Monthly Archives: January 2020

voluntary liquidation

The Insolvency and Bankruptcy Board of India (IBBI) has notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Amendment) Regulations, 2020 on 15th January. 2020.

 

The aforesaid amendment provides that a Liquidator shall deposit the amount of unclaimed dividends, if any, and undistributed proceeds, if any, in a liquidation process along with any income earned thereon into the Corporate Voluntary Liquidation Account before submission of an application for dissolution of the corporate person. It also provides a process for a stakeholder to seek withdrawal from the Corporate Voluntary Liquidation Account.

 

The amended regulations are effective from 16th January, 2020. These are available at http://www.mca.gov.in and www.ibbi.gov.in.

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security in credit cards

RBI circular dated 15th January, 2020 enhancing security of card transactions

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11788&Mode=0

Over the years, the volume and value of transactions made through cards have increased manifold. To improve user convenience and increase the security of card transactions, it has been decided as under:

a) At the time of issue / re-issue, all cards (physical and virtual) shall be enabled for use only at contact based points of usage [viz. ATMs and Point of Sale (PoS) devices] within India. Issuers shall provide cardholders a facility for enabling card not present (domestic and international) transactions, card present (international) transactions and contactless transactions, as per the process outlined in para 1 (c).

b) For existing cards, issuers may take a decision, based on their risk perception, whether to disable the card not present (domestic and international) transactions, card present (international) transactions and contactless transaction rights. Existing cards which have never been used for online (card not present) / international / contactless transactions shall be mandatorily disabled for this purpose.

c) Additionally, the issuers shall provide to all cardholders:

  1. facility to switch on / off and set / modify transaction limits (within the overall card limit, if any, set by the issuer) for all types of transactions – domestic and international, at PoS / ATMs / online transactions / contactless transactions, etc.;

  2. the above facility on a 24×7 basis through multiple channels – mobile application / internet banking / ATMs / Interactive Voice Response (IVR); this may also be offered at branches / offices;

  3. alerts / information / status, etc., through SMS / e-mail, as and when there is any change in status of the card.

2. The provisions of this circular are not mandatory for prepaid gift cards and those used at mass transit systems.

3. Issuers and card networks may give wide publicity to the provisions of this circular.

4. These directions are issued under Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall come into effect from March 16, 2020.

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Hedging report

RBI circular dated 15th January 2020 stipulating report to RBI in respect of hedging of commodity price risk and freight risk in overseas markets will now be made in XBRL format instead of excel mode as was stipulated earlier.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11789&Mode=0

Please refer to Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), as amended from time to time, and Hedging of Commodity Price Risk and Freight Risk in Overseas Markets (Reserve Bank) Directions, 2018 (issued vide A.P. (DIR Series) Circular No. 19 dated March 12, 2018).

2. Para 10 of the Directions ibid shall be substituted with following:

“10. Report to Reserve Bank – Banks shall submit a quarterly report to the Chief General Manager, Financial Markets Regulation Department, Reserve Bank of India through Extensible Business Reporting Language (XBRL) accessible at https://xbrl.rbi.org.in/orfsxbrl/ in the format provided in Annexure I. In case of no transactions, a “Nil” report shall be submitted by the bank.”

3. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions /approvals, if any, required under any other law.

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GST – staggered returns

Ministry of Finance press release dated 22nd January, 2020

Considering the difficulties faced by trade and industry in filing of returns, the government has decided to introduce several measures to ease the process. The Finance Ministry today said that now GST taxpayers can file their GSTR-3B returns in a staggered manner.

Presently the last date of filing GSTR-3B returns for every taxpayer is 20th of every month. From now on, the last date for filing of GSTR-3B for the taxpayers having annual turnover of Rs 5 crore and above in the previous financial year would be 20th of the month. Thus, around 8 lakh regular taxpayers would have the last date of GSTR-3B filing as 20th of every month without late fees.

The taxpayers having annual turnover below Rs 5 crore in previous financial year will be divided further in two categories. The tax filers from 15 States/ UTs, i.e., Chhattisgarh, Madhya Pradesh, Gujarat, Daman and Diu, Dadra and Nagar Haveli, Maharashtra, Karnataka, Goa, Lakshadweep, Kerala, Tamil Nadu, Puducherry, Andaman and Nicobar Islands, Telangana and Andhra Pradesh will now be having the last date of filing GSTR-3B returns as 22nd of the month without late fees. This category would have around 49 lakh GSTR-3B filers who would now have 22nd of every month as their last date for filing GSTR-3B returns.

For the remaining 46 lakh taxpayers from the 22 States/UTs of Jammu and Kashmir, Laddakh, Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Haryana, Delhi, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand and Odisha having annual turnover below Rs 5 crore in previous financial year will now be having last date of filing the GSTR-3B as 24th of the month without late fees.

The Finance Ministry said that the necessary notification in this regard would be issued later by the competent authority.

In a statement issues, the Ministry further said that it has also taken a note of difficulties and concerns expressed by the taxpayers regarding filing of GSTR-3B and other returns. The matter has been discussed by the GSTN with Infosys, the Managed Service Provider, which has come out with above solution to de-stress the process as a temporary but immediate measure. For further improving the performance of GSTN filing portal on permanent basis, several technological measures are being worked out with Infosys and will be in place by April 2020.

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Rights issues

SEBI has issued a circular dated 22nd January, 2020 streamlining the process of issue and allotment of rights shares by listed companies.

https://www.sebi.gov.in/legal/circulars/jan-2020/streamlining-the-process-of-rights-issue_45753.html

Salient features of the amendments are as follows:

1.1 The period for advance notice to stock exchange(s) under Regulation 42(2) of LODR Regulations has been reduced from at least 7 working days to at least 3 working days (excluding the date of intimation and the record date), for the purpose of rights issue.

1.2 Issuance of newspaper advertisement disclosing date of completion of dispatch and intimation of same to the stock exchanges for dissemination on their websites, as per Regulation 84 (1) of ICDR Regulations, shall be completed by the issuer at least 2 days before the date of opening of the issue.

1.3 Introduction of dematerialized Rights Entitlements (REs) –

1.3.1. In the letter of offer and the abridged letter of offer, the issuer shall disclose the process of credit of REs in the demat account and renunciation thereof.

1.3.2. REs shall be credited to the demat account of eligible shareholders in dematerialized form. 1.3.3. In REs process, the REs with a separate ISIN shall be credited to the demat account of the shareholders before the date of opening of the issue, against the shares held by them as on the record date.

1.3.4. Physical shareholders shall be required to provide their demat account details to Issuer / Registrar to the Issue for credit of REs not later than two working days prior to the issue closing date, such that credit of REs in their demat account takes place at least one day before the issue closing date.

1.4 Trading of dematerialized REs on stock exchange platform –

1.4.1. REs shall be traded on secondary market platform of Stock exchanges, with T+2 rolling settlement, similar to the equity shares. Trading in REs on the secondary market platform of stock exchanges shall commence along with the opening of the issue and shall be closed at least four days prior to the closure of the rights issue.

1.4.2. Investors holding REs in dematerialized mode shall be able to renounce their entitlements by trading on stock exchange platform or off-market transfer. Such trades will be settled by transferring dematerialized REs through depository mechanism, in the same manner as done for all other types of securities.

1.5. Payment mode – Application for a rights issue shall be made only through ASBA facility.

1.6. No withdrawal of application shall be permitted by any shareholder after the issue closing date.

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Reporting of large transactions

RBI circular dated 16th January, 2020 wherein they have streamlined the reporting of large exposures of Primary Urban Co-operative Banks having total assets of Rs.500 crores and above. Exposures to include all fund based, non fund based including investment exposure on the borrower. They have set up a three pronged strategy to report large exposures viz. exposure to large borrowers, reporting of technically/ prudentially written off accounts and reporting of balance in current account.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11790&Mode=0

We draw your attention to RBI Circular DOR (PCB). BPD.Cir.No.7/13.05.000/2019-20 dated December 27, 2019 on “Reporting of Large Exposures to Central Repository of Information on Large Credits (CRILC) – UCBs“. In terms of the instructions, Primary (Urban) Co-operative Banks (UCBs) having total assets of ₹500 crore and above as on 31st March of the previous financial year (hereinafter referred to as “banks”) shall report credit information, including classification of an account as Special Mention Account (SMA), on all borrowers having aggregate exposures of ₹5 crore and above with them to Central Repository of Information on Large Credits (CRILC) maintained by the Reserve Bank. Aggregate exposure shall include all fund-based and non-fund based exposure, including investment exposure on the borrower.

2. The operational guidelines for reporting the CRILC– UCBs return are as follows:

i. The reporting frequency of the CRILC– UCBs return is quarterly to start with. The banks need to submit the data on large exposures within 30 days from the end of the quarter through XBRL reporting platform of RBI. Banks may put in place appropriate systems to be in readiness to submit the return on a more frequent periodicity.

ii. CRILC – UCBs return will comprise of three sections viz. Section 1: Exposure to Large Borrowers, Section 2: Reporting of Technically / Prudentially Written-off Accounts and Section 3: Reporting of Balance in Current Account, as below:

  1. In Section 1: Exposure to Large Borrowers, the bank needs to report the credit information of all borrowers having aggregate exposures (fund-based, non-fund based and investment exposure) of ₹5 crore and above.

  2. In Section 2: Reporting of Technically / Prudentially Written-off Accounts, the bank needs to report the data on the amount written off, if any, for borrowers whose technically/prudentially written off amount is ₹5 crore or more and which are not reported in Section 1.

  3. In Section 3: Reporting of balance in Current Account, the bank needs to report the data on Current Account holders whose (i) balance (either credit or debit) in current account as on reporting date is ₹1 crore and above or (ii) total of credit summation (sum of all credit transactions) during the reporting quarter is ₹5 crore and above or (iii) total of debit summation (sum of all debit transactions) during the reporting quarter is ₹5 crore and above.

iii. The detailed instructions for each Section is provided in the CRILC-UCBs return installer (macro enabled excel template).

iv. Banks are advised to take utmost care about data accuracy and integrity while submitting the data on large credits to the Reserve Bank of India, failing which penal action would be undertaken.

3. In the light of DoR instructions referred above and in exercise of the powers conferred under Section 27 (2) read with Section 56 (a)(i) of the Banking Regulation Act, 1949(AACS), you are advised to submit the data in CRILC-UCBs return with effect from the quarter ended December 31, 2019. The format of reporting is enclosed.

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CS regulations

Govt. of India has vide its notification dated 17th January 2020 approved the following amendments to the Company Secretaries Regulations 1982

1) Introduction of entrance test (CSEET) in place of Foundation program for CS students

2) Introduction of uniform training structure of 24 months for the students after the Executive program;

3) Gap of 6 months between enrolment and examinations (for both Executive & Professional) for all modules and gap of 4 months between enrolment and examinations for single group or modules;

4) Introduction of Secretarial Executive Certificate for the Executive passed students;

5) Provision of Specialised, Advanced and Refresher course for the members;

6) Orientation program for the members for issuance of Certificate of Practice;

7) Pre-examination tests for enrolment into examinations.

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Rupee Derivatives

RBI circular dated 20th January, 2020 regarding introduction of rupee derivatives in international financial services centre

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11791&Mode=0

Attention of Authorised Dealers is invited to the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (Notification No. FEMA. 339/2015-RB dated 2nd March, 2015).

2. As announced in the statement on Developmental and Regulatory Policies dated October 4, 2019, it has now been decided to allow Rupee derivatives (with settlement in foreign currency) to be traded in International Financial Services Centres (IFSCs), starting with Exchange Traded Currency Derivatives(ETCD).

3. Currency futures contracts may be listed on recognised stock exchanges at IFSCs subject to the Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020 (Notification No.FMRD.FMD.01/ED(TRS)-2020 dated January 20, 2020), issued by the Reserve Bank of India, a copy of which is annexed (Annex I).

4. Currency options contracts may be listed on recognised stock exchanges at IFSCs subject to the Currency Options in International Financial Services Centre (Reserve Bank) Directions, 2020 (Notification No.FMRD.FMD.02/ED(TRS)-2020 dated January 20, 2020), issued by the Reserve Bank of India, a copy of which is annexed (Annex II).

5. Necessary amendments to the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (Notification No. FEMA. 339/2015-RB dated 2nd March, 2015) have been notified in the Official Gazette vide Gazette Id no.CG-DL-E-17012020-215530 dated January 16, 2020 a copy of which is annexed (Annex-III).

6. Amendments to Currency Futures (Reserve Bank) Directions, 2008 (Notification No.FED.1/DG(SG) – 2008 dated August 6, 2008), as amended from time to time, and Exchange Traded Currency Options (Reserve Bank) Directions, 2010 (Notification No. FED.01/ED(HRK) – 2010 dated July 30, 2010), as amended from time to time, is annexed as Annex IV & V respectively.

7. The above Directions have been issued under Section 45W of the Reserve Bank of India Act, 1934 and the above Regulation have been issued under Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999).

8. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions /approvals, if any, required under any other law.

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Rupee Derivatives

RBI circular dated 21st January, 2020 allowing rupee derivatives (with settlement in foreign currency) by the IFSC Banking Units.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11794&Mode=0

Please refer to RBI circular DBR.IBD.BC.14570/23.13.004/2014-15 dated April 01, 2015, as modified from time to time, setting out RBI directions relating to IFSC Banking Units (IBUs).

2. The Task Force (TF) on Offshore Rupee Markets chaired by Smt. Usha Thorat had recommended introduction of non-deliverable Rupee Derivatives in IFSCs in a phased manner, starting with exchange traded currency derivatives (ETCD) to be followed by Over the Counter (OTC) derivatives at a later stage.

3. RBI’s decision to accept the above recommendation and permit Rupee derivatives (with settlement in foreign currency) to be traded in IFSC was announced in para 2 of the Statement on Developmental and Regulatory policies issued on October 04, 2019. Accordingly, a new paragraph No.2.6 (xiv), has been added to Annex I and II of the aforesaid circular dated April 1, 2015, which reads as under:

“IBUs are allowed to participate in exchange traded currency derivatives on Rupee (with settlement in foreign currency) listed on stock exchanges set up at IFSCs. Banks shall ensure that their IBUs have necessary expertise to price, value and compute the capital charge and manage the risks associated with the products / transactions intended to be offered and should also obtain their Board’s approval for undertaking such transactions. IBUs shall follow all other risk mitigation and prudential measures as applicable and detailed in this circular while participating in these products. Further, IBUs may also be guided by A.P (DIR Series) Circular No. 17 on “Introduction of Rupee derivatives at International Financial Services Centres (IFSCs)” dated January 20, 2020.

4. Further, the existing paragraph 2.6(vii) of Annex I and II of the aforesaid circular dated April 01, 2015, is amended by adding the following at the end thereof:

“This is subject to the provisions of paragraph 2.6(xiv).”

5. All other terms and conditions contained in the aforementioned circular remain unchanged.

6. An updated copy of the RBI circular on IBU dated April 01, 2015 incorporating the amendments made hitherto is available on RBI’s website.

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new ITR forms

PIB press release dated 9th January, 2020 relaxing some conditions whilst filing the new Income Tax return forms.

In order to ensure that the e-filing utility for filing of return for assessment year (A.Y) 2020-21 is available as on 1st April, 2020, the Income-tax Return (ITR) Forms ITR-1 (Sahaj) and ITR-4 (Sugam) for the A.Y 2020-21 were notified vide notification dated 3rd January, 2020. In the notified returns, the eligibility conditions for filing of ITR-1 & ITR-4 Forms were modified with an intent to keep these forms short and simple with bare minimum number of Schedules. Therefore, a person who owns a property in joint ownership was not made eligible to file the ITR-1 or ITR-4 Forms. For the same reason, a person who is otherwise not required to file return but is required to file return due to fulfilment of one or more conditions in the seventh proviso to section 139(1) of the Income-tax Act, 1961 (the Act), was also not made eligible to file ITR-1 Form.

After the aforesaid notification, concerns have been raised that the changes are likely to cause hardship in the case of individual taxpayers. The taxpayers with jointly owned property have expressed concern that they will now need to file a detailed ITR Form instead of a simple ITR-1 and ITR-4. Similarly, persons who are required to file return as per the seventh proviso to section 139(1) of the Act, and are otherwise eligible to file ITR-1, have also expressed concern that they will not be able to opt for a simpler ITR-1 Form.

The matter has been examined and it has been decided to allow a person, who jointly owns a single house property, to file his/her return of income in ITR-1 or ITR-4 Form, as may be applicable, if he/she meets the other conditions. It has also been decided to allow a person, who is required to file return due to fulfilment of one or more conditions specified in the seventh proviso to section 139(1) of the Act, to file his/her return in ITR-1 Form.

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digital licensing

PIB press release dated 10th january 2020 introducing paperless licensing for petroleum road tankers. Good move by the govt.

In line with the vision of Prime Minister, Narendra Modi’s Digital India and Ease of Doing Business, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, has launched paperless licensing process through Petroleum and Explosives Safety Organisation (PESO) for road tankers for transportation of petroleum under the Petroleum Rules, 2002.

This is a significant move towards paperless and green India that will provide simpler mechanism, ease of living and business to the petroleum road tanker ownersMoving towards digitisation, the process will include filing the applications online. This will also include online payment of fees which will go directly to the concerned officer’s ID without any manual interface. Applicants, at each stage of processing of the application, will be intimated via SMS and email, whether discrepancy or grant of licence or approval. This will be in addition to the same being reflected in the applicant’s profile.

The new process will update the applicant at each stage triggering an e-mail and SMS immediately when the licence is granted by the officer concerned and is dispatched electronically. All this process will be without any need for printing and physical dispatch.

This extraordinary and forward looking initiative is directly going to benefit more than one lakh petroleum road tanker owners who together hold more than half of total licences issued under the Petroleum Rules, 2002. An added advantage of this move is that the authenticity of the licence can be verified through public domain available on PESO’s website. This automation is going to revolutionise the petroleum & gas industry benefitting it immensely.

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credit ratings

SEBI circular dated 3rd January, 2020 in respect of strengthening the rating process in respect of “INC” – “Issuer Not Co-operating” rating process.

https://www.sebi.gov.in/legal/circulars/jan-2020/annual-system-audit-of-market-infrastructure-institutions_45573.html

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significant beneficial ownership

MCA has vide its circular dated 1st January, 2020 extended the last date for filing of form BEN-2 without paying additional filing fees to 31st March, 2020.

BEN-2 is a form for reporting significant beneficial ownership of the company shareholdings. In line with the international standards on the matter, this reporting aims to delve into the actual ownership of the shareholdings of limited companies. Important especially from the point of view of money laundering situations and financial terrorism, benami transactions being carried out world over and related party transactions.

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company secretary

MCA has vide amendment dated 3rd January, 2020 to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 allowed private limited companies to appoint whole time company secretary when their paid up share capital exceeds Rs.10 crores. Hitherto the limit was Rs.5 crores.

Also it has mandated a secretarial audit report to be carried pursuant to section 203 of the Companies Act, 2013 to all companies (including private companies) who have  borrowings from banks or financial institutions exceeding Rs.100 crores. The threshold limit of Rs.100 crores to be seen from an audited financial statement. So it appears more or less at the year end status.

The circular is available at the MCA site.

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inter-bank transactions

RBI circular dated 6th January, 2020 permitting AD category 1 banks to undertake customer and inter bank transactions beyond onshore market hours.

Attention of Authorised Dealers (ADs) is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 notified vide Notification No. FEMA.25/RB-2000 dated May 3, 2000) issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (Act 42 of 1999), as amended from time to time and the Master Direction- Risk Management and Inter-bank Dealing dated July 05, 2016, as amended from time to time.

2. As announced in the Statement of Developmental and Regulatory Policies dated October 04, 2019 it has been decided to accept the recommendation of the Task Force on Offshore Rupee Market to permit AD Cat-I banks to offer foreign exchange prices to users at all times, out of their Indian books, either by a domestic sales team or through their overseas branches.

3. Accordingly, the following section is being added in Part C (Inter-Bank Foreign Exchange Dealings) of the Master Direction- Risk Management and Inter-Bank Dealings:

“6. Customer and inter-bank transactions beyond onshore market hours

Authorised dealers may undertake customer (persons resident in India and persons resident outside India) and inter-bank transactions beyond onshore market hours. Transactions with persons resident outside India, through their foreign branches and subsidiaries may also be undertaken beyond onshore market hours.”

4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

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