Updates under Companies Act, 2013
Extension of time under LLP Settlement Scheme, 2020:
The Ministry of Corporate Affairs vide its General Circular No.37/2020 dated 9th November, 2020, has extended the date for filing belated documents for a defaulting LLP until 30th November 2020.
In addition to the above relaxation,it is also provided that where the statement of accounts and solvency for the financial year 2019-2020 is signed beyond the period of six months from the end of financial year but not later than 30th November, 2020the same shall not be deemed as non-compliance.
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SEBI Updates
Advisory for Financial Sector Organizations regarding Software as a Service (SaaS) based solutions
Ministry of Electronics & Information Technology, Govt. of India (MoE&IT), has informed SEBI that the financial sector institutions are availing or thinking of availing Software as a Service (SaaS) based solution for managing their Governance, Risk & Compliance (GRC) functions so as to improve their cyber Security Posture. As observed by MoE&IT, though SaaS may provide ease of doing business and quick turnaround, but it may bring significant risk to health of financial sector as many a time risk and compliance data of the institution moves beyond the legal and jurisdictional boundary of India due to nature of shared cloud SaaS, thereby posing risk to the data safety and security. In this regard, Indian Computer Emergency Response Team (CERT-in) has issued an advisory for Financial Sector organizations to ensure complete protection and seamless control over the critical systems at your organizations by continuous monitoring through direct control and supervision protocol mechanisms while keeping the critical data within the legal boundary of India. Further, the compliance of the advisory shall be reported in the half yearly report by stock brokers and DP to stock exchanges and depositories respectively and by direct intermediaries to SEBI with an undertaking stating the compliance of the SEBI circular in this regard. The advisory annexed with this circular shall be effective with immediate effect.
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Amendments to guidelines for preferential issue and institutional placement of units by a listed InvIT
Preferential issue of units shall not be made to any person who has sold or transferred any units of the issuer during the six months preceding the relevant date.
Explanation: Where any person belonging to sponsor(s) has sold/transferred their units of the issuer during the six months preceding the relevant date, the sponsor(s) shall be ineligible for allotment of units on preferential basis.”
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Enhancement of Overseas Investment limits for Mutual Funds
Mutual Funds can make overseas investments subject to a maximum of US $ 600 million per Mutual Fund, within the overall industry limit of US $ 7 billion and can make investments in overseas Exchange Traded Fund (ETF(s)) subject to a maximum of US $ 200 million per Mutual Fund, within the overall industry limit of US $ 1 billion. Mutual Funds shall report the utilisation of overseas investment limits on a monthly basis, within 10 days from end of each month in the format specified in this circular.
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Introduction of “Flexi Cap Fund” as a new category under Equity Schemes
In order to give more flexibility to the mutual funds and taking into account the recommendations of Mutual Fund Advisory Committee (MFAC),a new category named “Flexi Cap Fund” under Equity Schemes will be available with the following scheme characteristics.
Category of Scheme | Scheme Characteristics | Type of scheme (uniform description of scheme) |
Flexi Cap Fund | Minimum investment in equity & equity related instruments – 65% of total assets | An open ended dynamic equity scheme investing across large cap, mid cap, small cap stocks |
Mutual Funds have the option to convert an existing scheme into a Flexi Cap Fund subject to compliance with the requirement for change in fundamental attributes of the scheme in terms of Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996. Scheme under the aforesaid mentioned new category can be launched with effect from the date of this circular.
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Norms regarding holding of liquid assets in open ended debt schemes & stress testing of open ended debt schemes
All open ended debt schemes (except Overnight Fund, Liquid Fund, Gilt Fund and Gilt Fund with 10 year constant duration) shall hold at least 10% of their net assets in liquid assets. For this purpose, ‘liquid assets’ shall include Cash, Government Securities, T-bills and Repo on Government Securities.
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Creation of Security in issuance of listed debt securities and ‘due diligence’ by debenture trustee(s)
In order to secure the interest of investors in listed debt securities and to enable debenture trustee(s) to perform their duties effectively, amendments to the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (“ILDS Regulations) and SEBI (Debenture Trustees) Regulations, 1993 (“DT Regulations”) were approved by SEBI Board and notified vide Gazette Notifications no. 34 and 35 dated October 08, 2020. Further additional guidelines are issued to give effect to above amendment.
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Guidelines for rights issue of units by an unlisted Infrastructure Investment Trust (InvIT)
In order to enable unlisted InvITs to raise further funds, it has been decided to provide a mechanism for raising of funds by unlisted InvITs through rights issue of units.
For the purpose of this circular “rights issue” shall mean an offer of units by an unlisted InvIT to the unit holders of the InvIT as on the record date fixed for the said purpose. The guidelines have been issued w.r.t Condition of Issue, Underwriting, letter of offer, Application, pricing of Units, Timelines, manner of issuance of Units and Allotment For rights issue of units by an unlisted InvIT.
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Investor Grievance Redressal Mechanism:
In order to further strengthen the Investor Grievance Redressal Mechanism, based on
feedback received from market participants and Working Group constituted for the purpose further guidelines have been provided w.r.t timeline, service related complaints, arbitration, stock exchanges, complaints and handling of cases by IGRC, Arbitration etc for resolution of Complaints by Stock Exchange.
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Monitoring and Disclosures by Debenture Trustee(s)
In order to enable debenture trustee(s) to discharge its obligations in respect of listed debt securities, the debenture trustee(s) shall undertake independent periodical assessment of the compliance with covenants or terms of the issue of listed debt securities including for ‘security created’
This Circular provides the guidelines w.r.t monitoring of ‘security created’ / ‘assets on which charge is created, action to be taken in case of breach of covenants or terms of issue, Disclosure on website by debenture trustee, Reporting of regulatory compliance etc.
The provisions of this circular shall come into force w.e.f. quarter endedDecember 31, 2020 for listed debt securities
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Non-compliance with provisions related to continuous disclosures
SEBI has prescribed continuous disclosure norms for issuers of listed Non-Convertible Debt Securities, Non-Convertible Redeemable Preference Shares (NCRPS) and Commercial Papers.
In order to ensure effective enforcement of continuous disclosure obligations by issuers of listed Non-Convertible Debt Securities or NCRPS or Commercial Papers, it has been decided to lay down a similar uniform structure for imposing fines for non-compliance with continuous disclosure requirements after discussion with market participants. The Stock Exchanges shall levy fine and take action in case of non-compliances with continuous disclosure requirements by issuers of listed Non-Convertible Debt Securities and/ or NCRPS and/ or Commercial Papers as specified in the circular
This provisions mentioned in this circular shall come into force for compliance period ending on or after December 31, 2020
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Outsourcing of activities, Business Continuity Plan (BCP) and Disaster Recovery (DR) and Cyber Security and Cyber Resilience framework – Limited Purpose Clearing Corporation (LPCC)
In view of Outsourcing of activities, Business Continuity Plan (BCP) and Disaster Recovery (DR) and Cyber Security and Cyber Resilience framework, towards compliance with requirement under Regulation 7 of SECC Amendment Regulations 2020, the framework governing the outsourcing activities by the LPCC and framework governing arrangements with existing Clearing Corporations for the purpose of BCP and DR, and Cyber Security have been updated.
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Schemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of Rule 19 of the Securities Contracts (Regulation) Rules, 1957
SEBI vide its Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017 has laid down the framework for Schemes of Arrangement by listed entities and relaxation under Rule 19(7) of the Securities Contracts (Regulation) Rules, 1957. This circular provides for further streamline the processing of draft schemes filed with the stock exchanges.
These amendments are aimed at ensuring that the recognized stock exchanges refer draft schemes to SEBI only upon being fully convinced that the listed entity is in compliance with SEBI Act, Rules, Regulations and circulars issued thereunder.
This Circular shall be applicable for all the schemes filed with the stock exchanges after November 17, 2020.
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Testing of software used in or related to Trading and Risk Management
This circular relaxes the requirement of mandatory mock trading sessions to facilitate testing of new software or existing software that has undergone any change of functionality shall be optional if a Stock Exchange provides suitable simulated test environment to test new software or existing software that has undergone any change of functionality
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Introduction of Unified Payments Interface (UPI) mechanism
Unified Payments Interface (UPI) mechanism and an additional mode for application through online (app / web) interface in public issues of securities have been introduced under the following:
SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (ILDS Regulations),
SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 (NCRPS Regulations),
SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 (SDI Regulations) and
SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 (ILDM Regulations)
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FEMA UPDATES NOVEMBER 2020
Discontinuation of certain returns/reports:
In the view to improve the ease of doing business and to reduce the cost of compliance, the existing forms and reports prescribed under FEMA, 1999 were reviewed by the Reserve Bank of India.
Accordingly, it has been decided to discontinue the seventeen (17) returns/reports with effect from November 13, 2020.
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Compounding of contraventions under FEMA,1999:
RBI vide circular dated November 17, 2020 has delegated the power to compound certain contraventions to the Regional Offices/ Sub Offices of the Reserve Bank.
- Contraventions under Foreign Exchange Management (Non –Debt Instruments) Rules, 2019 like issue of shares without approval of RBI or Government, Receiving investment in India from non-resident or taking on record transfer of shares by Investee Company and
- Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations , 2019 (Regulation 3.1(I)(A),4(1),4(2),4(3),4(6),4(7),4(11). shall now be compounded by Regional Offices/ Sub Offices of the Reserve Bank.
It has been further decided by the RBI to discontinue the classification of a contravention as ‘technical’ that was dealt with by way of an administrative/cautionary advice and regularize such contraventions by imposing minimal compounding amount as per the compounding matrix as contained in the ‘Master Direction-Compounding of Contraventions under FEMA,1999’ dated January 01,2016, as amended from time to time.
Further, In respect to public disclosure of compounding order, it has been decided that in respect of the compounding orders passed on or after March 01,2020 a summary information, instead of the compounding orders, shall be published on the Bank’s website in the following format:
Sr.No | Name of Applicant | Details of contravention | Date of compounding order | Amount imposed for compounding of contraventions |
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Establishment of Branch Office (BO)/Liaison Office (LO) /Project Office (PO) or any other place of business in India by Foreign law firms:
As per the Circular issued by the RBI, there shall be no Permission/Renewal of permission granted by Reserve Bank/AD Category-I banks to any foreign law firm for opening of Branch Office/Liaison Office/Project Office in India, till the policy is reviewed based on, among others, final disposal of the matter by Hon’ble Supreme Court.
AD Category – I banks are directed not to grant any approval to any branch office, project office, liaison office or other place of business in India under FEMA for the purpose of practicing legal profession in India.
All other provisions of the BO/LO/PO policy shall remain unchanged.
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Standard Operating Procedure (SOP) For Processing FDI Proposals:
The Department of Industrial Policy and Promotion has issued Standard Operating Procedure (SOP) for processing FDI Proposals.
Proposals for foreign investment in sectors/activities requiring Government approval as per
(i) consolidated FDI policy dated October 15, 2020,
(ii)Foreign Exchange Management (Non-Debt Instrument Rules), 2019
Would now be filed online through the Foreign Investment Facilitation Portal (FIFP).
The applicant is required to make an application as per guidelines and requirements under the FIFP. After the proposal is filed online, DPIIT (The Department of Promotion of Industry & Internal Trade) will identify the concerned administrative Ministry/Department and e-transfer the proposal within 2 days to the concerned Administrative Ministry/Department for processing and disposal of the case.
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