RBI & Foreign Exchange Management Act
a.) External Commercial Borrowings (ECB) by Registered Startups
Reserve Bank of India (RBI) on 27 October 2016 vide AP (DIR Series) Circular No. 13 permits Registered Startups (details here) to raise external commercial borrowings (ECBs) of up to USD 3 million in a financial year. Under this, Funds can be raised with a minimum maturity of 3 years and can be denominated in any freely convertible currency or INR. Most importantly, such ECB can be for any kind of business expenditure (ie no end use restrictions, which is the major rigour in ECB)
- In case of borrowing in INR, the non-resident lender, should mobilise INR through swaps / outright sale undertaken through bank in India.
- The regulator has not prescribed any cost-ceiling or restriction on the end use of the funds raised. Hence the cost shall be mutually agreed between the borrower and the lender.
b.) RBI notification GSR 1002(E) dated 24th October 2016
RBI vide its notification GSR 1002(E) dated 24 October 2016 made an amendment to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May 2000).
Accordingly to this amendment now a wholly owned subsidiary set up in India operating in a sector where 100 per cent foreign investment is allowed in the automatic route and there are no FDI linked conditionalities, may issue equity shares or preference shares or convertible debentures or warrants to the said non-resident entity against pre-incorporation/ preoperative expenses incurred by the said non-resident entity up to a limit of five per cent of its capital or USD 500,000 whichever is less, subject to the below mentioned conditions.
- Within thirty days from the date of issue of equity shares or preference shares or convertible debentures or warrants but not later than one year from the date of incorporation or such time as Reserve Bank of India or Government of India permits, the Indian company shall report the transaction in the Form FC-GPR to the Reserve Bank.
- The valuation of the equity shares or preference shares or convertible debentures or warrants shall be determined on the fair valuation of shares done by a chartered accountant as per the guidelines
- A certificate issued by the statutory auditor of the Indian company that the amount of pre-incorporation/preoperative expenses against which equity shares or preference shares or convertible debentures or warrants have been issued has been utilized for the purpose for which it was received.
c.) DIPP Press Note No. 6 (2016 Series) dated 25 October 2016
The government of India liberalised its FDI policy on other financial services and non-banking Financial Companies. According to this press note 100% FDI under automatic route is allowed for financial services activities regulated by SEBI, IRDA, RBI, NHB, PFRDA or any other financial sector regulator. However, other conditions including minimum capitalisation norms, continue.
Insolvency and Bankruptcy Law
Ministry of Corporate Affairs, vide notification dated November 1, 2016 notified the third tranche of sections. Sub-section (3) of section 1 empowers the Central Government for enforcement of certain provisions of the Insolvency and Bankruptcy Code, 2016. The earlier notification dated 19 August 2016 notified 6 definitions under section 3. The remaining definitions have been notified by virtue of the notification dated 1 November 2016, which shall come into effect from 15 November 2016.
- Insolvency Professional Agencies Section 99 to section 207 [both inclusive]
- Insolvency Professionals (sub section 1c,1e and subsection 2 of section 208 only )
- Inspection And Investigation (Section 217 to 220)
- Amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 shall be amended in the manner specified in the Seventh Schedule of the Act.
- Amendment to the Payment and Settlement Systems Act, 2007 shall be amended in the manner specified in the Ninth Schedule of the Act.
- Amendment to the Limited Liability Partnership Act, 2008 shall be amended in the manner specified in the Tenth Schedule.
- Amendment to the Companies Act, 2013 shall be amended in the manner specified in the Eleventh Schedule of the Act.
Ministry Of Finance vide Notification G.S.R. 1004 In exercise of the powers conferred by section 68 of the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988), the Central Government hereby makes the Prohibition of Benami Property Transactions Rules, 2016 which have come into force from 1 November, 2016.
As per the new law (Benami Transactions (Prohibition) Amendment Act, 2016) which has amended Benami Transactions Act of 1988, whoever is found guilty of the offence of Benami transaction shall be punishable with rigorous imprisonment for a term ranging 1-7 years and shall also be liable to fine which may extend to 25 per cent of the fair market value of the property.
Telecom Regulatory Authority of India
TRAI has invited for written comments from the stakeholders on the Consultation Note on Interoperable Architecture for Enabling Wi-Fi Hotspot. The last date for receipt of comments is 25 November 2015.
Interoperability means an ability of a computer system to run application programs from different vendors, and to interact with other computers across local or wide-area networks regardless of their physical architecture and operating systems. Interoperability is feasible through hardware and software components that conform to open standards such as those used for internet.
Interoperability allows a mobile device to dynamically use the multiple network interfaces available to it so as to maximize user satisfaction and system performance.
Securities Exchange Board of India vide its circular number CIR/CFD/DIL/115/2016 dated 24 October 2016, clarified publication of financial results for insurance companies listed on stock exchange. Accordingly, the insurance companies (life and non-life) shall submit the following disclosures for quarters ending 30 September 2016 and 31 December 2016 in the format as specified by Insurance Regulatory and Development Authority of India (IRDAI).
With respect to the format for Newspaper Publishing Purpose (Standalone/Consolidated), the insurance companies shall continue to follow the format as specified under the aforesaid circulars issued by SEBI. Additional disclosures may also be made as prescribed by IRDAI.
Earlier SEBI circular No. CIR/CFD/CMD/15/2015 dated 30 Nov 2015 specified that for the period ending on or after March 31, 2017, the formats for Unaudited/Audited quarterly financial results to be submitted by the Listed Entities, with the stock exchanges, shall be as prescribed in Schedule III to the Companies Act, 2013. However, Banking Companies and Insurance Companies shall follow the formats as prescribed under the respective Acts/Regulations as specified by their Regulators.
Compilation by Mr. N. Vadiraja and Mr. Deepanshu Singhi