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This June newsletter covers categories of relevant updates notified by the Ministry of Corporate Affairs (“MCA”), Reserve Bank of India (“RBI”) and the Ministry of Finance (“MoF”) for the month of May 2026.
MCA
MCA has issued amendments to the Companies (Corporate Social Responsibility Policy) Rules, 2014 (“CSR Rules 2014”)
May 27, 2026: Vide Notification G.S.R. 415(E), the MCA has amended the CSR Rules, 2014. Key amendments include:
Addition of certain definitions
- ‘Not for Profit Organization’, which shall have the definition as mentioned in regulation 292A (e) [1] of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; and
- ‘Zero coupon zero principal instrument’, which is defined as an instrument declared as a security that is issued by a Not for Profit Organization registered with the Social Stock Exchange segment of a recognised Stock Exchange in accordance with the regulations made by the Securities and Exchange Board of India; and
Insertion of a new rule 4A, which enables a company to carry out Corporate Social Responsibility (“CSR”) activities through a zero coupon zero principal instrument. The new sub-rule also states that the expenditure incurred for the zero coupon zero principal instrument shall not exceed 10% (ten per cent) of the CSR expenditure of such company for that financial year. Companies subscribing to such instruments are exempt from undertaking impact assessment of any project funded by such instrument.
MCA has amended Schedule VII of the Companies Act, 2013 (“Act”)
May 27, 2026: Vide Notification G.S.R. 416(E), the MCA has amended Schedule VII (Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to…) of the Act, to include ‘Subscription to zero coupon zero principal instruments on Social Stock Exchange’ as a permissible corporate social responsibility activity.
This amendment is aimed at providing significant ease of compliance to the companies and will also help Not for Profit Organisations (NPOs), to raise funding for public welfare projects in a transparent and regulated manner. These Not for Profit Organisations (NPOs) will be able to issue Zero Coupon Zero Principal Instrument on the Social Stock Exchange (SSE) in accordance with the Securities and Exchange Board of India's Regulations.
MCA has issued an update on the procedure to be followed in case of transfer of interest of a member in a company not having share capital
May 11, 2026: The MCA, vide an update has directed stakeholders to use Form SH-4 (Securities Transfer Form) for transfer of interest of member in case of a company limited by guarantee in terms of rule 11(2) of the Companies (Share Capital and Debentures) Rules, 2014 (“2014 Rules”).
While providing the rationale for the above, the MCA has cited Section 56 (Transfer and Transmission of Securities) of the Companies Act, 2013 and Rule 11 of the 2014 Rules. The update states that Rule 11(1) and Rule 11(2) of the 2014 Rules, when read together, mean that any instrument of transfer of interest of a member in the company shall be in Form SH-4, for companies not having share capital, and that Rule 11(2) clarifies that the reference to securities in Rule 11(1) of the 2014 Rules shall be read as reference to “interest of the member of the company”.
RBI
The Reserve Bank of India (“RBI”) notified the Issuance of Foreign Exchange Management (Authorized Persons) Regulations, 2026 (“AP Regulations”)
May 6, 2026: Vide RBI/2026-27/78, A.P. (DIR Series) Circular No. 09 dated May 06, 2026, the RBI has issued the AP Regulations. The RBI has stated that the existing framework for authorisation of persons as Authorised Persons under the Foreign Exchange Management Act, 1999 (“FEMA”) has been reviewed with the objective of rationalising the framework, improving delivery of foreign exchange services and easing compliance requirements.
The circular modifies certain provisions of the Master Direction - Money Changing Activities. In particular, paragraph 3 of the cover letter has been updated to clarify that the directions relating to money changing activities, including authorisation and conduct of foreign exchange transactions, are being issued in a consolidated form through the Master Direction under Section 10(4) and Section 11(1) of FEMA. In paragraph 1 of Section III, the RBI has provided that Authorised Persons shall not enter into any fresh franchisee arrangements henceforth, and all existing franchisee arrangements are required to be discontinued gradually, in any case within two years from May 06, 2026. The limited dispensation allowing franchisees functioning within 10 kilometres from the borders of Pakistan and Bangladesh to sell the currency of the bordering country, with prior approval of the relevant Regional Office of the RBI, has been retained.
In addition, paragraph 22 of Section V has been revised to require an FFMC / non-bank AD Category II to submit to the concerned Regional Office of the RBI: (i) a copy of its annual audited balance sheet, together with a certificate from its statutory auditors regarding net worth as on the date of the balance sheet, by October 31 every year; and (ii) a certificate from its statutory auditors regarding annual forex turnover during the financial year, by April 30 every year.
The Ministry of Finance (“MoF”) has notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026 (“NDI Second Amendment Rules 2026”) consequent to Department for Promotion of Industry and Internal Trade (“DPIIT”) Press Note No 1 (2026 Series)
May 02, 2026: Vide notification S.O. 2186(E), the MoF (Department of Economic Affairs) has notified the NDI Second Amendment Rules 2026, amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 to give effect to DPIIT Press Note No. 1 (2026 Series) in the insurance sector.
The amendment substitutes the entry governing foreign investment in Insurance (Serial Number F.8 in Schedule I of the NDI Rules) and permits foreign direct investment up to 100% (increased from the erstwhile cap of 74%) in Indian insurance companies and up to 100% in insurance intermediaries (including insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors, managing general agents and insurance repositories) under the automatic route, subject to approval and verification by the Insurance Regulatory and Development Authority of India ("IRDAI") and compliance with the Insurance Act, 1938 and applicable IRDAI regulations.
Foreign investment in the Life Insurance Corporation of India remains capped at 20% under the automatic route.
The amendment also imposes certain governance conditions to Indian Insurance companies including that:
- At least one of the Chairperson of the Board, the Managing Director or the Chief Executive Officer of an Indian insurance company having foreign investment shall be a resident Indian citizen; and
- An insurance intermediary having majority foreign shareholding shall be incorporated as a limited company under the Companies Act, 2013, shall have at least one resident Indian citizen among its Chairman, Chief Executive Officer, Principal Officer or Managing Director, and shall make prescribed disclosures of payments made to its group or associate entities. The NDI Second Amendment Rules 2026 have come into force on the date of their publication in the Official Gazette, i.e., May 02, 2026.
The NDI Second Amendment Rules 2026 have come into force on the date of their publication in the Official Gazette, i.e., May 02, 2026.
The Ministry of Finance (“MoF”) has notified the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026 (“NDI Amendment Rules 2026”) pursuant to Department for Promotion of Industry and Internal Trade (“DPIIT”) Press Note No 2 (2026 Series) (“Press Note 2”)
May 02, 2026: Vide notification S.O. 2174(E) dated May 01, 2026, published in the Official Gazette on May 02, 2026, the Ministry of Finance (Department of Economic Affairs) has notified the NDI Amendment Rules 2026, amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The amendment substitutes Rule 6(a) to further clarify the Government approval requirement for investments by an entity or citizen of a country sharing land border with India, and for investments where the beneficial owner is a citizen of such country or where the beneficial ownership is vested in such country.
The NDI Amendment Rules 2026 align the test for determining “beneficial owner” with Section 2(1)(fa) of the Prevention of Money-laundering Act, 2002 and the criteria specified under Rule 9(3) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. The amendment clarifies that beneficial ownership of an investment will be regarded as vested in a country sharing land border with India where a citizen or entity of such country has the ability, directly or indirectly, individually or cumulatively, independently or collectively, to: (i) hold rights or entitlements in excess of the applicable thresholds under Rule 9(3) over an investor entity incorporated or registered outside such land-bordering country; (ii) exercise control over such investor entity; or (iii) exercise ultimate effective control over the Indian investee entity.
The amendment further provides that investments into India from an investor entity having any direct or indirect ownership by a citizen or entity of a country sharing land border with India but not otherwise requiring prior Government approval under Rule 6(a), shall be subject to reporting requirements specified by the Reserve Bank of India. In addition, where the transfer of ownership of any existing or future foreign direct investment in an Indian entity, directly or indirectly, results in the beneficial ownership falling within the restricted category, such subsequent change in beneficial ownership will also require prior Government approval. The NDI Amendment Rules 2026 came into force on the date of their publication in the Official Gazette, i.e. May 02, 2026.
Reference
- 292A.(e) “Not for Profit Organization” means a Social Enterprise which is any of the following entities:
- a charitable trust registered under the Indian Trusts Act, 1882 (2 of 1882);
- a charitable trust registered under the public trust statute of the relevant State;
- a Trust registered under the Registration Act, 1908 (16 of 1908) with the relevant Sub-Registrar in those States that have not enacted the law governing public trust;
- a charitable society registered under the Societies Registration Act, 1860 (21 of 1860);
- a charitable society registered under the Societies Registration Act of the relevant State;
- a company registered under section 8 of the Companies Act, 2013 (18 of 2013) (including a company registered under section 25 of the repealed Companies Act, 1956);
- any other entity as may be specified by the Board.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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