Monthly Archives: September 2015

membership of commodity derivatives exchanges

SEBI has vide its circular dated 29th September, 2015 announced that existing members of commodities derivatives exchanges have to apply for registration of its membership to SEBI within a period of 3 months from 28th September, 2015, the date on which Forwards Market Commission gave up its regulatory power to SEBI.

The members have to satisfy the eligibility requirements for membership, as per the rules, regulations and requirements of the exchanges of which it is a member.

Such existing members of commodity derivatives exchanges shall be required to meet the eligibility criteria as specified under Rule 8 of Securities Contract (Regulation) Rules, 1957 (hereinafter referred to as SCRR), within a period of one year from the date of transfer and vesting of rights and assets of the Forward Market Commission (FMC) with SEBI i.e., by September 28, 2016.

Any person desirous of becoming a member of any commodity derivatives exchange(s), on or after September 28, 2015, shall have to meet the eligibility criteria to become a member of an exchange and conditions of registration, as specified in SCRR and Stock Broker Regulations, respectively.

The application for registration shall be made in the manner prescribed in the Stock Broker Regulations, through the commodity derivatives exchange, of which it holds membership, in the prescribed form, along with the applicable fees. The application shall be accompanied by Additional Information as prescribed vide SEBI Circular No. SMD/POLICY/CIR-11/98 dated March 16, 1998.

The minimum net worth specified for members of commodity derivatives exchanges, as per Stock Broker Regulations, shall have to be computed as per the formula prescribed vide SEBI Circular No. FITTC/DC/CIR-1/98 dated June 16, 1998.

It is clarified that, “business in goods related to the underlying” and/ or “business in connection with or incidental to or consequential to trades in commodity derivatives”, by a member of a commodity derivatives exchange, would not be disqualified under Rule 8(1)(f) and Rule 8(3)(f) of the Securities Contract (Regulation) Rules, 1957.

Source: SEBI circular no. MIRSD/4/2015 dated 29th september, 2015

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New MCA E-forms

MCA has released the much awaited new e-forms for filing the annual audited accounts and the annual return. These forms i.e. AOC-4 replaces forms 23ac & 23aca and MGT-7 replaces form 20B which was the annual return form under the old Companies Act, 1956. MCA has also given relaxation in additional fees penalty for companies upto 31/10/2015, vide its circular no. 10/2015 dated 13th July, 2015. The new e-forms are available on the MCA site.

Further in case of companies with paid up share capital of Rs.10 crores or more OR turnover of Rs.50 crores or more, the form MGT-7 should be accompanied with a certificate from the Practising Company Secretary in form MGT-8.

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Industrial Licence for Defence Sector

The initial validity of Industrial License for Defence sector, as per Press Note 5 (2015 series), is presently seven years, further extendable upto 10 years.

In partial modification of the above mentioned Press Note, the initial validity of Industrial License for Defence Sector is being revised to 15 years, further extendable upto 18 years for existing as well as future Licenses. However, in case a license has already expired, the Licensee has to apply afresh for issue of license. This is being done as a measure to further promote ease of doing business, in view of the long gestation period of Defence contracts to mature.

Source: PIB Release

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Private companies allowed to accept monies from relatives of directors

Vide an amendment to the Companies (Acceptance of Deposits), Rules, 2014 dated 15th September, 2015, the Ministry of Corporate Affairs has now allowed private companies to accept loans from relatives of directors provided the relatives give a written declaration that the loans are being given from out of their own funds and not borrowed from someone else. The company is required to mention the details of such loans taken in the Annual Report. 

Earlier vide an amendment in June 2015, private companies were allowed to take loans from members not exceeding 100% of its paid up capital and free reserves. Here also the company is required to file particulars with the Registrar of Companies.

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TRAI issues consultation paper on call drops

Telecom Regulatory Authority of India (TRAI) has released a Consultation Paper on compensation to the consumers in the event of dropped calls for comments of the stakeholders. Call drop represents the service provider’s inability to maintain a call once it has been correctly established i.e. calls dropped or interrupted prior to their normal completion by the user, the cause of the early termination being within the service provider’s network.

In the past one year, consumers, at various fora, have raised the issue of call drops, complaining that their experience of making voice calls has deteriorated. In order to assess the problem, TRAI, in the months of June/ July, 2015, conducted special drive-tests on certain routes of Mumbai and Delhi, in which, it was found that Call Drop Rate of most of the telecom service providers (TSPs) were higher than the permissible limit of ~2% set by the Authority. TRAI has prescribed financial disincentives on TSPs for failure to meet the quality of service benchmarks (including call drop) so as to strengthen the effectiveness and compliance of the regulations.

TRAI is of the view that the problem of call drops needs to be examined in its entirety and requires adoption of a multi-pronged approach. It is also considering to make it mandatory for the TSPs to make periodic disclosures about their network capacities and the steps taken to optimize their networks to address the problem of call drops. On the lines of Independent Drive Tests (IDT) undertaken in the cities of Mumbai and Delhi in June/July, 2015, the Authority would be conducting such tests across various cities in the country.

While all these steps are being contemplated, the Authority cannot remain a silent spectator to the problem of call drops encountered by the consumers. In this background, TRAI has issued a consultation paper on the issue of call drops and various possible methods for compensating the consumers for call drops, namely: (i) Provision of not charging for the dropped calls (a) consumers should not be charged for a call that got dropped within five seconds (b) In addition, if the call gets dropped any time after five seconds, the last pulse of the call (minute/second) which got dropped should not be charged. (ii) Provision of providing credit to the consumers for dropped calls (a) Credit of talk-time in minutes/ seconds, or (b) Credit of talk-time in monetary terms.

This is the gist of the press release issued by TRAI on 4th September, 2015. Call drops are rampant not only in closed areas inside office complexes but also while walking in the open in areas such as Churchgate, Nariman Point etc. While on the one hand TSPs allege that call drops are a direct result of the dismantling of the various towers atop residential buildings due to radiation fears, there is no direct or causal link between the telecom towers and cancer arising out of radiation from these towers.

The consultation paper is available on the TRAI website.

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XBRL Rules, 2015

Ministry of corporate affairs has released the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015 superceding the 2011 Rules on the same subject.

The coverage of companies to be covered by XBRL rules is the same as in the 2011 Rules i.e.

(i) all companies listed with any Stock Exchange(s) in India and their lndian subsidiaries;

or (ii) all companies having paid up capital of rupees five crote or above;

(iii) all companies having turnover of rupees hundred crore or above; or

(iv) all companies which were hitherto covered under the Companies (Filing ot l)ocuments and Forms in Extensible Business Reporting Language) Rules, 2011:

New form specified for the purpose is AOC-4 XBRL

Companies in Banking, Insurance, Power Sector and Non Banking Financial Companies are exempted from filing documents under the XBRL Rules.

Cost Audit Report is also required to be filed in the XBRL Format in the appropriate form i.e. CRA-4.

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Spectrum trading among telcos allowed

Close on heals of the decision on spectrum sharing, the Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today approved a proposal of the Department of Telecommunications on guidelines for spectrum trading arising from the recommendations of the Telecom Regulatory Authority of India (TRAI). Together with the earlier decision, this is expected to transform the spectrum usage in the telecom sector.

The salient features of the norms for spectrum trading shall include:-

1. Spectrum trading will be allowed only between two access service providers only outright transfer of right to use the spectrum from the seller to the buyer shall be permitted.

2. Spectrum trading will not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.

3. The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer. The Government shall, at its discretion, be entitled to recover the amount, if any, found recoverable subsequent to the effective date of the transfer, which was not known to the parties at the time of the effective date of transfer, from the buyer or seller, jointly or severally.

4. A licensee shall not be allowed to trade in spectrum if it has been established that the licensee had breached the terms and conditions of the licence and the Licensor has ordered for revocation/termination of its licence.

5. Spectrum Trading shall be permitted only on a pan-LSA (Licensed Service Area) basis. In case the spectrum assigned to the seller is restricted to part of the LSA by the Licensor, then, after trading, the rights and obligations of the seller for the remaining part of the LSA with regard to assignment of that spectrum shall also stand transferred to the buyer. Further, relevant provisions of NIA with respect to spectrum assignment in part of the LSA, which were applicable to seller before the spectrum trade, will apply to buyer subsequent to the spectrum trade.

6. All access spectrum bands earmarked for Access Services by the Licensor will be treated as tradable spectrum bands.

7. Only that spectrum in the specified bands is permissible to be traded which has either been assigned through an auction in the year 2010 or afterwards, or on which the Telecom Service Provider (TSP) has already paid the prescribed market value (as decided by the Government from time to time) to the Government. In respect of spectrum in 800 MHz band acquired in the auction held in March 2013, trading of spectrum shall be permitted only if the differential of the latest auction price and the March 2013 auction price on pro-rata basis on the balance period of right to use the spectrum is paid.

8. Buyer will be allowed to use the spectrum acquired in 800 MHz/1800 MHz band through trading to deploy any technology by combining it with their existing spectrum holding in the same band after converting their entire existing spectrum holding into liberalized spectrum in that band as per the prevalent terms and conditions.

9. The terms and conditions attached to the spectrum under the provisions specified in the relevant NIA document or otherwise shall continue to apply after the transfer of spectrum unless specifically mentioned in the guidelines.

10. If any TSP sells only a part of its spectrum holding in a band, both, buyer as well as seller, will be required to pay the remaining instalments of payment (in case seller had acquired the spectrum through auction and opted for deferred payment), prorated for the quantum of spectrum held by each of them subsequent to the spectrum trade.

11. The buyer should be in compliance of the prescribed spectrum caps from time to time. The spectrum acquired through trading shall be counted towards the spectrum cap by adding to the spectrum holding of the buyer.

12. The seller should clear its Spectrum Usage Charges (SUC) and its instalment of payment (in case seller had acquired the spectrum through auction and opted for deferred payment) till the effective date of trade.

13. Where an issue, pertaining to the spectrum proposed to be transferred is pending adjudication before any court of law, the seller shall ensure that its rights and liabilities are transferred to the buyer as per the procedure prescribed under the law and any such transfer of spectrum will be permitted only after the interest of the Licensor has been secured.

14. A Telecom Service Provider will be allowed to sell the spectrum through trading only after two years from the date of its acquisition through auction or spectrum trading or administratively assigned spectrum converted to tradable spectrum. It is clarified that in case of administratively assigned spectrum converted to tradable spectrum after paying the prescribed market value, period of two years will be counted from the effective date of assignment of spectrum.

15. A non-refundable transfer fee of one percent of the transactional amount or one percent of the prescribed market price, whichever is higher shall be imposed on all spectrum trade transactions, to cover the administrative charges incurred by Government in servicing the trade. The transfer fee shall be paid by the buyer (transferee) to the Government. The amount received from trading shall be part of Adjusted Gross Revenue (AGR) for the purpose of levy of License fee and Spectrum Usage Charges (SUC).

16. Frequency swapping/reconfiguration from within the assignments made to the licensees will not be treated as trading of spectrum. The conditions in the NIA shall govern frequency swapping/reconfiguration.

17. Existing rates as prescribed by the Government from time to time for Spectrum Usage Charge (SUC) shall continue to apply on spectrum held by the buyer which inter alia includes the spectrum acquired through trading. Spectrum acquired through spectrum trading will be treated akin to spectrum acquired through auction.

18. Both the licensees trading the spectrum shall jointly give a prior intimation for trading the right to use the spectrum at least 45 days before the proposed effective date of the trading. Both the licensees shall also give an undertaking that they are in compliance with all the terms and conditions of guidelines for spectrum trading and the licence conditions. In the event, it is established that any of the licensee was not in conformance with the terms and conditions of the guidelines for spectrum trading as well as the licence at the time of giving intimation for trading of right to use the spectrum, the Government is entitled to take appropriate action which inter-alia may include annulment of trading agreement.

In December, 2013, the then Government had approved in-principle the spectrum trading but the detailed guidelines were not issued and therefore this policy could not be implemented.

The issue was under active consideration of the present Government as this arrangement leads to greater competition; provides incentives for innovation; better data services, utilising state of art technologies, being available to consumers at cheaper tariffs; better choice to consumer etc. This also facilitates ease of doing business in India by allowing free play in the commercial decisions and leads to optimisation of resources. This will fulfil the present Government’s commitment of ease of doing business apart from improving the spectral efficiency and quality of service which is very essential to fulfil the dream of digital India.

Background:

Historically, in most countries, the Telecom sector was a highly regulated sector where the Government used to decide the procedure for allocation of spectrum. Recognising the benefits of telecommunication facilities, over the past two decades, there has been growing consensus that because of significant increase in the demand for spectrum, the prevalent regulatory paradigm would prove inadequate to deal with the situation on hand. Licensed Service Providers need flexibility to respond quickly to changes in the market demand and technology. In India also, attention has been drawn to new ways of spectrum regulation, with increasing emphasis on evolving more flexible and market oriented approach to increase opportunities for efficient spectrum usage, for better services to consumers.

In India the spectrum assignment is made for a period of 20 years. During this period, some operators are able to acquire subscribers and grow at a faster rate as compared to other operators. This results in the spectrum lying unutilised with some of the players while other operators face spectrum crunch as spectrum is a scare resource. In India, unlike other countries, the availability of the Spectrum is relatively small. Therefore, Spectrum Sharing and Spectrum Trading are necessary to make up the inadequacy. It will not only improve the quality of service and but also help address the issue of call drops.

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party. This allows better spectrum usages as the idle spectrum from the hands of one service provider gets transferred to the other service provider who is facing spectrum crunch. This also improves customer satisfaction and services of the service provider acquiring spectrum.

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FDI in While Label ATM operations

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi, has given its approval to permit Foreign Direct Investment (FDI), up to 100 percent, under the automatic route, in the activity of White Label ATM (WLA) Operations subject  to the following conditions:

  1. Any non-bank entity intending to set up WLAs should have a minimum net worth of Rs. 100 crore as per the latest financial year’s audited balance sheet, which is to be maintained at all times.
  2. In case the entity is also engaged in any other 18 Non-Banking Finance Companies (NBFC) activities, then the foreign investment in the company setting up WLA, shall also have to comply with minimum capitalization norms for foreign investments in NBFC activities, as provided in Para 6.2.18.8.2 of the Consolidated FDI Policy Circular 2015.

3.    FDI in the WLAO will be subject to specific criteria and guidelines issued by RBI vide Circular No. DPSS.CO.PD. No. 2298/02.10.002/2011-2012, as amended from time to time.

Background:

One of the main objectives of the Government is to achieve financial inclusion in the country. In this regard, ATMs have been leveraged for delivery of a wide variety of banking services to customers such as the facility of accessing their accounts for dispensing cash and to carry out other financial and non-financial transactions without the need for actually visiting their bank branch. While, there has been year-on-year growth in the number of ATMs, yet their deployment has been predominantly in Tier I & II centres. To expand the reach of ATMs in Tier III to VI centres, non-banks entities were also allowed to set up ATMs, and such ATMs are known as White Label ATMs.

Till date foreign investment in White Label ATM Operations (WLAO), was being allowed only through government approval route. This required some processing time and projects were consequently delayed, dissuading investors from investing in such critical areas.

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