In a recent case of South West Terminal Ltd. vs Achter Land, a Canadian judge ruled that even an emoji, a “thumbs-up” emoji (👍) in particular, shall be a valid confirmation and a non-traditional contract acceptance.

The ruling in this case from the Court of King’s Bench for Saskatchewan, Battleford, Canada (the province’s second-highest court) determined that employing a “thumbs-up” emoji (👍) in a text message can be considered equivalent to a valid signature, signifying acceptance of a contract.

Although a signature denotes the identity and validity of a transaction, it is classical and traditional. However, it does not imply the exclusion of a contemporary signature like the thumbs-up emoji. Let us talk about this case.

Background of the Case

The case referred to is South West Terminal Ltd. (Plaintiff) vs Achter Land (Defendant), as declared by the King’s Bench for Saskatchewan.

On March 26, 2021, the parties allegedly entered into a deferred delivery purchase agreement (the “flax contract”), whereby SWT (South West Terminal Ltd.) promised to buy.

Achter agreed to supply 87 metric tonnes of flax at a fixed price of $669.26 per tonne, with delivery between November 1 and November 30, 2021. Achter delivered no flax.

The plaintiff sued for contract breach and $82200 in damages, plus interest and fees. The defendant disputed entering into the contract and, alternatively or additionally, invokes the legal defence outlined in section 6(1) of The Sale of Goods Act, RSS 1978, Chapter S-1 (SGA), arguing that any contract is void since no note or memorandum of the transaction was made or signed by the parties.

Kent Mickleborough [Kent] began working for SWT as a grain buyer in 2015, and at least one year before that, Chris, the defendant Achter’s acting mind, had a long-standing business relationship with SWT.

The fundamental facts of this case, which mainly involve contract law and SGA (Sale of Goods Act) application, are not usually in question. The use of the thumbs-up emoji and its significance in the particular circumstances of this legal dispute distinguish this case from others.

Court Ruling

The Court observed an undisputed history of repeatedly entering into deferred delivery purchase agreements that both parties knew and accepted to be legally valid and binding.

It is important to note that each time Kent added to the offered contract, “Please confirm terms of durum contract,” and Chris did so by succinctly texting “looks good“, “ok” or “yup“, the parties clearly understood these words were meant to be confirmation of the contract.’

The parties were in complete agreement that Chris’s brief statement was intended to affirm the terms of the contract rather than merely acknowledge receipt of the document by Chris. The evidence is overwhelming, and no other plausible or rational explanation exists. Chris met the grain delivery deadline and received payment. He only acknowledged the receipt of a contract, and there was no proof.

Validity of a Contract: What Does the Indian Contract Act Say?

Section 10 of the Indian Contract Act discusses the validity of contracts and what agreements may be considered contracts. All those agreements made with consensus ad idem (free will of both parties), lawful consideration, lawful object and those that haven’t expressly been declared void are all contracts as under the Act.

Related: Definition and Essentials of Acceptance in Contract Act

Conclusion

It would be interesting to see whether Indian courts would deem the use of the thumbs-up emoji to be legitimate acceptance of the conditions of the contract and thereby consider a contract valid if all the other requirements of a valid contract are also met.

While speaking with a prospective landlord, a supplier, a service provider, or an employee, it is crucial to use caution while using emojis because they may be construed as binding communication.

Emojis have consequences, so it’s best to be aware of them and think about what kind of influence they might have. They continue to score lower than other traditional methods of conducting contracts because getting into a formal agreement is a practice meant to reduce ambiguity.

Legitimacy of Emojis (👍) in a Legal Contract
Yugandhara

Although most marriage laws utilise gender-neutral terminology, marriage is a prevalent cultural bond that is exclusively known as being between males and females. While there have only recently been numerous cases of homosexual weddings being acceptable, culture is gradually becoming indulgent. This reform is also reflected in Navtej Singh vs Union of India, where the Supreme Court overturned section 377 of the IPC.

However, several states have maintained their constitutional restrictions on homosexual marriages despite numerous protests from individuals and groups who argue that same-sex marriage must be permitted.

Meaning: Same-Sex Marriage

Marriage between people of the same sex, or SAME-SEX MARRIAGE (SSM), is a recent societal development that creates a new family structure.

SSM did not exist in the modern era until the twenty-first century when more and more nations started allowing same-sex couples to get married legally. Additionally, a growing global movement to recognise marriage as a fundamental human right that should be extended to same-sex couples emerged in the latter half of the 20th century (Moumneh, 2009; Human et al., 2009; Adam et al., 1999).

These developments are astounding because same-sex marriage was unthinkable and seen by nearly everyone as an oxymoron, even during the majority of the 20th century.

SSM is causing collation, controversy, and opposition in many nations throughout the world, particularly in the United States, as a result of successful legal challenges and related social and legislative changes (Masci, 2009; Angus-Reid, 2009; Eskridge & Spedale, 2006).

Indeed, one of the most socially, politically, and legally contentious issues of the day is the legal recognition of same-sex marriage. While most responses to this novel union and family formation method have been strong and vociferous, many pundits and the general public lack a solid understanding of same-sex unions. Public perception and sentiments about SSM are too frequently shaped by misinformation, gossip, and misperception.

What Indian People Think

According to a Pew Research Centre study that polled people in 24 nations, fifty-three per cent of individuals surveyed in India either “somewhat favour” or “strongly favour” same-sex marriage. The number of people who said they supported it “strongly” was somewhat more significant than the number of people who said they supported it “somewhat” (25%).

In India, same-sex unions are not officially permitted, and the country’s LGBT couples can only enjoy certain privileges if they live together as a cohabitating pair.

Recent Developments

Two same-sex couples petitioned the Supreme Court on November 14, 2022, requesting that same-sex marriages be recognised as legal in India. The Special Marriage Act of 1954 was the subject of the petitions, which focused on its constitutionality. Supriyo Chakraborty and Abhay Dang submitted the initial petition. Parth Phiroze Merhotra and Uday Raj Anand filed a second petition.

The petitioners contend that only “male” and “female” marriages are recognised by section 4(c) of the Act. Denying them marriage privileges, including adoption, surrogacy, employment, and retirement benefits, discriminates against same-sex couples.

The petitioners requested that section 4(c) of the Special Marriage Act be ruled unconstitutional by the court.

The request was linked to several other petitions that question other personal laws. The Hindu Marriage Act of 1955 and the Foreign Marriage Act of 1969 were two of the laws that were challenged.

The petitioners contended that denying same-sex marriage infringed their rights to dignity, equality, and freedom of expression. The cases NALSA vs Union of India (2014) and Navtej Singh Johar vs Union of India (2018), which validated non-binary gender identities and provided equal rights to homosexual people, were cited by these people.

Related: Five Landmark Judgements Related to IPC

Conclusion

By invalidating section 377 of the Indian Penal Code, the Supreme Court’s 2018 ruling in Navtej Singh Johar vs Union of India decriminalised homosexuality in India. The LGBTQ+ community in India has reached a significant turning point by recognising their right to love and intimacy without concern for retaliation or prosecution.

Read Next: Section 377 – Homosexuality in India

Same-Sex Marriage in India
Yugandhara

In this article, you will read about glass cliff with its effects on businesses and the corporate world, as well as strategies to address this phenomenon.

What Is Glass Cliff?

The term “glass cliff” refers to the tendency for women and members of other underrepresented, disadvantaged groups to be given leadership roles in corporations only during periods of crisis or downturn. The term originated in the field of corporate law.

These leaders are often given positions with high levels of risk and uncertainty, wherein the failure is most likely. It refers to obstacles and covert barriers that women, members of racial or ethnic minorities, individuals with disabilities, homosexual people, and other groups face at work and that prevent them from moving up the corporate ladder.

The glass cliff is a genuine phenomenon, according to research, and it can be caused by a variety of things, such as gender and racial stereotypes, the need to make a strong statement about diversity and inclusion, and the propensity (tendency) of organisations to seek out leaders who are seen as different from the previous leader.

Ultimately, the glass cliff sheds light on the difficulties minority groups who are underrepresented in corporate law confront, as well as the necessity for institutions and organisations to address diversity and inclusion concerns not only at lower levels but also at higher levels of leadership.

Evolution of Glass Cliff

From its initial introduction in 2004, the idea of the “glass cliff” has undergone a significant transformation. For example, it was initially thought to solely affect women in leadership roles. The glass cliff, however, also had an impact on people who belonged to other underrepresented groups, such as people of colour, LGBTQ+ persons, and people with disabilities, as the study* revealed over time.

It is not just a problem in business; it also exists in politics, academia, and other spheres. Women in academia are more likely to be chosen for leadership posts in underperforming departments or amid financial hardships, for instance, while female political leaders are frequently recruited to high-risk positions during periods of political crisis or economic instability.

The development of the glass cliff has also boosted awareness of the phenomenon, which has prompted businesses and individuals to take action. To avoid the formation of it, some businesses, for instance, are actively working to diversify their leadership teams.

Also, increasing activities and dialogues are aimed at encouraging diversity, equity, and inclusion in leadership roles.

Causes for the Formation of Glass Cliff in Corporate Governance

The following are some of the causes of the glass cliff:

1. Stereotyping and Bias

It’s possible that women and minorities are perceived as being more suitable for softer, more caring jobs than demanding leadership positions. Due to this prejudice, it may appear that minorities and women are better qualified for leadership positions in difficult or unstable situations.

2. Lack of Diversity in Leadership

Businesses may be more inclined to go to women and minorities to fill demanding leadership positions if they have a lack of diversity in their leadership ranks. This may give the impression that minorities and women are only appointed because they have no other options.

3. Risk-Taking Attitudes

It’s possible that minorities and women are seen as more risk-takers in leadership positions. When organisations face difficulties or uncertainty, this perception may influence the appointment of these people to high-pressure positions.

Concluding the Causes Section

Women and minorities may find it difficult to obtain leadership positions, especially in fields or organisations where men have traditionally held the majority of the positions. When possibilities do present themselves, they may be more likely to be appointed to demanding positions during periods of unrest or disaster.

Overall, structural biases and hurdles that impede women and minorities from attaining leadership positions and from being seen as credible and successful leaders are to be blamed for the glass cliff. It takes a dedication to diversity and inclusion at all levels of leadership, as well as an understanding of the particular difficulties and experiences that women and minority leaders may have in their positions, to address these biases and barriers. Organizations should avoid the glass cliff and promote the success of all leaders, regardless of gender or background, by fostering a fairer and more inclusive workplace.

Is There a Need for Glass Cliff?

The glass cliff is a phenomenon that describes the tendency to appoint women and minorities to leadership positions during times of crisis or instability, setting them up for failure. This is not a desirable or productive outcome for anyone involved.

The glass cliff can harm minority and women leaders’ reputations and careers, diminish their trustworthiness, and reaffirm preconceived notions about their aptitude for leadership and competence. Also, it may prohibit businesses from utilising their varied leaders’ capabilities to the fullest.

The glass cliff is unnecessary, and organisations should endeavour to remove the prejudices and obstacles that fuel this phenomenon in favour of developing an office environment that values inclusion and diversity at all levels of leadership.

Glass Cliff vs Glass Ceiling

Glass cliff and the glass ceiling are two similar but different workplace phenomena that impact various groups.

The term “glass ceiling” describes the invisible barriers that keep women and other underrepresented groups from rising to senior leadership positions in businesses. Systemic biases and cultural practices that favour males and uphold gender stereotypes can strengthen this barrier. Barriers to progression may include:

• Unequal remuneration.
• A lack of access to leadership training.
• Few possibilities for career development for women and other underrepresented groups.

On the other side, the glass cliff is the tendency for women and other marginalised groups to be appointed in disproportionate numbers to leadership roles during times of crisis or organisational unrest.

The Not-So-Obvious Dangers of the Glass Cliff

The glass cliff poses several dangers to women and minority leaders. Here are some of them:

1. Set Up for Failure

Women and minority leaders appointed to leadership positions during times of crisis or instability may be set up for failure. High expectations and pressure are common characteristics of these professions, although success isn’t always guaranteed. As a result, prejudices regarding the competence and leadership potential of women and minority leaders may be strengthened, harming their careers and reputations.

2. Increased Scrutiny and Bias

Women and minority executives may experience more scrutiny and bias while taking on difficult leadership positions. They could be held to harsher accountability requirements and higher performance standards than their male or non-minority counterparts.

3. Undermined Credibility

Women and minority leaders who are put in charge during times of crisis may find it difficult to build trust with team members and stakeholders. It may be harder for them to lead effectively if they are perceived as being less skilled or competent than their male or non-minority peers.

The risks of the glass cliff highlight the necessity of structural reform in the workplace. Organizations may foster a more equitable and inclusive workplace that is advantageous to all employees by addressing the biases and obstacles that impede women and minorities from thriving in leadership positions.

How Can Women Prevent Falling Off the Glass Cliff?

Although there are no quick fixes for the glass cliff because it is a systemic problem, women must utilise the following techniques to avoid slipping off:

1. Create a Strong Skill Set for Yourself

Women leaders who have a strong skill set are better able to handle demanding leadership jobs. Engage in learning and development activities that can aid in your growth of abilities in strategic thinking, conflict resolution, and decision-making.

2. Be Proactive About Seeking Out Opportunities

Women leaders may not always be given a chance to hold leadership positions; therefore, it’s crucial to be proactive in looking for fresh opportunities and demanding jobs. Speak up for yourself and look for fresh challenges that will allow you to expand your knowledge and expertise.

3. Have a Strong Personal Brand

Women leaders with strong personal brands are more likely to be viewed as competent executives. Work on crafting a message that is distinct from others and consistent with your abilities, expertise, and leadership style.

Instances Where Glass Cliffs Were Seen in Real Life

The glass cliff is a phenomenon where minority or women executives are more likely to be nominated to leadership positions in unstable or crisis-ridden environments where failure is more likely. Examples of the glass cliff include the following:

1. Yahoo’s Marissa Mayer

In 2012, Marissa Mayer was named CEO of Yahoo, a digital business that was in financial trouble and was losing market share to Google and Facebook.

2. Ellen Pao at Reddit

In 2014, Reddit, a well-known social media site dogged by controversy and scandal, nominated Ellen Pao as interim CEO. Users who disapproved of Pao’s leadership style and perceived a lack of transparency subjected her to harsh criticism and abuse, and she eventually decided to leave the company.

3. Mary Barra at GM

In 2014, Mary Barra was appointed as General Motors’ first female CEO. At the time, the firm had just come out of bankruptcy and was dealing with a number of significant recalls involving faulty ignition switches. Barra was given the difficult and stressful responsibility of handling the consequences of the recalls and repairing the company’s reputation.

4. Theresa May as UK Prime Minister

In 2016, immediately after the Brexit referendum, which had brought about political and economic unrest in the nation, Theresa May was appointed UK Prime Minister. May was under tremendous pressure to negotiate a successful Brexit deal and keep the Kingdom stable, but she ultimately found it difficult to win support for her ideas and was compelled to leave in 2019.

In general, the glass cliff is a phenomenon that can be harmful to minority and female leaders since it may set them up for failure in circumstances where success is uncertain. Therefore, a dedication to diversity and inclusion in leadership roles is necessary to address the glass cliff, as is a readiness to support and assist leaders who are dealing with difficult situations.

Conclusion

To sum up, the glass cliff is a serious and alarming phenomenon that has an impact on women and minority leaders. When women or members of minorities are nominated to leadership positions during periods of crisis or unrest, they may be subjected to more scrutiny and performance expectations than their male or non-minority counterparts. This may make it harder for them to succeed and may contribute to a larger pattern of minority and female underrepresentation in leadership roles.

A commitment to diversity and inclusion in leadership is necessary to address the “glass cliff,” as is an understanding of the difficulties and hindrances women and minorities encounter in these positions.

* Note: The author of this article has referred to the research, “The Glass Cliff: Evidence that Women are Over-Represented in Precarious Leadership Positions”, by Michelle Ryan and Alex Haslam, published in the Journal of Occupational and Organizational Psychology.’

Read Next:
1. Most Important Legal Rights of Women in India
2. What Are the Rights of Private Sector Employees in India?
3. Protection of Minorities in the Indian Constitution
4. What Are the Legal Consequences of Sexual Harassment in the Workplace?

What Is Glass Cliff in Corporate Law – Explained With Real Examples and Tips
Yugandhara

Cybercrimes are rising rapidly with the evolution of technology and the internet. Defined as a criminal activity taking place on or over the medium of computers, the internet, or other technology recognised by the Information Technology Act, cybercrimes are the most devastating and prevalent crimes in the post-internet, modern era.

The usage of computers and other allied technology in daily life is snowballing and has become a mode facilitating user convenience. Although a medium infinite and immeasurable, it has its dark sides too.

Some newly emerged cybercrimes are cyber stalking, cyber pornography, cyber terrorism, email spoofing, cyber defamation, etc. Out of these all, identity theft (ID) theft seems to be the most severe crime in cyberspace.

Let us now understand what exactly is Identity (ID) theft, and the modes in which it is performed. We shall also glance at the Indian provisions with respect to this cybercrime, and a few landmark judgments.

Must Read: Rise of Cybercrime in India: Reasons, Impacts & Safety Measures

Identity Theft Explained

Identity theft is a sort of fraud that entails the unauthorised use of another person’s personal information to carry out unlawful acts or to get financial or other rewards. Name, address, Aadhar card number, PAN card, credit card numbers, and other private information about the victim are some examples of this data.

Identity thieves can use personal information to open credit card accounts, obtain loans, make purchases, or even submit a job application in the victim’s name. The victim’s information might also be used to access private financial accounts or apply for government benefits. Financial losses, damaged credit, and emotional anguish can all be significant and long-lasting effects of identity theft.

Modes of Identity Theft

1. Malware

Malware is short for malicious software, which refers to any software that is intentionally designed to cause harm to a computer system, network, or user. It may appear as viruses, worms, Trojans, ransomware, spyware, adware, and more.

Malware can be used to collect sensitive data that can be exploited for identity theft, including passwords, credit card numbers, and other private information. A keylogger, which captures everything a user types on their keyboard, including passwords and other confidential information, is one of the most popular types of malware employed for this purpose.

It’s crucial to adhere to the best practices for online security, such as using strong and distinctive passwords, to prevent identity theft brought on by malware.

2. Hacking

Hackers can obtain personal information and use it for fraud via several methods, including malware infections and database breaches.

A hacker might, for instance, urge the receiver to submit their login details or other personal information in an email that appears to be from a reputable source, such as a bank or online retailer. Likewise, a database breach could allow a hacker to access a company’s database without authorization and take financial information, Aadhar Card number, PAN card, and other sensitive data.

3. Phishing

Phishing is a type of online scam used frequently to obtain sensitive data, including passwords, credit card numbers, and other personal information that can be exploited for identity theft.

Phishing attempts can appear as emails, texts, phone calls, or even messages on social media that claim to be from a reputable source like a bank, online merchant, or government agency.

In order to obtain sensitive information, such as login credentials or financial information, the attacker must successfully mislead the recipient.

Once the attacker obtains this information, they can use it to open new credit card accounts or carry out illicit purchases while using the victim’s identity.

Indian Laws Related to Identity Theft

Identity theft is a criminal offence in India, and there are laws and regulations in place to prevent and punish such acts. Some of the key laws related to identity theft in India are mentioned below.

Information Technology Act of 2000

The Information Technology Act (IT Act), a piece of legislation adopted in India, makes no mention of preventing identity theft in particular. The Act does, however, include provisions for the punishment of a number of cybercrimes, such as hacking and illegal access to private data.

A person can be held accountable for damages and compensation under sections 43 and 66 of the IT Act if they wilfully and unlawfully access, download, copy, or extract any data or information from a computer resource.

Furthermore, the IT Act’s section 72 addresses the protection of personal data and addresses the problem of data security.

While the IT Act does not specifically address identity theft, it provides legal provisions for the punishment of unauthorized access to sensitive information and personal data protection. To prevent identity theft, it is important to be cautious about sharing personal information online and secure online accounts with strong passwords and multi-factor authentication.

Section 66C: This section outlines the penalties for identity theft and specifies that they can include either a term of imprisonment of up to three years or a fine of up to one lakh rupees.

Section 66D: This section addresses the penalties for impersonating someone else to cheat using a computer resource and specifies a sentence of imprisonment for a term that may not exceed three years, a fine that may not exceed one lakh rupees or both.

The Indian Penal Code of 1860

The Indian Penal Code (IPC), which dates back to 1860, contains provisions to punish numerous offences, including those involving identity theft. Identity theft is covered under the following sections of the IPC:

Section 419: This section addresses cheating by impersonation and prescribes a punishment extending up to three years of imprisonment, or fine, or both.

Section 420: This section deals with defrauding and dishonestly procuring the handover of the property, and it lays forth a punishment that includes both a fine and a term of imprisonment that can last up to seven years.

The IPC also includes provisions for penalties in situations of document forgery and passing off a fabricated document as a real one.

Landmark Judgments Related to Identity Theft in India

Given below are a few recognised judgements related to the development of identity theft as a cybercrime in India.

1. Binod Sitaram Agarwal vs the State of Maharashtra (2018)

In this instance, the applicant was detained in connection with offences that violated sections 43 and 66C of the Information Technology Act 2000. When the charge sheet was filed, sections 408 of the Indian Penal Code and section 70 of the Information Technology Act were added.

2. K Sudhakar vs N Balaji (2017)

Facts: K. Sudhakar, the father-in-law of respondent N. Balaji, obtained his savings account statement from HDFC Bank without his consent. The respondent filed a private complaint stating that he has a savings account in HDFC Bank, Thillai Nagar Branch, Tiruchirapalli and for the above-stated reason, the petitioner has committed offences punishable under sections 66B and 66C of the Information Technology Act read with section 406 and section 416 of IPC.

Held: If the said bank had issued the bank statement to the petitioner without the consent of the respondent, utmost he can ask for any relief that is available under the law against the bank authorities. He cannot prosecute the petitioner in court instead. Therefore, this court is of the view that continuance of the proceedings against the petitioner would result in an abuse of procedure of the court, and hence, these proceedings must be quashed.

Conclusion

Millions of people are impacted by the growing issue of identity theft each year. It may result in serious monetary loss, severe mental suffering, injury to one’s reputation, and loss of credit. It’s critical to be diligent in securing your personal information, maintaining the security of your passwords, and routinely checking your credit reports if you want to prevent identity theft.

The use of services and tools like fraud alerts and credit freezes can assist you in detecting and recovering from identity theft. You can lessen your chance of falling victim to this crime by taking proactive steps to protect your identity.

Read Next:
1. Cyber Crime and Punishment in India
2. Domain Name Disputes and Their Redressal

What Is Identity Theft and Its Laws in India?
Yugandhara

India has long been the world leader when it comes to historically successful entrepreneurship prospects. High net worth individuals (HNIs), international funds, venture capitalists, angel investors, and many others in the investor community continue to be optimistic about the growth potential of the rapidly expanding Indian startup ecosystem.

While government programmes like Startup India, Stand-Up India, and Digital India help the Indian startup ecosystem grow favourably, the phrase “Angel Tax” continues to be a source of anxiety for the whole startup scene in India.

Significant amendments were noted in the Finance Bill of 2023 with respect to the Angel Tax. We shall discuss them in this article.

What Is Angel Tax?

Angel tax (often referred to as the “section 56(2) (vii b) tax” in India) is the tax on the capital or funding that a startup has received from an angel investor.

An angel investor, a private investor, a seed funder or an angel funder is a wealthy individual who contributes his wealth to start-up businesses or entrepreneurs who are starting off. In an effort to stop the flow of unaccounted money into the economy and avoid money laundering, the angel tax was implemented as a part of the Finance Act of 2012.

Nonetheless, the introduction of the angel tax has caused controversy because it is believed to be a significant roadblock to the development of India’s startup ecosystem. Due to the complicated rules and high tax rates associated with the angel tax, startups have had difficulty acquiring money, which has resulted in discouraged investments and slowed innovation.

Earlier vs the Finance Bill, 2023

Previously, as per section 56(2) (vii b) of the Income Tax Act, 1961, any premium received by a company (other than a publicly listed company) from a resident exceeding the Fair Market Value (FMV) of the share issued, was liable to tax in the hands of such company. Such premium exceeding the FMV shall be considered ‘income from other sources’ and hence, as a result, shall be taxable.

Now, the proposed amendment is such that clause (vii-b) of sub-section (2) of section 56 of the Income Tax, 1961 is to be amended to delete the phrase “being a resident” (the “Amended section 56”). Unlisted, privately held companies that are not substantially owned by the public will need to be on the lookout for the amended section 56 becoming applicable to share issuances to or funding from persons residing outside India once this amendment takes effect with regard to the assessment year 2024–25. (the non-residents/persons residing outside India).

The government has been continually working on the easement of conducting business in India. Companies have long raised significant FDIs from foreign non-resident investors at a premium without it affecting the tax regime or them being levied upon by taxes.

Now, these non-residents that undertake an FDI transaction are always subject to price guidelines. This is as per the FEM Rules, 2019. These rules mandate that companies shall not provide securities to a non-resident at a price that is lower than the fair evaluation of such equity instruments.

Therefore, in simple terms, the Finance Bill 2023 suggests an amendment in section 56(2) VII B of the Income Tax Act. As a result, it now involves foreign investors as well, under the ambit of tax. Hence when a startup shall raise funding from a foreign investor, that funding shall also be considered ‘income’ and will most certainly be taxable as a result of the amendment.

Will It Affect Startup Funding in India?

The amendment clearly states that the startups registered under DPIIT (Department for Promotion of Industry and Internal Trade) and other government-recognized public companies shall remain out of the purview of proposed changes. The changes shall only be applicable to private, unregistered companies in India that are not registered under the DPIIT.

Conclusion

As was also previously prevalent, investee firms will have to consider for all persons (not exempting non-residents) the amendments now prescribed in section 56.

It must be noted that the exempted categories remain intact for now, and it is suggested that:

1. The non-resident investors may start considering setting up funds in India in the exempted categories, and
2. Early-stage companies may consider procuring registration as a ‘startup’ with DPIIT and avail of the benefits of an exempted category by meeting the requirements prescribed for the same.

Read Next:
1. 13 Characteristics of a Company
2. What Is Moonlighting, Its Types, Legality, and Impacts?
3. Understanding Income Tax in India With All Tax Rates

What Is Angel Tax in the Indian Finance Bill of 2023?
Yugandhara