Category Archives: regulatory updates

Creche rules notified in Karnataka for establishments with 50 or more employees

Karnataka State Government vide Gazette Notification No.LD 127 LET 2018 dated August 8 2019, notified the Karnataka Maternity Benefit (Amendment) Rules, 2019 (“Karnataka Creche Rules”), wherein new rules relating to crèche facilities is inserted in the Karnataka Maternity Benefit Rules, 1966.

Earlier, the Central Government vide Gazette Notification dated March 28, 2017 had amended the Maternity Benefit Act, 1961 (“Act”) by inserting a new Section 11A mandating every establishment with fifty or more employees to have the facility of crèche and also to intimate in writing and electronically to every woman at the time of her initial appointment regarding every benefit available under the Act.  Further, the Central Government vide Gazette Notification No.S.O. 1026(E) dated March 31 2017, & S.O. 1049 (E) dated April 3 2017, had notified that the crèche related provision will be effective from July 1, 2017.

Further, the Government of India vide its Circular dated November 17 2017, requested that the State Governments being the appropriate Government under the Act, may take immediate action to frame and notify rules for the crèche facilities. The Karnataka State Government had published the draft rules on July 21 2018, inviting comments from the public and the present Karnataka Creche Rules was notified effective from the date of publication in the Official Gazette.

The compliance under the Karnataka Creche Rules is shown in the below table:

Standards Compliance Requirements
Number of Creches
  • One crèche for use of children below 6 years of age for every thirty children
  • Creche facility to be provided to employees of all types of employment like permanent, temporary, regular, daily wage, contract labour etc.
Location
  • To be situated within half a kilometre from the gate of the establishment
  • Easy access to the parents
  • To be away from excessively noisy process or dust/fumes/odours etc.
Building
  • Construction of room height of at least 9 feet with heat resistant material and waterproof with fencing
  • 5 Square Feet floor area for each child in crèche
  • Shady open-air playground well maintained/safe/secure or ensure safety/security in case of use of public playgrounds or parks
  • Artificial lightning to be connected with emergency power back up
  • Kitchen or in its absence, employer to make available hygienic food/beverages
  • Dedicated water purifier & washbasins at 1 for every 15 children
  • Washroom adjoining crèche with a separate facility for drying of soiled clothes and change of dresses
  • Separate ‘Latrine’ for children at 1 for every 20 children and separate ‘Latrine’ for staff/mothers adjoining the bathroom
Facilities
  • To be open 24/7 for employees working in shifts  with not more than eight hours a day per shift
  • Uniforms and clean clothes for staff as well as children
  • Water supply at the rate of 5 gallons per child per day
  • Supply of clean towels, oil and soap
  • Play and teaching materials, display of daily schedule/norms of child safety etc.
  • Medical check-up of children before admission and once in two months
  • Recording of Body-Mass Index once a month and other medical examination to be stored in the crèche
  • 250 ml of milk per child below the age of two years and adequate refreshments for child above two years
Equipments
  • Cradles
  • Cots
  • Beds
  • Mattresses
  • Cotton Sheets
  • Utensils to feed
  • Furniture for child and parents
  • Rubber sheets
  • Blankets
  • Pillow
  • First Aid Kit/ Medicine Kit
  • Toys
Staff
  • One women ‘Teacher cum Warden’ who is Government recognized qualification  holder & training in childcare
  • One woman ‘Creche Attender’ who is qualified or trained in midwifery
  • One woman ‘Ayah’ for every 10/15 children

Source: Kindly click here to access the notification

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RBI on Processing of e-mandate on cards for recurring transactions

Reserve Bank of India (“RBI”) vide its notification on August 21 2019 has permitted the processing of e-mandate on cards for recurring transactions (“Notification”). RBI has put in place various safety measures for card payments including the requirement of additional factor of authentication (AFA), especially for ‘card-not-present’ transactions. With this view in mind RBI earlier in 2011 notified that recurring transactions based on the standing instruction given to the merchant was to be brought within the ambit of AFA.

Keeping abreast with the changing payment needs RBI has permitted e-mandate on cards for recurring transactions with AFA during e-mandate registration, modification and revocation, and also for the first transaction and subsequent successive transactions.

APPLICABILITY:

This Notification shall become effective from 1st September 2019, and shall be applicable to all types of cards i.e. debit, credit, pre-paid instruments (PPI) including wallets. Further, the e-mandate arrangement shall be only for recurring transactions and not for a one-time payment. Kindly note that the maximum limit for a transaction under this arrangement is INR2000/- and no charges are levied on the cardholder for availing the e-mandate facility.

CONDITIONS TO BE FULFILLED FOR PROCESSING E-MANDATE ON CARDS FOR RECURRING TRANSACTIONS:

  1. Registration of card details for e-mandate– The cardholder who wishes to opt for the e-mandating facility shall undertake a one-time registration with AFA validation by the issuer. Further, the registration shall only be complete after all the requisite information is obtained by the issuer. Kindly note that the cardholder at the time of registration is given an option to provide the e-mandate for either a pre-specified value of recurring transactions or a variable value; in case of the latter, the cardholder shall clearly specify the maximum value of the recurring transaction (currently INR2000/- per transaction).
  2. Processing of the first transaction and subsequent recurring transactions- AFA validation shall be performed for processing the first transaction in the e-mandate based recurring transaction. Kindly note the AFA validation may be combined if the first transaction is being performed along with the registration of e-mandate. Further, any subsequent recurring transaction shall be only performed for those cards which have been successfully registered and for which the first transaction has been authenticated and authorised. Kindly note that the subsequent transitions may be performed without AFA.
  3. Pre-transaction notification- To mitigate the risk the issuer shall send a pre-transaction notification at least 24 hours to the cardholder. It is at the time of registering for the e-mandate on the card, the cardholder shall be given the option for receiving the notification through SMS, email, etc. In addition, the cardholder is also given a facility to change the mode of receiving the notification. Kindly note that the pre-transaction notification shall inform the cardholder about the name of the merchant, transaction amount, date/time of debit, reference number, and reason for debit. The same information shall be notified for a post-transaction notification. Finally, at the time of a receipt of a pre-transaction notification, the cardholder shall be provided with an option to opt-out of that particular transaction or the e-mandate. Any such opt-out shall require an AFA validation by the issuer.
  4. Withdrawal of e-mandate- The cardholder shall be given an online facility to withdraw any e-mandate at any point of time by the issuer. However, the exception to this will be a pipeline transaction for which a pre-transaction notification has been communicated to the cardholder and the debit has not been communicated to the cardholder. After an e-mandate is withdrawn the acquirer shall ensure that the merchants on-boarded by them delete all the details including the payment instrument information.
  5. Dispute resolution and grievance redressal- The issuer shall put in place an appropriate redress system with a clear turnaround time for lodging and resolving the grievances put forward by the cardholder. Further, the card network shall make arrangements to separately identify chargebacks and disputes in respect of e-mandates based recurring payments. Also, it is the responsibility of the acquired to ensure that the merchants fulfil the compliance as laid down in this Notification.

Source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11668&Mode=0

“APPOINTED DATE” IN CASE OF MERGER AND AMALGAMATION

The Ministry of Corporate Affairs (the MCA) vide its notification dated 21 August 2019, has provided a clarification with respect to interpretation of section 232(6) of the Companies Act (Act). Section 232(6) of the Act states that the scheme under section 232 of the Act shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. The circular has been brought in furtherance of several queries which have been received by MCA. The two important clarification sought are:

  1. Whether it is mandatory to indicate a specific calendar date as ‘appointed date’ in the scheme? and
  2. Whether the ‘acquisition date’ for the purpose of Ind-AS 103 (Business combinations) would be the ‘appointed date’ referred to in section 232(6)?

Prior to issuance of the aforementioned clarification for the first query, the MCA has referred to decision of Supreme Court in the case of  Marshall Sons & Co. India Ltd. v. lTO [223 lTR 809] where the court held that the date on which the amalgamation shall take place can be a date prior the filing of the sanctioning of the scheme by the Court, the date of filing of certified copies of the orders of the Court before the Registrar of Companies (the ROC) (i.e. Appointed Date). However, the scheme would be effective from the Appointed Date only after the order of the Court is filed with the RoC. The MCA also referred to the judgement held in Equitas Housing Finance Limited and Equitas Micro Finance Limited in C.P.Nos.l 19 to 121 of 2016 where the court was the of opinion that appointed date need not necessarily be a calendar date but can be a date tied to the occurrence of a relevant event.

Section 232(6) provides the companies a choice to decide and state a date from which the scheme shall be enforceable. The two options available while deciding the date are:

(i) a specific calendar date, or

(ii) date tied to the occurrence of an event such as of license by a competent authority or fulfilment of any preconditions agreed upon by the parties or meeting any other requirement as agreed upon between the parties, etc., which are relevant to the scheme.

In case the parties to the scheme of merger/amalgamation choose the ‘appointed date’ to be a calendar date, such date can be a date preceding the date of filing the scheme with National Company Law Tribunal. If the ‘appointed date’ is significantly dated beyond a year from the date of filing the scheme, a reason for the same has to be specifically captured in the scheme and such reason shall not be against public interest. Where the ‘appointed date’ is date tied to the occurrence of a relevant event to the scheme, such an event shall be specifically indicated in the scheme on the occurrence of which the scheme would be effective. However, in a situation where ‘appointed date’ is a date subsequent to the date of filing the order with the ROC under section 232(5) of the Act, the company has an obligation to file an intimation of the same with ROC within 30 days of such scheme coming into force and being effective.

With regard to the second query, the MCA states that the ‘acquisition date’ shall be same as ‘appointed date’ mentioned under the scheme and shall also be deemed to be the date of transfer of control for the purpose of conforming to accounting standards (including Ind-AS 103 Business Combinations).

Source: http://www.mca.gov.in/Ministry/pdf/GeneralCircular_21082019.pdf

Nidhi Provisions Notified under Companies Act, 2013

 Ministry of Corporate Affairs (“MCA”) vide Notification dated July 1, 2019,  appointed that Section 406 of the Companies Act, 2013 shall come into force from August 15, 2019.

Nidhi company is created for borrowing and lending money between members. Some prerequisites for a Nidhi company are incorporation as public limited company with minimum 200 members, net owned funds to deposits ratio not to be more than 1:20, etc.

Further, MCA vide Notification dated July 1, 2019, has notified the Nidhi (Amendment) Rules, 2019 which amends the Nidhi Rules, 2014 effective from August 15, 2019.  The brief changes are as shown below:

Rule No Existing Amendment effective from August 15, 2019
2(d) Applicability of the rules to company incorporated as Nidhi under Section 406 of Companies Act, 2013 or those under Section 620A of Companies Act, 1956 New rule inserted for applicability to every company declared as Nidhi or Mutual Benefit Society under Section 406(1) of Companies Act, 2013
3(da) Not applicable New rule inserted to define a “Nidhi” which involves a company which accepts deposits from its members and lends to only its members for mutual benefit
3A Not applicable New rule inserted prescribing the procedure for the Central Government to notify a public company as a Nidhi, pursuant to any application made inform NDH-4 and also mandating companies to comply with filing of Form NDH-4 within time limits prescribed, failing which, such companies are disallowed from filing any notice of alteration of capital in Form SH-7 or return of allotment in Form PAS-3
4 A public company could be a ‘Nidhi’ only if incorporated as a Nidhi Omission of parts of the rule that required prior incorporation as Nidhi,
5 (1) Minimum requirements for every Nidhi was to be adhered within one year from commence of the Nidhi Rules, 2014 Now the requirements are to be adhered within one (1) year from the date of Nidhi’s incorporation
5(3) Extension of time could be provided by Regional Director in case a Nidhi files an application in Form NDH-2 to comply with the requirements of minimum 200 members and for maintaining ratio of 1:20 for net owned funds to deposits The time period of extension which can be granted by a Regional Director is now limited to up to one year, through insertion of a proviso
5(4) Nidhi which failed to comply with minimum requirements were prohibited to accept deposits beyond second financial year, unless it complied Even if such Nidhi complied with the requirements beyond second financial year, prohibition to accept deposits continues till a fresh declaration is obtained under Section 406(1) of New Act
7(1) Nidhi were to issue either fully paid up or partially paid-up equity shares of the nominal value Nidhi is prohibited from issue of partly paid up equity shares
12 The application form for a deposit should contain a statement that a depositor could approach RoC over non-payment of deposit The statement is changed so that a depositor can approach only a bench of National Company Law Tribunal.

Further new rule is inserted mandating the mention of the date of declaration or notification as Nidhi in the application for deposit.

23 The Regional Director was empowered to enforce compliance Regional Director is replaced with the Central Government to enforce compliance.

Further two new rules 23A and 23B are inserted to mandate existing Nidhi to get fresh declaration as Nidhi after commencement of the Nidhi (Amendment) Rules, 2019

Form NDH-4 Not applicable Insertion of new form for filing application for declaration as Nidhi Company and for updation of status by Nidhis

Source: http://www.mca.gov.in/Ministry/pdf/NidhiRules_01072019.pdf

New Compliance under POSH for Entities in Telangana

Telangana Government’s Department of Women Development and Child Welfare vide its Notification on its website, has mandated entities with 10 or more employees to register their Internal Complaints Committee (ICC) constituted under Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH”) on the T-She box web portal on or before July 15, 2019, failing which a penalty of Rs.50,000/- will be imposed on the defaulting entities.

POSH is an act notified in 2013 with an intention to provide protection against sexual harassment of women at workplace and for redressal of complaints of sexual harassment. Section 6 of POSH mandates that every District Officer should constitute a ‘Local Complaints Committee’ to receive complaints of sexual harassment from establishments where ICC has not been constituted due to having less than ten workers. Hence, every employer with 10 or more employees is required to constitute an ICC with a senior level woman presiding officer, a member from a non-governmental organization and at least two members among the employees.

The present notification in Telangana mandates registering of such ICC with the Department of Woman and Child Welfare.  On a similar note, Karnataka Government vide its Notification dated May 25, 2019, made it mandatory for IT/ITES companies to form an ICC under POSH to avail an exemption till May 24, 2024, from the applicability of Industrial Employment (Standing Orders) Act, 1946.

Source: http://tshebox.tgwdcw.in/

New BEN-2 Form for declaration of Beneficial Owners

Ministry of Corporate Affairs (“MCA”) vide Notification dated July 1, 2019, amended the Companies (Significant Beneficial Owners) Rules, 2018 by substitution of the existing Form BEN-2 for declaration of Beneficial Owners through the Companies (Significant Beneficial Owners) Second Amendment Rules, 2019.

The Companies (Significant Beneficial Owners) Rules, 2018 was framed under Section 90 of the Companies Act, 2013 to identify the owners of a company incorporated by way of multilayered intermediate entities.  Such owners hold shares of a company but will not have any beneficial interest in such shares. These owners having an interest in indirect holding of shares, but their names are not entered in the register of members, are termed as ‘Beneficial Owner’. While such beneficial owner is required to file a declaration in Form BEN-1, the company is required to file a return in Form BEN-2.  These rules were earlier amended on February 8, 2019, whereby the definition of a significant beneficial owner was amended, to one who had a right of at least 10% of shares/voting right or has the right to receive 10% or more of distributable dividend. Form BEN-2 is to be filed within 30 days from the date of receipt of declaration in Form BEN-1. No additional fees is payable if Form BEN-2 is filed within 30 days from the date of deployment on MCA-21.

Source: http://egazette.nic.in/WriteReadData/2019/206373.pdf

New Procedure for filing Annual Return on Foreign Liabilities & Assets

Reserve Bank of India (“RBI”) vide its Circular No.37 dated June 28, 2019, discontinued the existing practice of submission of annual returns on Foreign Liabilities and Assets (FLA) through email to RBI by July 15 of every year.  RBI has provided a web-portal interface https://flair.rbi.org.in to the reporting entities to get an RBI provided login-name and password, using which the entities are required to report inward and outward foreign affiliate trade statistics (FATS).

Since 2012, RBI had mandated filing of the annual return FLA for all Indian companies which have received any foreign investment or has made overseas investment. The procedure for submission of the form was by sending an email to the RBI by July 15th every year attaching a duly filled form in soft copy.

The details sought in the revised Foreign Liabilities and Assets Information Reporting (FLAIR) system include, information on first year of receipt of foreign direct investment/overseas direct investment, disinvestment, and other financial details on fiscal year basis.

 

Source: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT226CBAA4706347E46429D5034B4671A6F60.PDF