Updates on Companies Act, 2013
- Inclusion of Shops and Establishment Registration application in Incorporation forms:
MCA vide its notification dated 7th June 2021 has included the application for Shops and Establishment Registration also at the time of incorporation of the Company in addition to GST registration, EPFO, ESIC, Profession Tax Registration and opening of bank accounts. The earlier AGILE PRO form has been amended as AGILE-PRO-S to enable this facility.
For further details, the notification can be accessed from the enclosed link.
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2. Manner of transfer of Shares to IEPF account under the provisions of SBO:
MCA vide its notification dated 9th June 2021 has provided for the manner of transfer of shares under Section 90(9) to the IEPF Account. Where there is no application made to the Tribunal for lifting the restrictive order under Section 90(8) within a period of one year from the order, the shares shall be transferred to IEPF Authority within 30 days from the date of becoming due to be transferred to the Fund. For further details, the notification can be accessed from the enclosed link.
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3. Restrictions on Transacting certain agendas through Video Conferencing relaxed:
MCA vide its notification dated 15th June 2021, has omitted the Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 that required certain agenda items to be transacted with physical quorum. Consequently, all agenda items can now be transacted at Video conference or other audio visual means without any restrictions. The relevant notification can be accessed from enclosed link.
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4. New Accounting Standards prescribed for Small and Medium Sized Company:
The Ministry of Corporate Affairs on 23 June 2021, has notified Companies (Accounting Standard) Rules, 2021 which are aimed at revising the definition of Small and Medium Sized Companies (SMCs) and provide them certain exemptions/ relaxations for the applicability of Accounting Standards. For further details, the notification can be accessed from the enclosed link.
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5. Delayed Inclusion or renewal of Independent directors name allowed on payment of additional fees:
MCA vide its notification dated 18th June, 2021 has notified that in case of delay on the part of an individual in applying to the Indian Institute of Corporate Affairs for inclusion of his name in the data bank or for renewal thereof, such application shall be allowed after charging a further fee of Rs.1,000/- for such delay. For further details, the notification can be accessed from the enclosed link.
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6. Relaxation on levy of Additional fees in filing of certain forms:
In continuation to the Ministry’s General Circular dated 03rd June, 2021 MCA has further granted additional time for filing certain specified forms (excluding charge related forms) upto 31st August 2021, that are due for filing between 1st April 2021 to 31st July, 2021 without any payment of additional fees. For further details, the notification can be accessed from the enclosed link.
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7. Further Relaxation of time for filing of Charge Creation and Modification forms:
In continuation to the Circular No. 07/2021, MCA has further allowed a relaxation of time with respect to filing of forms related to creation or modification of Charges and the period beginning from 1st April, 2021 and ending on 31st July, 2021 shall not be reckoned for the purpose of counting the no of days under Section 77 and 78 of the Companies Act. For further details, the notification can be accessed from the enclosed link.
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8. Extension for holding Extra-Ordinary General Meeting through Video Conferencing
Considering the on-going pandemic situation, MCA vide its circular dated 23rd June, 2021 have allowed the companies to conduct EGM through Video Conference or other audio visual means up to 30th December, 2021. For further details, the notification can be accessed from the enclosed link.
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RBI UPDATES
- Resolution Framework – 2.0: Resolution of COVID-19 related stress of Individuals and Small Businesses – Revision in the threshold for aggregate exposure:
Circular on “Resolution Framework – 2.0: Resolution of COVID-19 related stress of Individuals and Small Businesses” dated May 5, 2021 specified the eligible borrowers who may be considered for resolution under the framework which includes: Individuals who have availed of personal loans, Individuals who have availed of loans and advances for business purposes, Small businesses and to whom the lending institutions have aggregate exposure of not more than Rs.25 crore as on March 31, 2021.
Based on review, the threshold for aggregate exposure has been revised from ₹25 crores to ₹50 crores.
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2. Resolution Framework – 2.0: Resolution of COVID-19 related stress of Micro, Small and Medium Enterprises (MSMEs) – Revision in the threshold for aggregate exposure:
Circular on “Resolution Framework 2.0 – Resolution of COVID-19 related stress of Micro, Small and Medium Enterprises (MSMEs)” dated May 5, 2021 states that the aggregate exposure, including non-fund based facilities, of all lending institutions to the MSME borrower should not exceed ₹25 crore as on March 31, 2021.
Based on review, the threshold for aggregate exposure has been revised from ₹25 crores to ₹50 crores.
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3. Payment of margins for transactions in Government Securities by Foreign Portfolio Investors (FPI):
The Reserve Bank of India (RBI) has decided to permit banks in India having Authorized DealerCategory-1 licence under FEMA, 1999 to place margins on behalf of their FPI clients for their transactions in Government securities (including State Development Loans and Treasury Bills), within the credit risk management framework of banks. The decision was made to ease operational constraints faced by FPIs and promoting ease of doing business.
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4. Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021:
The Reserve Bank of India (RBI) said Certificate of Deposit (CD) shall be issued in minimum denomination of Rs 5 lakh and in multiples of Rs 5 lakh thereafter. The Master Direction on Reserve Bank of India (Certificate of Deposit) Directions, 2021 further said CDs shall be issued only in dematerialised form and held with a depository registered with the Securities and Exchange Board of India (SEBI). CDs may be issued to all persons resident in India. Further, banks are not allowed to grant loans against CDs, unless specifically permitted by the Reserve Bank.
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5. Transactions in Government securities by Foreign Portfolio Investors (FPIs): Reporting:
RBI has decided to provide operational flexibility for reporting of Over the counter transactions in Government securities undertaken by the Foreign Portfolio Investors (FPIs) in Government securities, as under:
- FPIs/custodian banks shall report their transactions to the Negotiated Dealing System – Order Matching (NDS-OM) platform within three hours after the close of trading hours for the Government securities market.
- Information about trades undertaken by domestic counterparties with FPIs shall be disseminated by the Clearcorp Dealing Systems (India) Ltd. (CDSL) after one leg of the trade is reported on the NDS-OM platform by the domestic counterparty with a suitable qualifier to indicate that the trade is awaiting counterparty confirmation.
- Domestic market participants, including domestic counterparties to transactions with FPIs, shall continue to report transactions to the NDS-OM platform as per extant practice.
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6. Usage of Automated Teller Machines / Cash Recycler Machines – Review of Interchange Fee and Customer Charges:
The Reserve Bank of India (RBI) has raised the interchange fee that banks can charge on automated teller machine (ATM) transactions from ₹15 to ₹17 per financial transaction and from ₹5 to ₹6 per non-financial transactions.
Customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They are also eligible for free transactions (inclusive of financial and non-financial transactions) from other bank ATMs viz. three transactions in metro centres and five transactions in non-metro centres. Beyond the free transactions, the ceiling / cap on customer charges is ₹20 per transaction.
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7. Risk Based Internal Audit (RBIA):
The Reserve Bank of India extended the Risk Based Internal Audit (RBIA) rules to Housing Finance Companies (HFCs).
The RBI decided that all deposit taking HFCs, irrespective of their size, and non-deposit taking HFCs with asset size of ₹5,000 crore and above would come under the Risk Based Internal Audit (RBIA) rules.
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8. Declaration of dividends by NBFCs:
The Reserve Bank of India (RBI) prescribed the guidelines on distribution of dividend by NBFCs to infuse greater transparency and uniformity in the practice.
The board of directors, while considering the proposals for dividend, will take into account supervisory findings of the Reserve Bank (National Housing Bank (NHB) for HFCs) on divergence in classification and provisioning for non-performing assets (NPAs), qualifications in the auditors’ report to the financial statements; and long-term growth plans of the NBFC
The NBFCs will need to comply with the minimum prudential requirements to be eligible to announce dividend.
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9. Appointment of Managing Director (MD) / Whole-Time Director (WTD) in Primary (Urban) Co-operative Banks:
The Reserve Bank prescribed the educational qualifications and ‘fit and proper’ criteria for managing directors (MDs) and whole-time directors (WTDs) of primary urban cooperative banks and barred MPs and MLAs from these posts. It further stated that the MD/WTD should be a post graduate or have qualifications in finance discipline. He or she could be either chartered/cost accountant, MBA (finance) or have a diploma in banking or cooperative business management.
The person should not be below 35 years of age or more than 70 years, it added.
The person shall have a combined experience of at least eight years at the middle/senior management level in the banking sector (including the experience gained in the concerned UCB) or non-banking finance companies engaged in lending (loan companies) and asset financing.
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10. Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021:
The prudential borrowing limits for transactions in Call, Notice and Term Money Markets have been revised. The revised table is as under:
| Participant Category | Prudential Limit |
| Scheduled Commercial Banks (including Small Finance Banks) | Call and Notice Money: (i) 100% of capital funds, on a daily average basis in a reporting fortnight, and (ii) 125% of capital funds on any given day. Term Money: (i) Internal board approved limit within the prudential limits for inter-bank liabilities. |
| Payment Banks and Regional Rural Banks | Call, Notice and Term Money: (i) 100% of capital funds, on a daily average basis in a reporting fortnight, and (ii) 125% of capital funds on any given day. |
| Co-operative Banks | Call, Notice and Term Money: (i) 2.0% of aggregate deposits as at the end of the previous financial year. |
| Primary Dealers | Call and Notice Money: (i) 225% of Net Owned Fund (NOF) as at the end of the previous financial year on a daily average basis in a reporting fortnight. Term Money: (i) 225% of Net Owned Fund (NOF) as at the end of the previous financial year. |
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11. New Definition of Micro, Small and Medium Enterprises- Clarifications:
Union Cabinet has approved the revised new definition of the MSMEto boost growth of small companies. The MSMEs have been redefined on the basis of investment limit and turnover size.
Revised definition of MSME:
- Micro Units: Companies with Investments up to Rs 1 crore& Turnover of below Rs 5 crore.
- Small Units: Companies with Investment of up to Rs 10 crore& Turnover of below 50 crore
- Medium Units: Companies with Investment of up to Rs 50 crore& Turnover of below Rs 250 crore
Paragraph 2.2 (i) of RBI circular dated August 21, 2020 stands modified as under:
“The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till December 31, 2021”.
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SEBI Updates
- ‘Off – market’ transfer of securities by FPI
The Finance Act, 2021 provides tax incentives for relocating foreign funds to International Financial Services Centre (IFSC) in order to make the IFSC in GIFT City a global financial hub.
In view of the above objective and to further facilitate such ‘relocation’, it has been decided that a FPI – (‘original fund’ or its wholly owned special purpose vehicle) may approach its DDP for approval of a one-time ‘off – market’ transfer of its securities to the ‘resultant fund’. The DDP after appropriate due diligence may accord its approval for a one – time ‘off – market’ transfer of securities for such relocation. The detailed circular can be accessed through the link mentioned below:
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2. Streamlining the process of IPOs with UPI in ASBA and Redressal of investor grievances
SEBI vide its Circular dated March 16, 2021 had put in place measures to have a uniform policy to further streamline the processing of ASBA applications through UPI process among intermediaries / SCSBs and also provided a mechanism of compensation to investors.
The stakeholders have approached SEBI seeking additional time for implementing the system changes given the prevailing uncertainty due to the COVID – 19 pandemic. The implementation timelines for the provisions can be access through the link mentioned below:
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3. Circular on Enhancement of Overseas Investment Limits
The Para 1 of SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/225 dated November 05, 2020 specified the overseas investment limits per Mutual Fund. Based on the representations received from Mutual Fund industry to enhance the investment limits per Mutual Fund, the limits are being revised. The detailed circular can be accessed through the link mentioned below:
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4. Centralized Database for Corporate Bonds/Debentures
The SEBI circular on ‘Centralized Database for Corporate Bonds/Debentures’ mandated Depositories to jointly create, host, and maintain a Centralized Database of corporate bonds held in demat form.
Pursuant to discussions with market participants, it has been decided to further streamline the database and provide further ease of access of information for investors. It is proposed to provide an updated list of data fields to be maintained in the database along with the manner of filing the same as prescribed in the said circular.
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5. Circular on Potential Risk Class Matrix for debt schemes based on Interest Rate Risk and Credit Risk
SEBI, vide its dated October 6, 2017 and December 4, 2017 on “Categorization and Rationalization of Mutual Fund Schemes”, has specified scheme categorization based on scheme characteristics.
Further, SEBI, vide its dated October 5, 2020 on “Product Labeling in Mutual Funds-Risk-o-Meter”, has advised the Mutual Funds to indicate risk taken by the scheme as on the end of the month. The Risk-o-Meter as specified captures the actual risk in the portfolio taken by the fund manager but there is also a need for disclosure of the maximum risk the fund manager can take in the scheme.
Based on the recommendation of the Mutual Fund Advisory Committee (MFAC) and discussions held with the mutual fund industry, it has been decided that all debt schemes also be classified in terms of a Potential Risk Class matrix consisting of parameters based on maximum interest rate risk and maximum credit risk
For the purpose of alignment of the existing schemes with the provisions of this circular, each scheme shall be placed in one of the 9 cells specified at Table 2 of this circular and This would not be considered as a change in fundamental attribute. The detailed circular can be accessed through the link mentioned below:
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6. Revised Framework for Regulatory Sandbox
To promote innovation in the securities market, SEBI had issued framework for Regulatory Sandbox vide circular no.: SEBI/HO/MRD – 1/CIR/P/2020/95 dated June 05, 2020. In order to enhance the reach and achieve the desired aim, the eligibility criteria of the Regulatory Sandbox are revised. The revised framework can be viewed by accessing the link mentioned below:
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7. Relaxation from the requirement of minimum vesting period in case of death of employee(s) under SEBI (Share Based Employee Benefit) Regulations, 2014
Under regulation 18(1) and 24(1) of the SEBI (Share Based Employee Benefit) Regulations, 2014 (“SBEB Regulations”) provides that there shall be a minimum vesting period of one year in case of employee stock options (“options”) and stock appreciation rights (“SAR”). Further, under regulation 9(4) of the SBEB Regulations states that in the event of death of the employee while in employment, all the options, SAR or any other benefit granted to him /her under a scheme till such date shall vest in the legal heirs or nominees of the deceased employee.
But, in view of COVID-19 pandemic situation, it has provided certain reliefs to the families of deceased employees. The detailed circular can be accessed by the link mentioned below:
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8. Settlement of Running Account of Client’s Funds lying with Trading Member (TM):
SEBI had extensive consultations with Stock Exchanges and industry representatives, to devise a framework to mitigate the risk of misuse of client’s funds. The proposal was also discussed in the meeting of Secondary Market Advisory Committee.
SEBI has partly modified the earlier circulars on settlement of running accountClient’s Funds lying with Trading Member (TM)
The revised guidelines can be viewed by accessing the below circular.
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9. Automation of Continual Disclosures under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015 -System driven disclosures for inclusion of listed Debt Securities:
SEBI, vide circular dated September 09, 2020 implemented System Driven Disclosures for member(s)of promoter group and designated person(s)in addition to the promoter(s)and director(s)of company(hereinafter collectively referred to as entities) under Regulation 7(2) of PIT Regulations pertaining to trading in equity shares and equity derivative instruments i.e. Futures and Options of the listed company(wherever applicable) by the entities.
It has now been decided to include the listed debt securities of equity listed companies under the purview of the said System Driven Disclosures for the entities.
The detailed circular can be accessed by the link mentioned below:
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10. Framework for administration and supervision of Investment Advisers under the SEBI (Investment Advisers) Regulations, 2013:
As per Regulation 14 of the SEBI (Investment Advisers) Regulations 2013 (“IA Regulations”), SEBI may inter-alia recognize any body or body corporate for the purpose of regulating Investment Advisers (“IA”)and delegate administration and supervision of the IAs on such terms and conditions as may be specified. Accordingly, an entity granted recognition under the aforesaid Regulation shall be designated as “Investment Adviser Administration and Supervisory Body” (“IAASB”)and shall be entrusted with the administration and supervision of IAs.
In this regard, BSE Administration & Supervision Limited (BASL), a wholly owned subsidiary of BSE Limited, has been granted recognition as IAASB for a period of three years from June 01, 2021.The details may be perused in the Press Release issued by SEBI on June 14, 2021
The detailed circular can be accessed through the link mentioned below:
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11. Norms for investment and disclosure by Mutual Funds in Derivatives
SEBI vide Circular No. Cir/IMD/DF/11/2010 dated August 18, 2010 has, inter alia, prescribed the guidelines for participation of mutual fund schemes in Interest Rate Swaps (IRS). In this regard based on the feedback received from the industry, it has been decided to modify paragraph 8 of the aforesaid circular.
The revised para 8 can be viewed by accessing the following link:
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12. Circular on Prudential norms for liquidity risk management for open ended debt schemes
SEBI vide circular SEBI/HO/IMD/DF3/CIR/P/2020/229 dated November 6, 2020 has specified norms regarding holding of liquid assets in open ended debt schemes & stress testing of open ended debt schemes. A committee was set up to deliberate on norms regarding holding of liquid assets in open ended debt schemes.
Based on the recommendations of the said committee, AMFI is advised to prescribe a suitable framework, in consultation with SEBI, for liquidity risk management for open ended debt schemes within a period of one month from the date of issuance of this circular. The said framework shall be adopted by all AMCs.
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13. Alignment of interest of Key Employees of Asset Management Companies (AMCs) with the Unit holders of the Mutual Fund Schemes
SEBI vide Circular no. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/553 dated April 28, 2021, specified provisions with regard to ‘Alignment of interest of Key Employees of Asset Management Companies (AMCs) with the Unit holders of the Mutual Fund Schemes’. The aforesaid circular was to be applicable with effect from July 01, 2021. However, based on the feedback received from stakeholders, it has been decided to extend the date of implementation of the circular to October 01, 2021.
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14. Circular on Amendment to SEBI (Alternative Investment Funds) Regulations, 2012
SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), have been amended and notified on May 05, 2021. Glitch of the amendment as follows;
1. Framework for AIFs to invest simultaneously in units of other AIFs and directly in securities of investee companies
2. Applicability of Code of Conduct on key management personnel
3. Clarifications with respect to Investment Committee
The said amendment can be accessed through the link mentioned below:
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15. Cross Margin in Commodity Index Futures and its underlying constituent futures or its variants:
SEBI has prescribed norms, inter-alia, for providing margin benefit on spread positions in commodity futures contracts, vide various circulars. In order to improve the efficiency of the use of the margin capital by market participants, it has been decided to introduce cross margin benefit between Commodity Index futures and futures of its underlying constituents or its variants. This shall reduce the cost of trading and may lead to enhanced liquidity in both the Commodity index futures and its underlying constituent futures or its variants.
The detailed circular can be accessed through the link mentioned below:
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16. Relaxation in timelines of compliance with regulatory requirements
In view of the situation arising due to COVID-19 pandemic, lockdown imposed by the Government and representations received from Stock Exchanges, SEBI had earlier provided relaxations in timelines for compliance with various regulatory requirements by the trading members / clearing members / depository participants. Later, vide circulars were passed for timelines / period of exclusion were further extended for certain compliance requirements. The detailed circular can be accessed by clicking the link mentioned below:
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