Monthly Archives: December 2014

Arbitration Act – amendments

The Government has issued an ordinance to bring in amendments to the Arbitration and Reconciliation Act, 1996. While I am unable to get a hand on the copy of the ordinance, according to various news reports, these are the salient features of the amendments:

1) Special fast track courts to be set up to deal with arbitration cases and for speedy resolution of commercial disputes;

2) mandatory for a judge presiding over commercial disputes to settle cases within nine months;

3) Arbitrator will be free to seek an extension from the high court;

4) In case of further delays, the high court will be free to debar the arbitrator from taking up fresh cases for a certain period;

5) A cap has been placed on the fee of the arbitrator – he will be able to charge only a composite fee and not on billable hours basis;

6) Arbitrator will have to spell out whether he has a conflict of interest in the case before taking up the case;

In the absence of the copy of the ordinance, unable to give more details on the amendments.

The amendments are based upon the Law Commission recommendations, which are available in this link i.e.

Click to access Report246.pdf

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Land Acquisition – Amendment

Press Release dated 29th December, 2014.

Amendments made in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved certain amendments in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

The Act came into effect from 01.01.2014 but it has been reported that many difficulties are being faced in its implementation.  In order to remove them, certain amendments have been made in the Act to further strengthen the provisions to protect the interests of the ‘affected families’.  In addition, procedural difficulties in the acquisition of lands required for important national projects required to be mitigated.

States, Ministries and stakeholders had been reporting many difficulties in the implementation of this Act.  Several suggestions came up in interactions with State Revenue Ministers and key implementing Ministries. Proposed amendmentsmeet the twin objectives of farmer welfare; along with expeditiously meeting the strategic and developmental needs of the country.

Pro-farmer step: Excluded Acts brought under RFCTLARR Act for Compensation and R&R

The existing Act vide Section 105 (read with Schedule IV) has kept 13 most frequently used Acts for Land Acquisition for the Central Government Projects out of the purview. These acts are applicable for national highways, metro rail, atomic energy projects, electricity related other projects etc. Thus a large percentage of famers and affected families were denied  the compensation and R&R measures prescribed under the Act.

The present amendments bring all those exempted 13 Acts under the purview of this Act for the purpose of compensation as well as rehabilitation and resettlement. Therefore, the amendment benefits the farmers and the affected families.

Pro-development: Faster processing without compromising on compensation or R&R measures to farmers

The second important aspect of the amendment is to make developmental and security related works much faster without compromising on the benefits/compensation to be given to the farmers.

In the process of prolonged procedure for land acquisition, neither the farmer is able to get benefit nor is the project completed in time for the benefit of society at large.

Therefore the present changes allow a fast track process for defence and defence production, rural infrastructure including electrification, housing for poor including affordable housing, industrial corridors and infrastructure projects including projects taken up under Public Private Partnership mode where ownership of the land continues to be vested with the government.

These projects are essential for bringing in better economic opportunities for the people living in these areas and would also help in improving quality of life.

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New Code of ethics for hospitals, nursing homes

NEW DELHI: A new code of ethics will now govern hospitals, nursing homes and other similar medical establishments, prohibiting any malpractices such as earning cuts, commissions, inflating patients’ bills and accepting freebies. The Indian Medical Association (IMA) has recently issued the broad guidelines for healthcare providers and asked them to put it on display.

“IMA’s Central Council has passed the declaration. We will bring out a detailed guideline explaining the code of ethics as declared. The detailed note will elaborate on what healthcare providers should do and not do,” said Dr KK Aggarwal, who took over as IMA secretary general on Sunday.

The detailed note on code of ethics, to be prepared within next three months, will also specify actions against hospitals if there is violation of the code, Dr Aggarwal said.

The present declaration, passed by IMA, highlights that hospitals or other such establishments will not “accept expensive gifts, cash benefits or gratification from the drug and equipment suppliers, diagnostics centres or similar agencies”. It also clearly states that unjustified admissions or billing to patients, giving cuts and commissions to anyone for soliciting patients, over-billing in claim cases or improper entries in insurance forms will be considered ‘unethical or illegal’ as is the case with sheltering any criminal from law and pre-natal sex determination.

The idea is to prepare a basic guideline for regulation of hospitals and other such medical establishments, which currently remains completely unmonitored.

The move comes in the wake of reports of hospitals engaging in unethical practices, mainly giving or accepting cuts or commissions and for unjustified billing among other things.

Source: http://timesofindia.indiatimes.com/india/Hospitals-nursing-homes-get-new-code-of-ethics/articleshow/45671565.cms

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FDI in medical devices

Govt. Press Release dated 24th December, 2014 – FDI allowed in 100% automatic route for medical devices

Review of the policy on Foreign Direct Investment in Pharmaceutical Sector – carve out for medical devices
The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its approval to amend the existing Foreign Direct Investment (FDI) policy in the Pharmaceutical Sector to create carve out for medical devices.

As per the extant FDI policy for pharmaceuticals sector, FDI up to 100% is permitted subject to specified conditions. While FDI for green-field projects is under automatic route, brown-field projects are placed under government route. The Policy on the pharmaceutical sector covers ‘medical devices’ since this area is not separately covered.

Since medical devices are part of the Drugs & Cosmetics Act, 1940 and fall under the Pharmaceutical sector, all the conditions of the FDI policy on the sector, including the condition relating to ‘non-compete clause’, apply on brownfield investment proposals of medical devices industry. As per National Industrial Classification (NIC) Code 2008, sector code of ‘Manufacture of pharmaceuticals, medicinal chemical, and botanical products’ is 2100 while sector code of ‘Manufacture of medical and dental instruments and supplies’ is 3250. Medical devices will fall under the category of ‘medical and dental instruments and supplies’. Therefore, drugs and pharmaceuticals and medical devices are two different industrial activities. The condition of ‘non-compete’ was imposed so that the Indian manufacturers can continue manufacturing generic drugs and catering to the needs of the large number of people in the country and in other developing countries who cannot afford branded and patented drugs. This condition is not relevant to ‘medical devices’ industry of the country where the country is substantially import dependent and the sector is adversely impacted because of the lack of adequate capital and required technology.

Therefore, the Cabinet approved the following proposal to amend the relevant paragraphs of the extant FDI policy as contained in the Consolidated FDI Policy Circular 2014 as follows:

i.            FDI up to 100%, under the automatic route is permitted for manufacturing of medical devices. The abovementioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry.

ii.            Medical device means-

a. “any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of-

(aa) diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;

(ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;

(ac) investigation, replacement or modification or support of the anatomy or of a physiological process;

(ad) supporting or sustaining life;

(ae) disinfection of medical devices;

(af) control of conception,

and   which does not achieve its primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by  such means;

b. an accessory to such an instrument, apparatus, appliance, material or other article;

c. a device which is reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of in vitro examination of specimens derived from the human body or animals;

iii     The definition of medical device at Note (ii) above would be subject to the amendment in Drugs and Cosmetics Act.

India has achieved an eminent global position in pharma sector. However, same has not been replicated in the medical devices industry. The country has huge pool of scientists and engineers who have potential to take medical device industry to a very high level. Domestic capital market is not able to provide much needed investment in the sector. Easing of norms for medical devices industry by creating special carve out in the extant FDI policy on pharma sector will encourage FDI inflows in this area.

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SEBI order of arrest u/s 28A

In a first of its kind SEBI has order dated 18th December, 2014 ordered the arrest of a defaulter against whom notices of demand were issued and recovery proceedings initiated. The Recovery Officer has issued this arrest order u/s 28A of the SEBI Act, 1992. The recovery proceedings have been going on for 4 years. The order says that he will remain in custody of a civil prison for maximum 6 months or until he pays the penalty with interest or until a fresh order of release is signed.

Section 28A reads as under:

28A. (1) If a person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any direction of the Board for refund of monies or fails to comply with a direction of disgorgement order issued under section 11B or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes, namely:—
(a) attachment and sale of the person’s movable property;
(b) attachment of the person’s bank accounts;
(c) attachment and sale of the person’s immovable property;
(d) arrest of the person and his detention in prison;
(e) appointing a receiver for the management of the person’s movable and immovable properties,
and for this purpose, the provisions of sections 220 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules made thereunder were the provisions of this Act and referred to the amount due under this Act instead of to income-tax under the Income-tax Act, 1961.
Explanation 1.— For the purposes of this sub-section, the person’s movable or immovable property or monies held in bank accounts shall include any property or monies held in bank accounts which has been transferred directly or indirectly on or after the date when the amount specified in certificate had become due, by the person to his spouse or minor child or son’s wife or son’s minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property or monies held in bank accounts so transferred to his minor child or his son’s minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the person’s movable or immovable property or a monies held in bank accounts for recovering any amount due from the person under this Act.

A copy of the SEBI order can be found here i.e. http://www.sebi.gov.in/cms/sebi_data/attachdocs/1418898173309.pdf

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Service Tax on Lawyers’ fees

The Bombay High Court has upheld the levy of service tax on services provided by lawyers and law firms, to their business clients. Business entities who hire lawyers and law firms will continue to pay service tax and also deposit it with the government.The Bombay High Court on Monday set aside writ petitions filed by the Bombay Bar Association, Advocates Association of Western India and a few lawyers. The main argument of these petitioners was that lawyers are officers of the court who help in the administration of justice. In the absence of any service being provided, no ser vice tax can be imposed. The petitioners had held introduction of service tax on legal fees was unconstitutional. Current rate of service tax is 12.36%.

Dismissing the petition, the court referred to the changing role of the legal profession and held it is no longer limited to appearing before the court. It also pointed out that the classification between legal services provided to business entities and to individuals, for the purpose of levy of service tax, is not discriminatory and does not violate the Constitution.

In addition to their key contention that lawyers are officers of the court and perform a solemn duty in the administration of justice, the petitioners also pleaded: “The levy of service tax imposes a heavy additional burden on litigants and disables them from approach ing the courts.“ The writ petition also said the service tax provision is unconstitutional as it discriminates between ser vices provided to an individual (where there is no tax) and to a large business entity which has to bear the tax burden.

The service tax authorities and the Government of India, who were respondents in the case, argued that even as lawyers provide assistance in administering justice, they do in fact provide services to their clients and are duly compensated in the form of fees which are charged from clients.

The respondents also argued that representational legal services provided to individuals were kept out of the service tax net to ensure the burden is not borne by the common man.

As there was a rational nexus, it was not discriminatory against business entities and this has been the position taken earlier by the Supreme Court.

The HC observed that the legislature, in introducing service tax on the legal profession, noted the commercialization of the practice of law which has expanded in scope and sphere post liberalization and globalization. At the same time the fact that a lawyer is an officer of the court and part and parcel of the administration of justice was not ignored. “Rather by a rational and intelligible differentiation the Parliament has proceeded to levy and impose service tax on legal services rendered to business entities by an individual advocate or law firm,” concluded the HC.

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SEBI settlement proceedings

Press release issued by SEBI on 19th November, 2014

SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014 (Regulations) enables settlement of administrative and civil proceedings under the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956 and

the Depositories Act, 1996. As per the extant practice, settlement of administrative and civil proceedings commences generally after issuance of a formal show cause notice. However, this does not bar any person from suo motu approaching SEBI for settlement, if he is aware of the probable SEBI action. The relevant provisions of the securities laws, i.e., section 15JB of SEBI Act, section 23JA of the Securities Contracts (Regulation) Act, 1956 and section 19-IA of the Depositories Act, 1996 and corresponding regulation 3 of the Regulations entitle a person to approach SEBI even before the initiation of the enforcement proceedings:

This being so, it is noted that the extant practice of providing the first opportunity to settle administrative and civil proceedings only post show cause notice stage results in delay in conclusion of proceedings and resultant wastage of resources. SEBI, has, therefore, decided that in minor violations intimation will be sent about the impending enforcement action to the concerned parties upon approval of the said actions by the competent authority and before a show cause notice is issued. This would enable parties to seek settlement of proceedings or make voluntary submissions even prior to receipt of a detailed show cause notice. If any party avails such an opportunity to respond to such a notice, the proposed proceedings may be settled(unless rejected) or discontinued on the basis of the submissions of the noticee (if any).

The notice of impending enforcement proceedings which will be treated as a show cause notice under regulation 4 of the Regulations, contain the charges and relevant extracts of findings of investigation/inspection. Such notices would only cover minor violations specified under Chapter VI and Column 2 of Table XII of Chapter VII of Schedule II of the Regulations. In these cases, procedure for settlement as specified in the Regulations will be followed.

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Insurance Amendment Bill

The Union Cabinet has approved the amendments to Insurance Laws Amendment Bill 2008. Hitherto the insurance companies were allowed foreign investment of upto 26%. Now it will be a composite cap of 49% foreign investment which includes FDI and foreign portfolio investment.

Management of insurance companies will remain in Indian’s hands.

Investment above 26% will still require approval of the Foreign Investment Promotion Board.

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SEBI (Research Analysts) Regulations, 2014

SEBI has notified the SEBI (Research Analysts) Regulations, 2014 to come into effect from 1st December, 2014. The copy of the REgulations can be found at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1409631811730.pdf

In terms of the RA Regulations, no person shall act as research analyst or research entity or hold itself out as
research analyst unless he has obtained a certificate of registration from SEBI under these regulations unless
an exemption specifically applies.

Further, in terms of regulation 21 of RA Regulations, “any person who makes public appearance or makes a
recommendation or offers an opinion concerning securities or public offers through public media has to
disclose his name, registration status and details of financial interest in the subject company and he shall
comply with the provisions of regulations 16 and 17.”

The provisions of the RA Regulations are quite comprehensive – proxy advisors are covered and so are people who give buy/ sell recommendations on specific stocks. Compliance Officer needs to be appointed by each RA. The FAQs released by SEBI is very comprehensive and covers the entire gamut of the RA regulations.

  1. How the research analysts are regulated in India?

The SEBI (Research Analysts) Regulations, 2014 (“RA Regulations”) were notified on September 01, 2014. The RA Regulations have come into effect from December 01,2014.The regulations specify conditions for registration, certification, limitations on trading by research analysts, limitations on compensations of research analyst, various

disclosures to be made during public appearance and during making recommendations through public media, code of conduct, records to be maintained, manner of conducting inspection, etc. The RA Regulations are available on the SEBI website http://www.sebi.gov.in.

  1. What is the transition period provided for the existing persons acting as research analyst or research entity for obtaining registration under RA Regulations?

Transition period of six months from the date of commencement of RA Regulations has been provided to the existing persons acting as research analyst or research entity before commencement of the RA Regulations to comply with certification, qualification, segregation of research activity from other activities, etc. However, they are required to file an application for grant registration within the said period of six months from the commencement of the regulations i.e. December 01, 2014, to continue to do so thereafter. Such persons who have made applications for grant of registration can continue to do so till the disposal of the application. The person who fails to file an application for grant of registration within the aforesaid time period of six months from the commencement of the regulations, shall stop acting as research analyst. If any person found to be acting as research analyst without making an application for grant of registration under RA regulations after expiry of such period i.e. May 31, 2015, appropriate action as deemed fit, under SEBI Act, 1992 may be initiated.[Ref. Regulation 3(1)].

  1. Whether the individuals employed as research analyst with an entity are required to obtain registration certificate under RA Regulations?

No. Individuals employed as research analyst with an entity are not required obtain registration certificate from SEBI. The research entity which employs individuals as research analysts is required to obtain registration certificate under RA Regulations. The individuals employed as research analyst by research entity are required to comply with qualification and certification requirements as specified in the regulations. The trading limitations prescribed under the regulations are applicable to them.[Ref Regulation 7 and 16]

  1. Whether the personnel involved in publication activities like marketing and editing are covered under the definition of Research Analyst under RA Regulations.

The RA Regulations do not cover personnel engaged in clerical activities/marketing activities, back office assistance, support services, etc, in relation to publication and/or distribution of research report. As per the regulations, “research analyst” means a person who is primarily responsible

for,-

  1. preparation or publication of the content of the research report; or
  2. providing research report; or

iii. making ‘buy/sell/hold’ recommendation; or

  1. giving price target; or
  2. offering an opinion concerning public offer,

with respect to securities that are listed or to be listed in a stock exchange, whether or not any such person has the job title of ‘research analyst’ and includes any other entities engaged in issuance of research report or research analysis. Explanation.-The term also includes any associated person who reports.

  1. What are all the communications excluded from the definition of research report?

“Research report” does not include the following communications:-

  1. comments on general trends in the securities market
  2. discussions on the broad-based indices;

iii. commentaries on economic, political or market conditions;

  1. periodic reports or other communications prepared for unit holders of Mutual Fund or Alternative Investment Fund or clients of Portfolio Managers and Investment Advisers;
  2. internal communications that are not given to current or prospective clients;
  3. communications that constitute offer documents or prospectus that are circulated as per regulations made by SEBI

vii. statistical summaries of financial data of the companies

viii. technical analyses relating to the demand and supply in a sector or index ix. any other communication which SEBI may specify from time to time [Ref. Regulation 2(1)(w)]

  1. Whether technical analysis is exempted under the purview of the RA

Regulations?

Making buy/sell/hold recommendation on individual stocks based on the technical analysis is not exempted under the purview of the RA Regulations. However, technical analyses relating to the demand and supply for a particular sector or index is exempted from the purview of the RA Regulations. [Ref. Regulation 2(1)(w)]

  1. What are all communications excluded under periodic reports as per definition of research report?

Periodic reports such as sending financial account statements, annual reports and any other communication as required under the specific regulations prepared for unit holders of Mutual Fund or Alternative Investment Fund or clients of Portfolio Managers and Investment Advisers are excluded from the definition of research report under RA

Regulations.

  1. Does RA Regulations cover only equity and equity linked securities?

No. RA Regulations covers all the securities as defined under clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.

  1. Who are all covered under the definition of Research Entity?

Intermediaries registered with SEBI who is engaged in merchant banking or investment banking or brokerage services or underwriting services and issue research report or research analysis and other intermediaries to whom there is no specific exemption under RA Regulations are covered under the definition of research entity. Accordingly, SEBI registered Stock Brokers, Merchant Bankers and Underwriters and other intermediaries except those who are exempted from making application under RA Regulations are required to make application for grant of registration under RA Regulations, if they are engaged in issuance of research reports or research analyses. [refer to Regulation 2(v) for the definition of research entity]

10.Who is an independent research analyst?

“Independent research analyst” means a person whose only business activity is research analysis or preparation and/or publication of research report and includes individuals engaged in providing research services without being employed with any research entity(intermediary) and entities other than SEBI registered intermediaries who are engaged in research activities. [refer to Regulation 2(h)]

11.Who is a proxy adviser?

“Proxy adviser” means any person who provide advice, through any means, to institutional investor or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on

agenda items.[ Ref Regulation 2(1) (p)].

12.Whether proxy advisers are required to obtain registration under RA Regulations?

Yes. Proxy Advisers are required to obtain registration from SEBI under RA Regulations.

13.What are the additional requirements to be fulfilled by proxy adviser?

All the provisions of Chapter II, III, IV, V and VI of RA Regulations shall apply mutatis mutandis to the proxy adviser. The proxy adviser shall additionally disclose the following:

(i) the extent of research involved in a particular recommendation and the extent and/or effectiveness of its controls and procedures in ensuring the accuracy of issuer data;

(ii) (ii) policies and procedures for interacting with issuers, informing issuers about the recommendation and review of recommendations.

Proxy adviser is required to maintain the record of his voting recommendations and furnish the same to SEBI on request. [Ref. Regulation 23]

14.Who is required to make an application to get registration under RA Regulations?

In terms of the RA Regulations, no person shall act as a research analyst or research entity or hold itself out as a research analyst unless he has obtained a certificate of registration from SEBI on and from the commencement of RA Regulations unless an exemption specifically applies. [Ref. Regulation 3(1)].

Independent research analyst or research entity (intermediary) who is engaged in issuance of research report or research analysis is required to make an application for registration under RA Regulations.

15.What is the procedure of obtaining registration as a research analyst from SEBI?

Application shall be made in Form A as specified in RA Regulations with necessary supporting documents. A section by the name “Research Analyst” has been created on the SEBI website where in the details/circulars/press releases pertains to RA regulations will be uploaded on a periodic basis. A document by the name “How to get registered as research analyst” has also been uploaded under the relevant section.

16.Where to make an application to get registered as a research analyst?

The application for grant of registration as a research analyst under RA Regulations shall be filed with either the Head Office (HO) or the concerned Regional Office(RO) / Local Office(LO) of the SEBI under the jurisdiction of which the registered address of the applicant is located. The addresses of offices of SEBI are available on the website at http://www.sebi.gov.in and also on the link

http://www.sebi.gov.in/sebiweb/stpages/contact_us.jsp.

17.Who are exempted from making application for grant of registration under RA Regulations?

Investment Advisers, Credit Rating Agencies, Asset Management Companies and Fund Managers (i.e. fund managers of a mutual fund or alternative investment fund or venture capital fund or portfolio manager) shall not be required to be registered under these regulations. However, they are required to comply with Chapter III of these Regulations, if they issue research reports or their research report is circulated or distributed to public or general investors and/or if they or their directors or employees make public appearance. [Ref. Regulation 3(1)].

18.Who are all covered under public media?

Any persons who makes recommendation or offers an opinion concerning securities or public offers to the general public through any media source available such as radio, television, internet, web or print media are covered under the definition of “public media”.

19.Whether journalists who are on the payrolls of media organizations such as newspaper or television are covered under definition of public media ?

Yes. SEBI (Research analyst) Regulations, 2014 covers any person including journalists who:

  1. make public appearance or
  2. make comments through the public media for giving opinion or recommendations concerning securities or on public offers.

Journalists employed by various news organizations and who comment on specific stock with proper research, which get published in news paper, etc have to comply with provisions specified under regulation 21(2) of SEBI (Research Analysts) Regulations, 2014. However, RA regulations do not cover the following communications while making recommendations through public media:

(i) general trends in the securities market;

(ii) discussions on the broad-based indices;

(iii) commentaries on economic, political or market conditions;

(iv) statistical summaries of financial data of the companies

(v) technical analyses relating to the demand and supply in a sector or index based on trading volume and price

20.Whether journalists who are on the payrolls of media organizations such as newspaper or television are required to get registered with SEBI ?

No. The journalists who are on the payrolls of media agency such as newspaper or television are not required to get registered with SEBI. However, if they make public appearance or makes a recommendation or offers an opinion concerning securities or public offers through public media, all the provisions of regulations 16 on limitations on

trading and 17 on limitations on compensation shall apply mutatis mutandis and they shall disclose their name, registration status and details of financial interest in the subject company.

21.Whether the persons making recommendations through public media are required to obtain registration under RA Regulations?

No. Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations. However, whenever they make public appearance or makes a recommendation or offers an opinion concerning securities or public offers through public media, all the provisions of regulations 16 on limitations on trading and 17 on limitations on compensation shall apply mutatis mutandis to him and he shall disclose his name, registration status and details of financial interest in the subject company. Further, if such person is also engaged in preparation and/or publication of research report or research analysis, he or the entity on whose behalf the he is acting as a research analyst, needs to get registered with SEBI.

22.What are the disclosures required for making recommendations in public media?

Any person including a director or employee of an investment adviser or credit rating agency or asset management company or fund manager, makes public appearance or makes a recommendation or offers an opinion concerning securities or public offers through public media, all the provisions of regulations 16 on limitations on trading and

17 on limitations on compensation shall apply mutatis mutandis to him and he shall disclose his name, registration status and details of financial interest in the subject company at the time of:

(i) making such recommendation or offering such opinion in personal

capacity;

(ii) responding to queries from audiences or journalists in personal capacity;

(iii) communicating the research report or substance of the research report through the public media.

23.Whether any application fee is required to be paid at the time of making application for grant of registration under RA Regulations and What is the amount to be paid for grant of registration/renewal registration as research analyst?

Yes. Application fees must be paid along with the application Form for grant of registration. Applicants who are individuals and firms including proxy advisers are required to pay a sum of Rs. Five Thousand (Rs.5,000/-) as application fee at the time of filing of application for grant of registration. Applicants who are body corporates and Limited Liability Partnership Firms (LLPs) are required to pay a sum of Rs. Fifty Thousand (Rs. 50,000/-) as application fee at the time of filing of application for grant of registration. [Ref. Second schedule of RA Regulations].Applicants who are individuals and firms are required to pay a sum of Rs. Ten Thousand (Rs.10,000/-) as registration fee at the time of grant of registration or renewal of certificate by SEBI.Applicants who are proxy advisers are required to pay a sum of Rs. Ten Thousand (Rs.10,000) as registration fee at the time of grant of registration or renewal of certificate by SEBI.Applicants who are body corporates and Limited Liability Partnership Firms (LLPs) are required to pay a sum of Rs. Five Lakh (Rs. 5,00,000) as registration fee at the time of grant or renewal of certificate by SEBI. [Ref. Second schedule of RA Regulations]

24.What is the capital adequacy requirement for a Research Analyst?

 

A research analyst who is individual or partnership firm is required to have a minimum net worth of Rs. One Lakh. A research analyst who is body corporate or limited liability partnership firm (LLPs) required to have a minimum net worth of Rs. Twenty Five Lakh. [Ref. Regulation 8] Proxy Advisers shall have to comply with the capital adequacy requirements within three years from the date of commencement of the RA Regulations.

25.Can a sole proprietor make an application to get registered as a research analyst?

A sole proprietor can make an application to get registered as an independent research analyst. The proprietor of the sole proprietorship firm is required to fulfill eligibility conditions applicable to individual under RA Regulations.

26.Whether a person located outside India can issue research reports under RA Regulations?

Yes. Any person located outside India engaged in issuance of research report or research analysis in respect of securities listed or proposed to be listed on a stock exchange in India shall enter into an agreement with a research analyst or research entity registered under RA regulations.

27.What is the qualification and certification requirement under regulation 7(2) of RA Regulations?

An individual registered as a research analyst, individuals employed as research analyst and partners of a research analyst, as the case may be engaged in preparation and/or publication of research report or research analysis are required to obtain NISM certification for research analysts as specified by SEBI or other certification recognized by SEBI from time to time.

28.Is it mandatory for research analysts to include the words ‘research analyst’ in its name?

Research analyst registered under these regulations shall use the term “research analyst‟ in all correspondences. [Ref. Regulation 13(iii)]

29.What is the time period for obtaining certification as specified under regulation 7(2) of RA Regulations for an existing research analyst?

The existing persons acting as research analysts before commencement of the RA Regulations and seeking registration are required to comply with the regulation 7(2) of RA Regulations within two years from the date of commencement of RA Regulations i.e. December 01, 2014. [Ref. proviso to Regulation 7(2)]

30.In case of a partnership firm, who is required to fulfill qualification and certification requirement under regulation 7 of RA Regulations?

All the partners engaged in preparation and/or publication of research report or research analysis are required to fulfill qualification and certification requirement under regulation 7 of RA Regulations.

31.What is the criteria for Net worth certificate?

The Networth certificate should not be more than 6 months old at the time of filing of application.

32.How long does the certificate of registration remain valid under RA Regulations?

The certificate of registration under RA Regulations remains valid for five years or till suspended. [Ref. Regulation 10]

33.When can a research analyst/research entity can apply for grant of renewal of its registration?

A research analyst/research entity is required to apply for grant of renewal registration certificate to SEBI, three months before the expiry of the validity of the certificate. [Ref. Regulation 11]

34.Who are all required to monitor the personal trading activities of the individuals employed as research analysts ?

Research entities and independent research analysts who employ individuals as research analysts are required to monitor and record the personal trading activities of the individuals employed as research analyst with them {Ref Regulation 16(1)}

35.What are trading restrictions imposed under RA Regulations?

Research analyst or his associate shall not deal or trade any securities that the research analyst recommends or follows within 30 days before and 5 days after the publication of a research report on the subject company. Research analyst or his associate shall not deal or trade directly or indirectly any securities that he reviews in a

manner contrary to his outstanding recommendation, etc. [ Ref Regulation 16]

36.Whether the limitations on trading prescribed under regulation 16 of RA Regulations are applicable to research entity?

The trading limitations prescribed in the RA regulations are applicable to the individuals employed as research analyst, individuals registered as research analyst, independent research analysts, research entities and their associates. [Ref Regulation 16(2)]

37.Whether the limitations on trading applicable to research entity or its associates,if it has segregated its research activities from other activities?

The limitations on trading prescribed under regulation 16(2) to 16(4) are not applicable to a research entity or its associates, if such research entity has segregated its research activities from all other activities and maintained arms-length relationship between such activities. A time period of six months from the commencement of RA Regulations i.e. December 01, 2014,has been provided to the existing research entities to segregate its research activities from all other activities.

38.Who are required to comply with chapter III of RA Regulations?

All the SEBI registered research analysts are required to comply with chapter III of RA Regulations. Further, the exempted persons from obtaining registration under RA Regulations such as investment adviser, credit rating agency, asset management company or fund manager, who issues research report or circulates/distributes research report to public or its director or employee who makes public appearance are required to comply with Chapter III of RA regulations. [Ref. proviso to Regulation 3(1)]

39.Who are required to appoint a compliance officer under RA Regulations?

Research analyst or research entity which is a body corporate or limited liability partnership firm is required to appoint a compliance officer who shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations,

notifications, guidelines, instructions issued by SEBI. [Ref. Regulation 26]

40.Whether the existing compliance officer of a Brokerage Firm/Merchant Banking Firm, etc can act as a compliance officer of research entity under RA regulations.

Yes. The existing compliance officer of intermediary can be appointed as a compliance officer of a research entity under RA Regulations.

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SEBI Delisting Regulations – Amendments

SEBI has in its Board meeting held on 19th November, 2014 approved the following amendments to the SEBI (Delisting) Regulations.

(i) The delisting shall be considered successful only when (A) the shareholding of the acquirer together with the shares tendered by public shareholders reaches 90% of the total share capital of the company and (B) if atleast 25% of the number of public shareholders, holding shares in dematerialised mode as on the date of the Board meeting which approves the delisting proposal, tender in the reverse book building process.

(ii) The offer price determined through Reverse Book Building shall be the price at which the shareholding of the promoter, after including the shareholding of the public shareholders who have tendered their shares, reaches the threshold limit of 90%.

(iii) The promoter/ promoter group shall be prohibited from making a delisting offer if any entity belonging to the said group has sold shares of the company during a period of six months prior to the date of the Board meeting which approves the delisting proposal.

(iv) Use of Stock Exchange platform for offers made under Delisting, Buy Back and Takeover Regulations.

(v) The Board of the company shall approve the proposal for delisting only after satisfying itself that delisting is in the interest of shareholders and that the company is in compliance with applicable securities laws. The Board of the company shall appoint a Merchant Banker on behalf of the company and the promoter for the said purpose and for compliance with the Delisting Regulations.

(vi) Companies whose paid up capital does not exceed Rs.10 crores and net worth does not exceed Rs.25 crores as on the last day of the previous financial year are exempted from following the Reverse Book Building process. The exemption would be available only if (a) there was no trading in the shares of the company in the last one year from the date of the board resolution authorizing the company to go for delisting and (b) trading of shares of the company has not been suspended for any non-compliance during the same period.

(vii) Timelines for completing the delisting process has been reduced from 137 calendar days (approx 117 working days) to 76 working days.

(viii) Option to the acquirer to delist the shares of the company directly through Delisting Regulations pursuant to triggering Takeover Regulations has been provided. However, if the delisting attempt fails, the acquirer would be required to complete the mandatory open offer process under the Takeover Regulations and pay interest @ 10% p.a. for the delayed open offer.

(ix) SEBI may, for reasons recorded in writing, relax the strict enforcement of any requirement of the provisions of the Delisting Regulations or exempt from compliance, in line with the provisions existing in ICDR and Takeover Regulations.

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Insider Trading Regulations 2014

SEBI has at its Board meeting held on 19th November, 2014 proposed new regulation to update the Insider Trading Regulations of 1992. Salient features of the new SEBI (Prohibition of Insider Trading) Regulations are as follows:

(A) STRENGTHENING THE LEGAL AND ENFORCEMENT FRAMEWORK

(i) The definition of Insider has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI). However directors, employees and all other persons in the deeming category covered under 1992 regulations would continue to be covered. Insider will also include a person who is in possession or has access to UPSI. Now, immediate relatives will be presumed to be connected persons, with a right to rebut the presumption. In 1992 regulations, definition of connected person was largely position based.

(ii) In the case of connected persons the onus of establishing, that they were not in possession of UPSI, shall be on such connected persons.

(iii) Clear prohibition on communication of unpublished price sensitive information (UPSI) has been provided except legitimate purposes, performance of duties or discharge of legal obligations.

(iv) Considering every investor’s interest in securities market, advance disclosure of UPSI at least 2 days prior to trading has been made mandatory in case of permitted communication of UPSI.

(v) UPSI has been defined as information not generally available and which may impact the price. The definition of UPSI has been strengthened by providing a test to identify price sensitive information, aligning it with listing agreement and providing platform of disclosure. Earlier, the definition of price sensitive information had reference to company only; now it has reference to both a company and securities.

(vi) Generally Available Information will be the information that is accessible to the public on a non-discriminatory platform which would ordinarily be stock exchange platform.

(vii) Companies by law would be entitled to require third-party connected persons to disclose their trading and holdings in securities of the company.

(viii) In line with Companies Act, 2013, prohibition on derivative trading by directors and KMPs on securities of the company has been provided.

(B) ALIGNING INSIDER TRADING NORMS WITH INTERNATIONAL PRACTICES

(i) The requirement of communication of UPSI in the case of legitimate business transaction has been recognized in law and a carve-out with safeguards has been provided. [Reference to A (iii) and (iv) above]

(ii) Disclosure of UPSI in public domain has been made mandatory before trading, so as to rule out asymmetry of information in the market, as prevalent in other jurisdictions. [Reference to A (iv) above]

(iii) A provision of Trading Plans on the lines of U.S. has been introduced for insiders with necessary safeguards. Such a plan has to be for bona fide transactions and has to be disclosed on stock exchange platform in  advance.

(C) CLARITY IN THE DEFINITIONS AND CONCEPTS

(i) With important provisions, clarificatory notes have been inserted in the regulations itself.

(ii) Clarity has been brought to the definition of UPSI by aligning it with listing agreement and making the definition inclusive.

(iii) To provide clarity, Generally Available Information has been defined as information that is accessible to public on a non-discriminatory platform such as stock exchange. [Reference to A (vi) above]

(iv) Clarity about timing of disclosure of UPSI has been provided and the trading window norms have been made uniform to other connected persons.

(D) FACILITATING LEGITIMATE BUSINESS TRANSACTIONS

(i) To facilitate legitimate business transactions, unpublished price sensitive information (UPSI) can be communicated with safeguards. [reference to A (iii) & (iv) above]

(ii) Insiders who are liable to possess UPSI all round the year would have the option to formulate prescheduled trading plans. Trading plans would, however, to be disclosed on the stock exchanges and have to be strictly adhered to. Trading plans shall be available for bona fide transactions.

(iii) Principle based Code of Fair Disclosure and Code of Conduct has been prescribed.

(iv) In given cases, certain circumstances which can be demonstrated by an insider to prove his innocence have been provided.

(v) Repeated disclosures have been removed so as to ease compliance burden and to align with Takeover Code. Disclosure of any change of 2% for persons holding more than 5% shares or voting rights has been removed as they are prescribed under Takeover Code.

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Procedure for registration of a warehouse

Procedure for registration of a warehouse under the Warehousing (Development & Regulation) Act, 2007 by the WDRA (Warehousing Development and Regulatory Authority) is outlined below:

1. If a warehouseman wants to apply for registration of his warehouse, then he has to apply
for registration in the prescribed form A1(Annexure – I).
2. Copy of above application form A1 has to be submitted to one of the accreditation agency,
(suitable to applicant) requesting them for accreditation of their warehouse, as per WDR
Act, 2007. List of accreditation agencies is at (Annexure-II).
3. The accreditation agency will inform to the applicant about date and time on which the
examiner appointed by accreditation agency will come to their premises for inspection and
verifications.
4. In the mean while till such time the examiner comes for inspection, the applicant shall
ascertain that following conditions are fulfilled:-
(a) Fee for accreditation is paid to accreditation agency as per circular (Annexure-III).
(b) Godowns of the warehouse shall be as per BIS standards (Annexure-IV). *
(c) The manpower shall be as per WDRA norms (Annexure -V).
(d) Equipments, chemicals and other laboratory articles shall be as per the list (Annexure –
VI).
(e) Documents to ascertain adequate positive networth of the warehouse, a certificate from
a Chartered Accountant or creditworthiness from a scheduled bank of the individual
warehouse or its organisation will suffice.
(f) Proof of ownership or registered lease deed vesting the right with the warehouseman to
use the relevant warehouse for the purposes of operating a warehouse.
(g) No objection certificate or warehouse license from the Municipal Corporation or local
authority for carrying out the business of warehousing within the premises of the
relevant warehouse.
(h) List of the goods for which the registration is being sought.(List of notified commodities
Annexure VII)
(i) Insurance policies for fire, floods, theft, burglary, misappropriation, riots, strikes or
terrorism. The values of the sum insured for different policies shall be as follows:-
(i) Special fire perils policy (for a value not less than the actual value of the stocks held
in storage at a given point of time and if the stocks exceed the limit of insurance
cover value/sum insured then warehouseman shall immediately get enhanced the
value of sum insured from insurance company otherwise, the warehouse has to
bear the cost of un-insured stocks and has to pay to the depositor. In case of loss of
stocks).
Policy should give details of different stocks with “held in trust” clause.
(ii) Other risks such as floods and riots, strikes or terrorism shall be covered as an add on policy of special fire perils
(iii) Theft and burglary policy – The warehouseman has to take this policy on first loss
basis and he shall ensure that the policy adequately covers the risks.(iv) Misappropriation – The warehouseman shall take policy of covering losses  of goods
etc due to fraudulent activities of an employee of warehouse, then the said risks
shall be adequately covered.
(j) Statement/copy of agreement for outsourcing work of pest control and security and also
to support tie-ups, if any, with grading, testing laboratories.
(k) Layout plan of the Warehouse.
5. Accreditation agency will inspect the warehouse and verify all above documents and will
prepare inspection report in a checklist (Annexure – VIII)
6. Applicant will submit all above documents alongwith application in form A1 in original duly
verified by examiner of accreditation agency alongwith following documents to WDRA:-
(a) Board Resolution / Power of attorney authorizing the applicant to apply on behalf of the
organization
(b) Identity proof of the applicant such as certificate of incorporation or Memorandum and
Articles of Association for companies or copy of partnership deed for partnerships or
such other documents as may be specified by the Authority.
(c) Proof of ownership or registered lease deed or rent agreement and receipt of the
warehouse.
(d) No objection certificate from the Municipal Corporation or local authority, for carrying
out the business of warehousing.
(e) Accreditation certificate issued by an accreditation agency registered by the Authority
under section 5 and the matters’ referred to under clause (a) of sub-section (2) of
section 35 of the Act.
(f) Fee as specified by the Authority as follows:-
1. Application Registration Fee. – Every application for registration of warehouse or renewal
thereof shall be accompanied with fee by way of bank draft or bankers cheque of any
nationalized bank in favour of the Drawing and Disbursing Officer, Warehousing Development
and Regulatory Authority payable at New Delhi at the rate as indicated below:-
Registration/renewal of registration of warehouse:-
(i) State Capital cities Rs.2.50 per MT
(ii) District Headquarters Rs.1.50 per MT
(iii) For rural and other areas Re.1.00 per MT
Subject to a minimum amount of Rs.7500 for each warehouse.
2. Security Deposit.- Every applicant, at the time of submission of the application for
registration of each warehouse, shall furnish to the Authority, security deposit by bank draft or
bankers cheque of any nationalised bank in favour of Drawing and Disbursing Officer,
Warehousing Development and Regulatory Authority payable in New Delhi at the rate as
indicated below:-
(i) State Capital cities Rs.2.50 per MT
(ii) District Headquarters Rs.1.50 per MT
(iii) For rural and other areas Re.1.00 per MT
Subject to a minimum amount of Rs.7500 for each warehouse.
(g) Statement of financial credibility in the form of audit reports/budget statement with
supporting documents.
(h) Such other documents as may be specified by the Authority.
7. After the above documents alongwith the following prescribed fee and accreditation
certificate is received by WDRA then after through examining if WDRA finds that the
applicant warehouse meets all the standards and norms prescribed by WDRA and as per
Act, Rules & Regulations, then a registration certificate will be issued in the name of
applicant warehouseman and same will be sent to him by speed post.

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Draft IPR Policy – India

http://pib.nic.in/newsite/PrintRelease.aspx?relid=110790

Department of Industrial Policy and Promotion has constituted a IPR Think Tank to draft the National Intellectual Property Rights Policy and to advice the Department of Industrial Policy and Promotion on IPR issues.

The composition of the IPR Think Tank will be as follows:-

1.Justice (Retd) Prabha Sridevan, Chairperson, IPR Think Tank;

  1. Ms. Pratibha M Singh, Sr.Advocate, Singh & Singh Law Firm, Member;

3.  Ms. Punita Bhargava, Advocate, Inventure IP, Membe

4.Dr. Unnat Pandit, Cadila Pharmaceuticals Limited, Member;

5. Shri Rajeev Srinivasan, Director, Asian School of Business, Thiruvananthapuram, Member; and

6. Shri Narendra K. Sabarwal, Retired DDG, WIPO, Member and Convener.

The terms of reference of the IPR Think Tank will be as follows;-

  1. To draft National Intellectual Property Rights Policy.
  2. To identify areas in the IPRs where study needs to be conducted and to furnish recommendations in this regard to the Ministry.

3  To provide views on the possible implications of demands placed by the negotiating partners.

4. To keep the Government regularly informed about the developments taking place in IPR cases which have an impact upon India’s IPR Policy.

5. To advise the Government on best practices to be followed in Trademark Offices, Patent Offices and other Government Offices dealing with IPR in order to create an efficient and transparent system of functioning in the said offices.

6. To prepare periodic reports on best practice followed in foreign countries.

7.        To highlight anomalies in the present IPR legislations and to advice possible solutions to the Ministry.

8.        To give suggestions on the steps that may be taken for improving infrastructure in IP offices and Tribunals.

  1. To examine the current issues raised by industry associations and those that may have appeared in media and to give suggestions to the Ministry on such issues.

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FDI rules in construction development sector

The Department of Industrial Policy & Promotion has formalised the new FDI rules in construction development sector vide their PRess Note no. 10/2014 dated 3rd December, 2014.

FDI is allowed upto 100% in automatic route in construction, development of townships, housing, built-up infrastructure and construction development projects (which would include but not be restricted to housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure).

Under the new Rules

1) Minimum area to be developed under each project of serviced housing plots has been done away with, so no minimum area requirement under this clause;

2) Minimum area for development of construction development projects has been brought down from 50,000 sq. mtrs to 20,000 sq. mtrs;

3) Minimum capitalization norms have been relaxed. The investee company will be required to bring in US$5 million within 6 months of the commencement of the project which is approval of the building / layout plan by the relevant authorities. The balance monies can be brought in tranches till a period of 10 years from the commencement of the project or before completion of the project, whichever is earlier. The earlier capitalization norms were US$10 million for wholly owned subsidiaries and US$5 million for joint ventures with Indian partners. That classification has also been done away with;

4) The investor is allowed to exit on completion of the project or after development of trunk infrastructure i.e. roads, drainage, sewerage, water supply, street lighting etc. Earlier the investor was locked in for a period of three years from the period of minimum capitalisation. Now the government may on a case by case basis allow repatriation of FDI or stake sale from one non resident investor to another non resident investor before completion of the project;

5) The requirement that 50% of each project must be developed within a period of 5 years from the date of obtaining all statutory clearances has been done away with.

6) FDI is not permitted in real estate business, construction of farm houses and trading in transferable development rights (TDRs);

7) The conditions regarding minimum area, capitalisation and exit norms are not applicable to hotels and tourist resorts, hospitals, special economic zones (SEZs), educational institutions, old age homes and investment by NRIs;

8) The conditions regarding minimum area and capitalisation norms are not applicable where the investee/ joint venture companies commit at least 30% of their project cost  to affordable low cost housing;

9) The Indian company which is the recipient of the FDI should procure a certificate from an architect empannelled by any Authority authorised to sanction building plan to the effect that the minimum area requirement has been complied with;

10) Completion of the projects will be determined by the local bye laws/ rules and other regulations of the state government;

11) 100% FDI under automatic route is allowed in completed projects for operation and management of townships, malls/ shopping complexes, and business centres.

The Press Note is available at http://dipp.nic.in/English/acts_rules/Press_Notes/pn10_2014.pdf

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Companies Amendment Bill 2014

http://pib.nic.in/newsite/PrintRelease.aspx?relid=112434

Companies (Amendment) Bill, 2014

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, today approved the introduction of the Companies (Amendment) Bill, 2014 in Parliament to make certain amendments in the Companies Act, 2013.

The Companies Act, 2013 (Act) was notified on 29.8.2013. Out of 470 sections in the Act, 283 sections and 22 sets of Rules corresponding to such sections have so far been brought into force. In order to address some issues raised by stakeholders such as Chartered Accountants and professionals, following amendments in the Act have been proposed:

1. Omitting requirement for minimum paid up share capital, and consequential changes. (For ease of doing business)

2. Making common seal optional, and consequential changes for authorization for execution of documents. (For ease of doing business)

3. Prescribing specific punishment for deposits accepted under the new Act. This was left out in the Act inadvertently. (To remove an omission)

4. Prohibiting public inspection of Board resolutions filed in the Registry. (To meet corporate demand)

5. Including provision for writing off past losses/depreciation before declaring dividend for the year. This was missed in the Act but included in the Rules.

6. Rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend(s) has been claimed. (To meet corporate demand)

7. Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report. (Demand of auditors)

8. Exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries. (This was provided under the Rules but being included in the Act as a matter of abundant caution).

9. Empowering Audit Committee to give omnibus approvals for related party transactions on annual basis. (Align with SEBI policy and increase ease of doing business)

10. Replacing ‘special resolution’ with ‘ordinary resolution’ for approval of related party transactions by non-related shareholders. (Meet problems faced by large stakeholders who are related parties)

11. Exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders. (corporate demand)

12. Bail restrictions to apply only for offence relating to fraud u/s 447. (Though earlier provision is mitigated, concession is made to Law Ministry & ED)

13. Winding Up cases to be heard by 2-member Bench instead of a 3-member Bench. (Removal of an inadvertent error)

14. Special Courts to try only offences carrying imprisonment of two years or more. (To let magistrate try minor violations).

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