Updates on Companies Act, 2013
- Exemption from various provisions of the Companies Act, 2013 to Foreign Companies and Companies incorporated outside India that are offering securities in IFSC:
Vide Notification dated 05th August, 2021, MCA has given exemptions to certain class of companies which are offering securities in the International Financial Services Centre (IFSC) set up under Section 18 of the Special Economic Zones (SEZ) Act, 2005 from the provisions of Section 387 to 392 insofar as they relate to offer for subscription in securities, requirements related to the prospectus and all other matters incidental thereto.
This exemption is available to Foreign companies and Companies incorporated or to be incorporated outside India, whether the company has or has not established or when formed may or may not establish a place of business in India,
Further the specification of definition rules and registration of Foreign companies rules are also amended to provide an explanation that electronic based offering of securities, subscription thereof or listing of securities in IFSC set up under section 18 of SEZ Act, 2005 shall not be construed as “electronic mode” for the purpose of 2(42) of the Act.
- Relaxations from Online proficiency self- assessment test:
Vide Notification dated 19th August, 2021, the Companies (Appointment and Qualification of Directors) Rules, 2014 have been amended to insert few more relaxations for Independent Directors. As per the new amendment,
- Individuals who are or have been for at least 10 years as
- An advocate of a court or
- In practice as a Chartered accountant or
- In practice as a Cost accountant or
- In practice as a Company secretary
- An Individual who has served for a total period of not less than 2 years in the pay scale of Director or equivalent or above in any Ministry or Department of the Central or State Government and has experience in handling specified areas
are exempted from passing the online proficiency self-assessment test.
- FAQs on Corporate Social responsibility:
The MCA has released General Circular No. 14/2021 for issuing clarifications including FAQ’s on various issues concerning CSR. This Circular has been issued in supersession of all the earlier FAQ’s released by the Ministry. The same may be accessed through the link provided below:
SEBI Updates – September, 2021
- Permitting non-scheduled Payments Banks to register as Bankers to an Issue
SEBI has permitted non-scheduled Payments Banks to register as Bankers to an Issue. In continuation to this, SEBI vide Circular dated 03 August, 2021 permitted such other banking company, as specified by the Board, from time to time, to carry out the activities of Bankers to an Issue (BTI), in addition to scheduled banks. The non-scheduled payments banks which have prior approval from RBI, is eligible to act as a BTI upon fulfilment of conditions as specified under the BTI Regulations.
- Modification in Operational Guidelines for FPIs and DDPs pursuant to amendment in SEBI (Foreign Portfolio Investors) Regulations, 2019
SEBI (Foreign Portfolio Investors) Regulations, 2019, has been amended vide notification dated August 04, 2021. The amended notification is that “The contribution of resident Indian individuals shall be made through the Liberalised Remittance Scheme (LRS) notified by Reserve Bank of India and shall be in global funds whose Indian exposure is less than 50%.”
- Maintenance of Current Accounts in multiple banks by Mutual Funds
Mutual Funds currently maintain current accounts in multiple banks having presence beyond top 30 cities for receiving subscription amount , payment of redemption proceeds, dividends etc., which enables the investor to transact at their choice which facilitates faster transfer of funds.
Based on Reserve Bank of India (“RBI”)instruction to Bank not open current accounts for customers who have availed credit facilities in the form of cash credit / overdraft from the banking system. Mutual fund industry has represented that subscription in units of open ended mutual fund schemes is akin to continuous NFO and redemption of units of mutual fund schemes is akin to buy back or repurchase of shares.
Based on the request of mutual fund industry, SEBI vide circular dated 04 August, 2021 it is clarified that mutual funds should maintain current accounts in an appropriate number of banks for the purpose of receiving subscription amount and for payment of redemption/dividend/brokerage/ commission etc. to facilitate financial inclusion, convenience of investors and ease of doing business.
- Requirement of minimum number and holding of unit holders for unlisted Infrastructure Investment Trusts (InvITs)
SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) were amended to provide for the requirement of minimum number and holding of unit holders for unlisted InvITs. Already issued units of registered unlisted InvITs as on date of the circular dated August 04, 2021shall comply with the provisions of (3) of regulation 26B of InvIT Regulations within a period of 6 months from the date of this circular.
- Calendar Spread margin benefit in commodity futures contracts
SEBI had prescribed norms, inter-alia, for providing margin benefit on calendar spread positions in commodity futures contracts. Earlier the calendar spread margin benefit is presently applicable for the first three expiries only. The modified norms which were issued by SEBI vide circular dated August 09, 2021 are as follows-
In case of calendar spreads or spreads consisting of two contract variants having the same underlying commodity (wherein currently 75% benefit in initial margin is permitted, benefit in initial margin shall be permitted when each individual contract in the spread is from amongst the first six expiring contracts.
- Operational Circular for issue and listing of Non-Convertible Securities (NCS), Securitised Debt Instruments (SDI), Security Receipts (SR), Municipal Debt Securities and Commercial Paper (CP)
SEBI ILDS Regulations, 2008 & SEBI NCRPS Regulations, 2013, they have issued multiple circulars covering procedural and operations aspects. SEBI circular dated 10 August, 2021 provides a chapter-wise framework for the issuance, listing and trading of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities or Commercial Paper. For ease of reference, each chapter of this operational circular contains footnotes corresponding to the respective erstwhile circulars which can be accessed by clicking the link mentioned below:
- Guidelines on issuance of non-convertible debt instruments along with warrants (‘NCDs with Warrants’) in terms of Chapter VI – Qualified Institutions Placement of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
In order to streamline procedure of issuance and applicability of Electronic Book Provider platform mechanism on the ‘NCDs portion’, the following has been decided and made applicable for issues wherein the size of NCDs portion is above threshold prescribed under SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and Circulars issued there under:
1. EBP platform mechanism shall be mandatory for ‘NCDs portion’ of the issue (for both stapled and segregated offer) and issuer shall be required to comply with the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and Circulars issued there under.
2. ‘Warrants portion’ of the issue shall be in terms of Chapter VI on Qualified Institutions Placement under ICDR Regulations, 2018.
3. Of the ‘total issue size’ of the issue, at least 40% size shall consist of ‘Warrants portion’. It may be noted that ‘total issue size’ shall mean combined size of NCDs issue and the aggregate size of the warrants portion, including the conversion price of warrants.
4. The segregated offer of NCDs and stapled offer, both shall be exempted from the requirements as prescribed under the Regulations 175(3), 179(2) (a), 180(1), and 180(2) of the ICDR Regulations, 2018.
This circular shall be applicable for all issues of ‘NCDs with Warrants’ made under ICDR
Regulations, 2018, on or after the date of this Circular. Further, Entities involved in the ‘NCDs with Warrants’ issue process are advised to ensure compliance with this circular.
- Disclosure of shareholding pattern of promoter(s) and promoter group entities
Regulation 31(4) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) mandates that all entities falling under promoter and promoter group be disclosed separately in the shareholding pattern on the website of stock exchanges, in accordance with the format(s) specified by the Board.
In the interest of transparency to the investors, all listed entities shall now provide such shareholding, segregated into promoter(s) and promoter groupas per the revised format given in SEBI Circular dated August 13, 2021 whichcan be accessed through the link mentioned below:
- Automation of Continual Disclosures under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015 – System driven disclosures – Ease of doing business
It has been confirmed by Stock Exchanges and Depositories that they have implemented the System Driven Disclosures (hereinafter referred to as SDD) in line with the circular dated September 09, 2020 and the same has gone live from April 01, 2021. It is, therefore, clarified that for listed companies who have complied with requirements of the circular dated September 09, 2020, the manual filing of disclosures as required under Regulation 7(2) (a) & (b) of PIT Regulations is no longer mandatory.
- Tendering of shares in open offers, buybacks and delisting offers by marking lien in the demat account of the shareholders
In consultation with Depositories, Clearing Corporations and Stock Exchanges, it has been decided that a lien shall be marked against the shares of the shareholders participating in the tender offers. Upon finalization of the entitlement, only accepted quantity of shares shall be debited from the demat account of the shareholders. The lien marked against unaccepted shares shall be released. The detailed procedure for tendering and settlement of shares under the revised mechanism is specified in the circular dated August 31, 2021
The said revised mechanism shall be applicable to all the tender offers for which Public Announcement is made on or after October 15, 2021. The detailed circular can be accessed through the link mentioned below:
- Security and Covenant Monitoring’ using Distributed Ledger Technology
In order to strengthen the process of security creation, monitoring of security created, monitoring of asset cover and covenants of the non-convertible securities, a working group comprising of officials from SEBI, Depositories, Stock Exchanges and Trustees Association of India (TAI) was constituted by SEBI. Based on the recommendations of the working group, a platform for ‘Security and Covenant Monitoring System’ (‘system’) hosted by Depositories shall be developed.
The system shall be used for recording and monitoring of the security created and monitoring of covenants of non-convertible securities. The system shall inter alia capture the process of creation of security (viz. due diligence, charge creation etc.), continuous monitoring of covenants by Debenture Trustees (as applicable), credit rating of the non-convertible securities by the Credit Rating Agencies (CRAs) etc. Depositories shall create, host, maintain and disseminate the system for security and covenant monitoring using distributed ledger technology.
- Penalty for Repeated Delivery Default
In order to strengthen the delivery mechanism and ensure market integrity there is a need to put in place a suitable deterrent mechanism to address instances of repeated delivery defaults. In view of the above, in consultation with Clearing Corporations (CCs), the following has been decided:
1.In the case of repeated default by a seller or a buyer, for each instance of repeated default, an additional penalty shall be imposed, which shall be 3 % of the value of the delivery default.
2. Repeated Default shall be defined as an event, wherein a default on delivery obligations takes place 3 times or more during a six months period on a rolling basis.
3.The penalty levied shall be transferred to Settlement Guarantee Fund (SGF) of the Clearing Corporation.
- Extension of time for seeking membership of BSE Administration & Supervision Limited
SEBI issued a Circular dated August 31, 2021 stating that the terms of Regulation 14 of the SEBI (Investment Advisers) Regulations, 2013 granted recognition to BSE Administration & Supervision Limited (“BASL”) a wholly owned subsidiary of BSE Limited, for administration and supervision of Investment Advisers (“IA”),for a period of three years from June 01, 2021. With SEBI vide circular dated June 18, 2021 were advised to seek membership of BASL within three months of the recognition of BASL i.e., by August 31, 2021. Based on the representations received from some of the existing Investment Advisers it has extended the timeline for seeking the membership of BASL by two months (i.e., till October 31, 2021).
- Disclosure of risk-o-meter of scheme, benchmark and portfolio details to the investors
In continuation with SEBI vide circular SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/555 dated April 29, 2021, it is clarified that AMCs shall disclose the following in all disclosures, including promotional material or that stipulated by SEBI:
a. risk-o-meter of the scheme wherever the performance of the scheme is disclosed
b. risk-o-meter of the scheme and benchmark wherever the performance of the scheme vis-à-vis that of the benchmark is disclosed.
- Discipline while opening of Current Accounts by Banks
The RBI on August 06, 2020 has issued a notification highlighting the discipline the banks shall have to follow while opening current accounts and has also introduced restrictions in opening current accounts for the borrowers having exposures of the banking system.
In short, the restrictions are as follows:
i) Customer having banking exposure of Rs.50 crore or more: The non-lending banks are allowed to open only a collection account and the funds shall be remitted to the lending bank at a frequency agreed between the bank and the borrower.
ii) Customer having banking exposure of Rs.5 crore or more by less than 50 crore: The non-lending banks are allowed to open only a collection account.
iii) Customer having banking exposure of less than Rs.5 crore: An undertaking shall be obtained from the customer to the effect that customers shall inform the bank(s), if and when the credit facilities availed by them from the banking system becomes ₹5 crore or more
Vide the notification dated August 04, 2021, the RBI has extended the time till October 31, 2021 for the banks to implement the provisions of the circular issued on August 06, 2020. Further, asked the banks to put in place a monitoring mechanism to ensure that the customers are not put to undue inconvenience during the implementation process.
- Reserve Bank of India (RBI)revises timelines for compliances for Lending Institutions:
The RBI on August 06, 2021 has issued a notification for Resolution Framework for COVID-19-related Stress and revision of timelines.
The key ratios and their sector specific thresholds to be considered by lending institutions while finalising the resolution plans in respect of eligible borrowers under Part B of the Annex to the Resolution Framework for Covid-19 related stress issued earlier on August 06, 2020.
The key ratios consisted of four operational ratios are, Total Debt / EBITDA, Current Ratio, Debt Service Coverage Ratio (DSCR) and Average Debt Service Coverage Ratio (ADSCR), along with the ratio Total Outside Liabilities / Adjusted Tangible Net Worth (TOL/ATNW) representing the debt-equity mix of the borrower post implementation of the resolution plan.
It has been decided to defer the target date for meeting the specified thresholds in respect of the four operational parameters, to October 1, 2022.
- Reserve Bank of India (RBI) announces collateral free loans to self help groups under Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM):
The RBI on August 09, 2021 notified the enhancement of collateral free loans to self-help groups (SHGs) from Rs 10 lakh to Rs 20 lakh under Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM).
In view of the above amendment, Security and Margin which is Para 7.4 of RBI Master Circular dated 01st April 2021 stands modified as under:
- For loans to SHGs up to ₹10.00 lakh, no collateral and no margin will be charged. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.
- For loans to SHGs above ₹10 lakh and up to ₹20 lakh, no collateral should be charged and no lien should be marked against savings bank account of SHGs. However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below ₹10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).”
- Reserve Bank of India (RBI) extends the scope of permitted devices for Tokenisation:
The RBI on August 25, 2021 has issued extension on the permitted device for Tokenisation in reference with Circular dated January 08, 2019 which specifies “Tokenisation – Card transactions”, permitting authorised card networks to offer card tokenisation services to any token requestor, subject to the conditions listed therein.
Earlier the facility was available only for mobile phones and tablets of interested card holders.
RBI has decided to extend the scope of tokenisation to include consumer devices – laptops, desktops, wearables (wrist watches, bands, etc.), Internet of Things (IoT) devices, etc.
This initiative is expected to make card transactions more safe, secure and convenient for the users.