Monthly Archives: September 2017

FPI participation in commodity derivatives in IFSC

SEBI has vide circular dated 26th September, 2017 allowed Foreign Portfolio Investors (FPIs) to participate in commodity derivative contracts traded in stock exchanges in International Financial Services Centre (IFSC) subject to conditions, such as

a) Participation would be limited to derivative contracts in non agricultural commodities only;

b) Contracts would be cash settled on settlement price determined on overseas exchanges;

c) All transactions shall be denominated in foreign currency only.

SEBI circular can be found here i.e. http://www.sebi.gov.in/legal/circulars/sep-2017/participation-of-foreign-portfolio-investors-fpis-in-commodity-derivatives-in-ifsc_36081.html

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NCLAT Amendment Rules, 2016

The MCA has vide its notification dated 24th August, 2017, amended the National Company Law Appellate Tribunal Rules, 2016.

Rule 63 which hitherto specified that any party to any proceedings or appeal before the Appellate Tribunal may either appear in person or authorise one or more chartered accountants or cost accountants or company secretaries or legal practitioners or any other person to present his case before the Appellate Tribunal.

Now a sub Rule (2) has been added to the Rule 63, which allows the Central Government or Regional Director or Registrar of Companies or Official Liquidator to authorise an officer or an advocate to represent them in the proceedings before the Appellate Tribunal. If it is an officer, then it shall not be below the rank of junior time scale or company prosecutor.

The amendment is available at

Click to access NCLATAmendmentRules2017_25082017.pdf

 

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Companies (Acceptance of Deposits) Second Amendment Rules, 2017

MCA has brought about an amendment to the Companies (Acceptance of Deposits) Rules vide its Second Amendment Rules of 2017 on 19th September, 2017.

Rule 3(3) of the Rules stated that

“No company referred to in sub-section (2) of section 73 shall accept or renew any deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds [thirty five per cent] of the aggregate of the [Paid-up share capital, free Reserves and securities premium account] of the company.

[“Provided that a private company may accept from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.”]

It is the proviso to Rule 3(3) that is being amended.

The new proviso allows specified IFSC public company and private company to accept monies from its members not exceeding 100% of the aggregate of paid-up share capital, free reserves and securities premium account and such company shall file details of monies so accepted to the Registrar in form DPT-3.

Explanation to the proviso states that specified IFSC public company is an unlisted public company licensed to operate either by RBI, SEBI, IRDA in an approved international financial services centre located in an approved multi services Special Economic Zone.

Another proviso has been added to this sub-rule viz.

that the maximum limit in respect of deposits to be accepted shall not apply to

  1. private company which is a start-up for 5 years from the date of its incorporation, or
  2. private company which fulfills all the following conditions, viz.

a) which is not an associate or subsidiary of any other company (i.e. a purely private company)

b) the borrowings of such company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or Rs.50 crores, whichever is less (i.e. if the paid up share capital is Rs.1 lakh, then the borrowings should be less than Rs.2 lakhs or Rs.50 crores, whichever is less. So obviously the borrowings in this case should be less than Rs.2 lakhs)

c) company has not defaulted in repayment of such borrowings.

All the three conditions above has to be satisfied in respect of this second clause of this second proviso.

So basically the relaxation in acceptance of deposits is in favour of IFSC public company and start up private company. In respect of a purely private company the relaxations are dependent on its paid up share capital.

The companies accepting deposits should report the same in form DPT-3.

The amendment is available at

Click to access CompaniesAcceptanceofDepositSecondAmendmentRule_22092017.pdf

 

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Restriction on no. of layers

MCA has come out with a new rule with effect from 20th September, 2017 which is called the Companies (Restrictions on Number of Layers), Rules, 2017.

As per this Rule, no company shall have more than two layers of subsidiaries. Exemptions are wholly owned subsidiary or subsidiaries. Companies can however acquire more than two layers of subsidiaries outside India as per the laws of such jurisdiction.

Banking company, NBFC, Insurance company and government company is exempted from the provisions of these Rules.

Rule 3 says that the provisions of this rule shall not be in derogation to proviso to section 186(1) of the Act. That proviso says, in the first part that the company can acquire any other company incorporated outside India, if such foreign company has investment subsidiaries beyond more than two layers as per the laws of such country. The (b) portion of the proviso says that a subsidiary company can have investment subsidiary for the purpose of meeting any requirement under any law or rule or regulation thereto. The (b) proviso pertains to the Indian jurisdiction. So basically investment subsidiaries are outside the ambit of this Rule if they are the 2nd layer of subsidiaries.

Rule 4 specifies that where a company has subsidiaries in excess of the limits specified in these Rules, as on the date the Rules come into force, then it shall, within 150 days of these Rules, file with the ROC a form i.e. CRL-1, disclosing the details specified therein in the said Form. It shall not after the commencement of these Rules, have any additional layer of subsidiaries more than what it had on the date of commencement of these Rules. In case one or more layers are reduced after these Rules come into force, the Company shall keep the layers of subsidiaries at that reduced level or at the maximum level specified in these Rules. For eg. if a company has 4 layers of subsidiaries at the commencement date and subsequently one layer has dropped off, the company cannot increase the layer from 3 to 4 merely because it had 4 layers at the commencement date. It should be kept at 3 levels only.

Rule 5 is the penalty clause whereby the fine is Rs.10,000 for the company and every officer in default and if it is a continuing default, then further fine of Rs.1000 per day during the period the contravention continues.

So basically the Rule allows the companies to retain their level of subsidiaries, but not add to it. As and when the companies delete one or more of their subsidiaries, then they should retain it at that level or upto two layers and not increase it further.

The Rules is available at the MCA site at

Click to access CompaniesRestrictionOnNumberofLayersRule_22092017.pdf

 

 

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Payment of Gratuity Amendment Bill, 2017

PIB Press Release dated 12th September, 2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for introduction of the Payment of Gratuity (Amendment) Bill, 2017 in the Parliament.

The Amendment will increase the maximum limit of gratuity of employees, in the private sector and in Public Sector Undertakings/ Autonomous Organizations under Government who are not covered under CCS (Pension) Rules, at par with Central Government employees.

Background:

The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. The main purpose for enacting this Act is to provide social security to workmen after retirement, whether retirement is a result of the rules of superannuation, or physical disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity Act, 1972 is an important social security legislation to wage earning population in industries, factories and establishments.

The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh. The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity are also similar. Before implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling now is Rs. 20 Lakhs effective from 1.1.2016.

Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, the Government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to Payment of Gratuity Act, 1972.

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