchange Penalties to Clients: Axis Securities purportedly passed on penalties imposed by Stock Exchanges for short collection of upfront/nonupfront margin to its clients. Transfer of Securities to "Client Unpaid Securities Account": Axis Securities is alleged to have transferred securities of clients having a credit balance of funds with the Axis Securities to a "client unpaid securities account,". Inadequate Grievance Redressal: Axis Securities allegedly failed to properly redress the complaints and grievances of its clients, that shows inadequate customer service and grievance resolution mechanisms. Discrepancies in PEP Reporting: The count of Politically Exposed Persons (PEP) reported under the Risk Based Supervision data submitted by Axis Securities to the Stock Exchange did not align with the clients marked as PEP in the Unique Client Code (UCC), indicating inaccurate reporting of PEP clients under Risk Based Supervision data. Excessive Exposure in Margin Trading: The exposure of Axis Securities towards Margin Trading funding exceeded the allowable threshold. Additional exposure of ₹17.40 Crores was given to clients in six instances. Moreover, there was a shortfall in the margin collected from one client. Mitigating Factors Considered: The Adjudicating Officer considered the following mitigating factors for computing the quantum of penalty: Axis Securities engaged Shah Kapadia & Associates, an external audit firm, for verification of data before reporting of WHS to the exchanges and to review and verify the process of settlement of client funds. Axis Securities took corrective action and immediately started including the investment in Max Life Insurance Company Limited in its WHS reporting. NSE had already penalized Axis Securities for the discrepancy in WHS reporting. SEBI's Decision: After considering the inspection report, the SCN, and Axis Securities' reply, SEBI passed an order finding that Axis Securities have violated various circulars of SEBI, MCX, NCDEX, etc. Accordingly, SEBI imposed a penalty of ₹10,00,000/- (Rupees Ten Lakhs Only) on Axis Securities Limited under Section 15HB of the SEBI Act. This order against Axis Securities underscores SEBI's focus on maintaining the integrity of the securities market and protecting investors' interests. By addressing discrepancies in reporting, client fund handling, and adherence to margin requirements, SEBI aims to ensure that stock brokers uphold the highest standards of regulatory compliance and prioritize investor protection. The views expressed in this update are personal and should not be construed as any legal advice. Please contact us for any assistance. Authored By:  Mr Bhushan Shah, Partner and Mr Abhishek Nair, Associate.

Overview: A recent Circular dated 29 January 2025 issued by the Securities and Exchange Board of India  (‘SEBI’) provides imperative clarifications regarding the association of persons regulated by  SEBI, market infrastructure institutions (MIIs), and their agents with individuals or entities  engaged in prohibited activities. This circular serves as a follow-up to the earlier circular dated  22 October 2024 (‘October Circular’). Essentially, the present circular marks a significant  regulatory shift aimed at curbing the activities of unregistered financial influencers, commonly  referred to as "finfluencers". This directive prohibits the influencers from using live stock  prices in their educational content, requiring them in the alternative, to refer to stock prices  that are at least three months old. This change is expected to have profound implications for  the finfluencer industry. Key highlights of the Circular: Regulatory Background: The circular references amendments to various regulations, including the Securities  and Exchange Board of India (Intermediaries) Regulations, 2008, and others, which  were published on August 29, 2024. These amendments restrict associations with  individuals or entities that provide unregistered advice or make unpermitted claims  regarding securities. Prohibited Activities: The regulations prohibit any direct or indirect association with persons who: a) Provide advice or recommendations related to securities without SEBI registration; b) Make claims regarding returns or performance related to securities without SEBI  permission. III. Clarifications Provided: The circular includes an annexure containing certain frequently asked questions that  clarify the following; a) Definitions of ‘persons regulated by the Board’ and ‘agents’ b) Responsibilities of regulated entities to ensure that associated individuals do not engage in prohibited activities c) The distinction between investor education and prohibited advisory roles. Compliance Requirements: Regulated entities must ensure compliance with these provisions and are advised to  terminate existing contracts with individuals engaged in prohibited activities within  three months from the October 2024 circular's issuance. This compliance is crucial for  maintaining regulatory standards and protecting investor interests. Investor Education allowed with certain restrictions: While genuine investor education is still permitted, it must strictly adhere to the new  guidelines. This includes avoiding any performance claims or investment  recommendations unless the educator is a SEBI-registered entity. Consequences for violations: The circular outlines potential actions SEBI may take against violations, including  penalties, suspension, or cancellation of registrations. It emphasizes the importance  of adhering to these regulations to avoid severe repercussions. Expected Outcomes: Reduction in misleading practices: By closing this loophole, SEBI aims to reduce misleading investment claims that have  proliferated in the finfluencers space, thereby enhancing investor protection and  market integrity. Challenges for Social Media Influencers: Many influencers who relied on live market data for their content may find their  business models unsustainable. The shift could lead to a significant restructuring  within this sector as they adapt to the new regulations or face potential subscriber  losses. III. Stringent Enforcement: SEBI's recent action is part of a larger initiative to strengthen compliance within the  financial system. This could result in tougher measures against deceptive stock market  content and promote the idea that investors should consult only registered  professionals for advice. MHCO Comment: This circular ensures that finfluencers are restricted from selling stock tips on various social  media platforms. This regulatory change represents a critical step in addressing the challenges  posed by unregulated financial advice in India, aiming for a more transparent and safer  investment environment for retail investors. Authored By: Mr Bhushan Shah, Partner,  Ms. Shreya Dalal, Associate Partner and Mr Gaurav Edekar, Associate. This article was released on 3 February 2025. The views expressed in this update are personal and should not be construed as any legal  advice. Please contact us for any assistance.

Background The Reserve Bank of India (RBI), through a press release dated 16 January 2025,  introduced amendments to several regulations made under the Foreign Exchange  Management Act 1999 (FEMA). These amendments aim to enhance the use of the  Indian Rupee (INR) in cross-border transactions. This initiative is a significant step  towards reducing dependency on foreign currencies and increasing the global  acceptability of INR for trade and investment purposes. Amendments Brought In The key changes introduced by the amendments include: 2.1. Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt  Instruments) Regulations 2019: Foreign investors can now use repatriable rupee  accounts or foreign currency accounts for transactions, instead of earlier modes such  as NRE, NRO, FCNR(B), or escrow accounts. This applies to transactions including the  purchase/sale of equity instruments of Indian companies, investment/disinvestment  in LLPs, purchase/sale of units of investment vehicles, and purchase/sale of convertible  notes of startups. 2.2. Foreign Exchange Management (Deposit) Regulations, 2016: The amendments allow a  Person Resident Outside India (PROI) to open a Special Non-Resident Rupee (SNRR)  account with an Authorized Dealer (AD) Bank’s branch outside India, in addition to  domestic branches. The restriction on the maximum tenure of SNRR accounts  (previously capped at 7 years) has also been removed. Additionally, SNRR accounts  may now be used for all permissible current and capital account transactions, including  transactions among PROIs. 2.3. Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in  India) Regulations, 2015: Indian exporters are now permitted to open and maintain  foreign currency accounts with overseas banks for receiving full export value and  advance payments, which may be used for imports into India or must be repatriated  by the end of the next month. Brief Overview of the Effects of the Amendments The amendments streamline foreign investment processes and promote ease of doing  business by: 3.1. Expanding the flexibility of currency options for foreign investors. 3.2. Enhancing cross-border trade settlements in INR by enabling transactions through Special Rupee Vostro Accounts (SRVA) and SNRR accounts. 3.3. Strengthening India’s position in global financial markets by facilitating seamless INR transactions. 3.4. Providing exporters with greater autonomy in managing their foreign earnings, improving liquidity and operational efficiency. 3.5. Enabling units in International Financial Services Centres (IFSCs) to open SNRR  accounts with AD banks in India for business-related transactions, thereby bolstering India's financial infrastructure. MHCO Comment: These amendments represent a progressive step towards internationalizing the INR. By  allowing broader use of INR in foreign transactions, India reduces reliance on hard currencies  like the USD and EUR, mitigating exchange rate risks. Moreover, the regulatory simplifications  make it easier for foreign investors to engage with Indian markets. However, the success of  these changes will depend on global acceptance of INR and reciprocal arrangements with  foreign trade partners. The removal of the SNRR account tenure cap and the expanded scope  for transactions could improve liquidity and promote investment. However, further  refinements may be needed to address practical challenges, such as liquidity management,  foreign investor confidence in INR settlements, and compliance with global financial norms. The amendments to FEMA regulations reflect India’s commitment to enhancing the global  utility of INR and facilitating foreign investments. While this is a significant milestone,  continued efforts are necessary to build confidence and establish INR as a preferred currency  for international trade and investment. The long-term success of these measures will depend on sustained policy support, market confidence, and international collaboration. Authored By: Mr Bhushan Shah, Partner,  Ms Shreya Dalal, Associate Partner and Ms Veena Hari, Associate. This article was released on 7 February 2025. The views expressed in this update are personal and should not be construed as any legal  advice. Please contact us for any assistance.

Background: The Hon’ble High Court of Bombay in the matter Wonderchef Home Appliances Pvt.  Ltd. v. Shree Swaminarayan Pty Ltd. held that a gag order under Section 9 of the  Arbitration and Conciliation Act, 1996 (“the Act”) can be granted, pending resolution  of disputes between the parties, if the contractual obligation between the parties  stipulates to protect the party’s reputation and not otherwise. Facts: The Respondent is a distributor of the Petitioner in Australia. The Respondent has been  sending out e-mails to various parties, including other distributors of the Petitioner in  other jurisdictions and various statutory addressees such as Government Officers and  prospective financial investors, complaining about the Petitioner's product having  demonstrated defects, the poor treatment of the Respondent by the Petitioner, and  the manner in which the relationship is being handled. Accordingly, in light of the  Distribution Agreement dated 26 December 2017 (“Agreement”) executed between  the Petitioner and Respondent, the Petitioner sought the present petition to injunct  the Respondent from making disparaging statements or taking any actions that may  harm or damage, malign or disparage the Petitioner's reputation and its brand name  “Wonderchef”. Issue for consideration: Whether a gag order to injunct commercial speech can be passed under the ambit of  Section 9 of the Act. Held: The Hon’ble High Court of Bombay stated that the scope of powers of this Hon’ble  Court under Section 9 of the Act is essentially to make interim measures of protection  with respect to the preservation of the subject matter of the agreement between the  parties, which is subject to resolution by arbitration. To be able to seek a gag order, the  Petitioner would need to show that the remarks of the Respondent are proscribed by  the agreement that contains the arbitration agreement and that, pending resolution of disputes, such remarks cannot be made. The Hon’ble Court, considered clause  12.2(c) of the Agreement, which required the distributor to conduct business in a  manner that reflected favorably on the Petitioner and its products. Given the  contractual obligation and the potential harm alleged by the Petitioner, the Hon'ble Court granted an interim injunction against the Respondent for 90 days following  clause 12.2(c) of the Agreement, restraining them from making statements that could  harm the Petitioner’s reputation and also stated that the Respondent shall not vitiate  the atmosphere for the arbitration by sending out e-mails attacking the Petitioner’s  reputation. MHCO Comment: The Hon’ble High Court of Bombay clarified that a gag order under Section 9 of the Act  can only be granted if there is a contractual obligation to protect a party’s reputation.  While the Hon’ble Court rejected the Petitioner’s claim of confidentiality breach, it  recognized the contractual duty under clause 12.2(c) of the Agreement to maintain the  Petitioner’s reputation. We believe that this judgment is a welcome step by the Hon’ble  Court to protect a Petitioner’s reputation, by injuncting the Respondent from  spreading derogatory information about the Petitioner, pending arbitration  proceedings. Authored by- Mr Bhushan Shah, Partner and Ms Alisha Dsouza, Associate. This article was released on 12 February 2025. The views expressed in this update are personal and should not be construed as any legal  advice. Please contact us for any assistance.