Monthly Archives: May 2014

Private placement/ preferential allotment to foreign shareholders

In respect of private placement/ preferential allotment of shares under section 42 of CA 2013, the allotment has to be done within 60 days of the receipt of application money, whereas FEMA gives 180 days time for allotment of shares in case of receipt of inward remittance from foreign shareholders. This is apparently a dichotomy because normally in case of foreign inward remittances companies normally wait for one or more tranches and then allot the shares within 180 days of the first remittance received. Also how do we treat that companies act 2013 gives one time limit for allotment and FEMA regulations gives another time limit for allotment. 

Moreover where one remittance has been received before April 2013 and the second one after April, 2013, which law should be applied, the 1956 Act or the 2013 Act, because for private placement under section 42 requires previous approval of the shareholders by way of special resolution for each of the private offers. So in case do we have to treat each remittance as a separate offer then take separate special resolutions for each offer. 

Moreover, rights issue, ESOP issue and preferential allotment appears in Chapter IV relating to share capital and debentures whereas private placement under section 42 appears in Chapter III relating to Prospectus and Allotment. 

Moreover what is the form to be used for filing allotment under section 62 in respect of rights issue or preferential allotment. Form PAS 3 refers to allotment made under sections 39 and 42 only.

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Overseas Recruitment Agents’ Licences

While visiting a friend today, he had remarked about the difficulty of obtaining a renewal of his licence as a recruiter for overseas positions. That led to do some research on the subject of overseas manpower consultants and their registration process and licensing. 

Overseas manpower recruitment agents have to obtain license from the office of the Protector of Emigrants. Apparently there are offices of the PoE’s in Mumbai, Chennai, Kolkata, Chandigarh, Trivandrum, Cochin, Hyderabad, Jaipur and Rae Bareilly. In Mumbai the office is based out of Santacruz.

These Protector of Emigrants are officers under the Ministry of Overseas Indian Affairs and the Act regulating the registration and licensing of overseas recruitment agents is the Emigration Act, 1983. Chapter III of the Act covers registration of recruitment agents whereas Chapter IV covers permits for overseas recruitment by employers i.e. where the employers themselves recruit for overseas positions without going through an Agent. 

Section 10 of the Act – No person can function as a recruitment agent without a valid certificate;

Section 11- application for registration. The applicant is required to deposit a bank guarantee of Rs.20 lakhs to take care of the eventuality when the employee recruited by the agent is required to be repatriated back to India for any reason.

Section 12 – Terms and conditions of Registration – certificate valid for 5 years

Section 13 – Renewal of Registration

Section 14 – Cancellation/ Suspension of Registration – there are 7 reasons on which a certificate can be cancelled.

Section 16 – Recruitment by employers to be through recruiting agent or under permit

Section 17 – Procedure for obtaining permits

Section 18 – Period of validity of permit – valid for one year at a time

Section 20 – Cancellation or Suspension of Permits – same reasons as section 14 applies.

The Emigration Rules, 1983 gives the procedural effect to the provisions of the Act regarding registration of Agents/ employers. 

From an observation of the website of the MOIA, it seems that the application for registration of licences/ permits are to be made on the basis of submission of physical documents. There is no procedure yet for making an online application, which is the dire need of the hour in respect of each and every government service for obvious reasons. 

 

 

 

 

 

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penal charges on inoperative bank accounts

The RBI has clarified vide its circular dated 6th May, 2014 that banks are not permitted to levy penal charges for non maintenance of minimum balances in any inoperative account. 

Earlier such charges were allowed to be levied on normal savings bank accounts while no charges were to be levied on Basic Savings Bank accounts. On the normal savings bank accounts also the banks could levy penal charges only after informing the customers regarding the same at the time of opening bank accounts. 

But now the penal charges on all inoperative bank accounts has been eliminated. This is a measure towards better customer service by the banks. 

A copy of the RBI circular is to be found here i.e. http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8867&Mode=0

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Foreclosure charges/ Pre-payment penalty banned

RBI has vide its circular dated 7th May 2014 immediately banned the foreclosure charges/ pre-payment penalty that was being levied by banks and financial institutions on pre-payment of loans by borrowers. This will be brought into effect immediately but will cover only loans with floating rate of interest and that too only for individual borrowers. 

Not clear why RBI has left our the fixed interest rate borrowers and commercial entities who borrow monies. 

It is a case of too little, too late from RBI. 

RBI should levy a fine of a few thousand crores on all the banks and financial institutions who have been levying these charges on borrowers for all these years and reimburse to the borrowers who have been so effected. 

The copy of the circular can be found here. 

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8868&Mode=0

 

 

 

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Re-schedulement of ECBs – simplification of procedure

RBI has vide its circular dated simplified its procedure for re-schedulement of External Commercial Borrowings. The re-schedulement will now be allowed subject to the following conditions:

  1. Changes, if any, in all-in-cost (AIC) is only on account of the change in average maturity period (AMP) due to re-schedulement of ECB and post re-schedulement, the AIC and the AMP are in conformity with applicable guidelines. There should not be any increase in the rate of interest and no additional cost (in foreign currency / Indian Rupees) should be involved.

  2. The re-schedulement is allowed only once, before the maturity of the ECB.

  3. If the lender is an overseas branch of a domestic bank, the prudential norms applicable on account of re-schedulement should be complied with.

  4. The changes on account of re-schedulement should be reported to DSIM through revised Form 83.

  5. The ECB should be in compliance with all applicable guidelines related to eligible borrower, recognised lender, AIC, AMP, end-uses, etc.

  6. The borrower should not be in the default / caution list of RBI and should not be under the investigation of Directorate of Enforcement.

The re-schedulement facility will be available both on automatic and approval route ECBs. The copy of the RBI circular can be found here.

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8870&Mode=0 

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