KYC of all Directors

Important update from MCA - KYC of all Directors 

Posted on MCA website today. 

As part of updating its registry, MCA would be conducting KYC of all Directors of all companies annually through a new eform viz. DIR-3 KYC
to be notified and deployed shortly. Accordingly, every Director who has been allotted DIN on or before 31st March, 2018 and whose DIN is in ‘Approved’ status, would be mandatorily required to file form DIR-3 KYC
on or before 31st August,2018. While filing the form,the Unique Personal Mobile Number and Personal Email ID would have to be mandatorily indicated and would be duly verified by One Time Password(OTP). The form should be filed by every Director using his own DSC and should be duly certified by a practicing professional (CA/CS/CMA). Filing of DIR-3 KYC would be mandatory for Disqualified Directors also.
After expiry of the due date by which the KYC form is to be filed,the MCA21 system will mark all approved DINs (allotted on or before 31st March 2018) against which DIR-3 KYC form has not been filed as ‘Deactivated’ with reason as ‘Non-filing of DIR-3 KYC’. After the due date filing of DIR-3 KYC in respect of such deactivated DINs shall be allowed upon payment of a specified fee only, without prejudice to any other action that may be taken

Monitoring of foreign investment limits in listed Indian companies

SEBI circular dated April, 5, 2018 follows:

1. Foreign Investment in India is regulated in terms of clause (b) of sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017 issued vide Notification No. FEMA 20(R)/2017-RB dated November 7, 2017. FEMA prescribes the various foreign investment limits in listed Indian companies. These include the aggregate FPI limit, the aggregate NRI limit and the sectoral cap. The RBI Master Direction (FED Master Direction No. 11/2017-18) dated January 04, 2018 provides a compilation of the instructions issued on Foreign Investment in India and its related aspects under FEMA.    

2. As per FEMA, the onus of compliance with the various foreign investment limits rests on the Indian company. In order to facilitate the listed Indian companies to ensure compliance with the various foreign investment limits, SEBI in consultation with RBI has decided to put in place a new system for monitoring the foreign investment limits. The architecture of the new system has been explained in Annexure A. 

3. The depositories (NSDL and CDSL) shall put in place the necessary infrastructure and IT systems for operationalizing the monitoring mechanism described at Annexure A. The Stock Exchanges (BSE, NSE and MSEI) shall also put in place the necessary infrastructure and IT systems for disseminating information on the available investment headroom in respect of listed Indian companies. 

4. The depositories shall issue the necessary circulars and guidelines for collecting data on foreign investment from listed companies. The system for collecting this data from the companies shall go live on the date of the issuance of this circular. The companies shall provide the necessary data (details of which have been mentioned in Annexure A) to the depositories latest by May 15, 2018 (amended vide SEBI circular dated 27th April, 2018). 

5. The new system for monitoring foreign investment limits in listed Indian companies shall be made operational on May 18, 2018 (amended vide SEBI circular dated 27th April, 2018). The existing mechanism for monitoring the foreign investment limits shall be done away with once the new system is operationalized. RBI shall issue the necessary guidelines in this regard. 

Annexure A

Architecture of the System for Monitoring Foreign Investment Limits in listed Indian companies

Housing of the System
1. The system for monitoring the foreign investment limits in listed Indian companies shall be implemented and housed at the depositories (NSDL and CDSL).

Designated Depository

2. A Designated Depository is a depository which has been appointed by an Indian company to facilitate the monitoring of the foreign investment limits of that company.  As defined at Regulation 2(xxiii) of FEMA, the term ‘Indian company’ means a company incorporated in India and registered under the Companies Act, 2013.

3. The Designated Depository shall act as a lead depository and the other depository shall act as a feed depository. 

Company Master

4. The company shall appoint any one depository as its Designated Depository for the purpose of monitoring the foreign investment limit. 

5. The stock exchanges (BSE, NSE and MSEI) shall provide the data on the paid-up equity capital of an Indian company to its Designated Depository. This data shall include the paid-up equity capital of the company on a fully diluted basis. As defined at Regulation 2(xvii) of FEMA, the term “fully diluted basis” means the total number of shares that would be outstanding if all possible sources of conversion are exercised.

6. The depositories shall provide an interface wherein the company shall provide the following information to its Designated Depository:

i. Company Identification Number (CIN)
ii. Name
iii. Date of incorporation
iv. PAN number
v. Applicable Sector
vi. Applicable Sectoral Cap
vii. Permissible Aggregate Limit for investment by FPIs
viii. Permissible Aggregate Limit for investment by NRIs
ix. Details of shares held by FPI, NRIs and other foreign investors, on repatriable basis, in demat as well as in physical form
x. Details of indirect foreign investment which are held in both demat and physical form
xi. Details of demat accounts of Indian companies making indirect foreign investment in the capital of the company
xii. Whether the Indian company that has total foreign investment in it , is either not owned and not controlled by resident Indian Citizens or is owned or controlled by person’s resident outside India (Yes or No)
xiii. ISIN-wise details of the downstream investment in other Indian companies

The information provided by the companies shall be stored in a Company Master database. The Designated Depository, if required, may seek additional information from the company for the purpose of monitoring the foreign investment limits. The companies shall ensure that in case of any corporate action, the necessary modification is reflected immediately in the Company Master database.

7. In the event of any change in any of the details pertaining to the company, such as increase/decrease of the aggregate FPI/NRI limits or the sectoral cap or a change of the sector of the company, etc. the company shall inform such changes along with the supporting documentation to its Designated Depository. Such documentation may include:

i. Board of Directors resolution approving the increase/decrease
ii. General body resolution approving the increase/decrease
iii. Company Secretary certificate for compliance with FEMA, 1999


Reporting of trades

8. At present, as per SEBI guidelines, the custodians are reporting confirmed trades of their FPI clients to the depositories on a T+1 basis. This reporting shall continue and the data shall be the basis of calculating FPI investments/holding in Indian companies. 

9. With respect to NRI (repatriable) trades, Authorized Dealer (AD) Banks shall report the transactions of their NRI clients to the depositories. The AD Banks shall be guided by the circulars issued by RBI in this regard. 

Activation of a Red Flag Alert 

10. The monitoring of the foreign investment limits shall be based on the paid-up equity capital of the company on a fully diluted basis to ensure that all foreign investments are in compliance with the foreign investment limits. 11. A red flag shall be activated whenever the foreign investment within 3% or less than 3% of the aggregate NRI/FPI limits or the sectoral cap. This shall be done as follows :

Aggregate NRI investment limit in the company

11.1. The system shall calculate the percentage of NRI holdings in the company and the investment headroom available as at the end of the day with respect to the aggregate NRI investment limit

11.2. If the available headroom is 3% or less than 3% of the aggregate NRI investment limit, a red flag shall be activated for that company.

11.3. Thereafter, the depositories and exchanges shall display the available investment headroom, in terms of available shares, for all companies for which the red flag has been activated, on their respective websites.

11.4. The data on the available investment headroom shall be updated on a daily end-of-day basis as long as the red flag is activated. 

Aggregate FPI investment limit of the company

11.5. The system shall calculate the percentage of FPI holding in the company and the investment headroom available as at the end of the day with respect to the aggregate FPI investment limit

11.6. If the available headroom is 3% or less than 3% of the aggregate FPI investment limit, a red flag shall be activated for that company.

11.7. Thereafter, the depositories and exchanges shall display the available investment headroom, in terms of available shares, for all companies for which the red flag has been activated, on their respective websites.

11.8. The data on the available investment headroom shall be updated on a daily end-of-day basis as long as the red flag is activated. 

Sectoral cap of the company

11.9. The system shall calculate the total foreign investment in the company by adding the aggregate NRI investment on the stock exchange, the aggregate FPI investment in the company and other foreign investment as provided by the company in the company master.

11.10. If the total foreign investment in a company is within 3% or less than 3% of the sectoral cap, then a red flag shall be activated for that company.

11.11. Thereafter, the depositories and exchanges shall display the available investment headroom, in terms of available shares, for all companies for which the red flag has been activated, on their respective websites.

11.12. The data on the available investment headroom shall be updated on a daily end-of-day basis as long as the red flag is activated.

12. The depositories shall inform the exchanges about the activation of the red flag for the identified scrip. The exchanges shall issue the necessary circulars/public notifications on their respective websites. Once a red flag has been activated for a given scrip, the foreign investors shall take a conscious decision to trade in the shares of the scrip, with a clear understanding that in the event of a breach of the aggregate NRI/FPI limits or the sectoral cap, the foreign investors shall be liable to disinvest the excess holding within five trading days from the date of settlement of the trades.

Breach of foreign investment limits

13. Once the aggregate NRI/FPI investment limits or the sectoral cap for a given company have been breached, the depositories shall inform the exchanges about the breach. The exchanges shall issue the necessary circulars/public notifications on their respective websites and shall halt all further purchases by :

13.1. FPIs, if the aggregate FPI limit is breached
13.2. NRIs, if the aggregate NRI limit is breached

13.3. All foreign investors, if the sectoral cap is breached

14. In the event of a breach of the sectoral cap/aggregate FPI limit/aggregate NRI limit, the foreign investors shall divest their excess holding within 5 trading days from the date of settlement of the trades, by selling shares only to domestic investors.

Method of disinvestment

15. The proportionate disinvestment methodology shall be followed for disinvestment of the excess shares so as to bring the foreign investment in a company within permissible limits. In this method, depending on the limit being breached, the disinvestment of the breached quantity shall be uniformly spread across all foreign Investors/FPIs/NRIs which are net buyers of the shares of the scrip on the day of the breach.  The foreign investors are required to disinvest the excess quantity by selling them only to domestic investors, within 5 trading days of the date of settlement of the trades that caused the breach. 

16. This method has been illustrated with the help of an example provided below. 

 
 17. As can be observed from the above table, the foreign investors/FPIs/NRIs which are required to disinvest shall be identified and shall be informed of the excess quantity that they are required to disinvest. 

18. In the case of FPIs which have been identified for disinvestment of excess holding, the depositories shall issue the necessary instructions to the custodians of these FPIs for disinvestment of the excess holding within 5 trading days of the date of settlement of the trades. 

19. In the case of NRIs which have been identified for disinvestment of excess holding, the depositories shall issue the necessary instructions to the Authorized Dealer (AD) Banks for disinvestment of the excess holding within 5 trading days of the date of settlement of the trades.

20. The depositories shall utilize the FPI trade data provided by the custodians, post custodial confirmation, on T+1 day, where T is the trade date.  The breach of investment limits (if any) shall be detected at the end of T+1 day and therefore, the announcement pertaining to the breach shall be made at the end of T+1 day. The foreign investors who have purchased the shares of the scrip during the trading hours on T+1 day shall also be given a time period of 5 trading days from the date of settlement of such trades, to disinvest the holding accruing from the aforesaid purchase trades. In other words, the purchase trades of such foreign investors which have taken place of T+1 day, shall be settled on T+3 day and thereafter a time period from T+4 day to T+8 day shall be available to them to disinvest their entire holding arising from purchases on T+1 day.

21. If T+1 is a settlement holiday, then the custodial confirmation of the trade executed on T day shall be done on T+2 day and the subsequent settlement of the trade on T+3 day. In such a 22. A table summarizing the breach-disinvestment scenario is given below 

 22. A table summarizing the breach-disinvestment scenario is given below

 

23. In the event the foreign shareholding in a company comes within permissible limit during the time period for disinvestment, on account of sale by other FPI or other group of FPIs, the original FPIs, which have been advised to disinvest, would still have to do so within the disinvestment time period, irrespective of the fresh availability of an investment headroom during the disinvestment time period.

24. There shall be no annulment of the trades which have been executed on the trading platform of the stock exchanges and which are in breach of the sectoral caps/aggregate FPI limits/aggregate NRI limits. Failure to disinvest within 5 trading days
25. If a breach of the investment limits has taken place on account of the FPIs and the identified FPIs have failed to disinvest within 5 trading days, then necessary action shall be taken by SEBI against the FPIs. 

Fees

26. The Designated Depository shall levy reasonable fee/charges on the company towards development, ongoing maintenance and monitoring costs at an agreed upon frequency.

BSE Start-up Platform

BSE circular dated 21st June, 2018 on the above subject.

Trading Members and participants are hereby informed that BSE SME segment has emerged as preferred platform for SME in India with highest number of listed companies.

In order to provide further incentive to the companies which are “Startups” in the sector of IT, ITES, Bio-technology and Life Science etc., the Exchange is pleased to announce that “BSE Startup Platform” is enabled on BSE SME Segment.  

This platform will facilitate the listing of companies in the sector of IT, ITES, Bio-technology and Life Science, 3D Printing, Space technology, E-Commerce, Hi- Tech Defense, Drones, Nano Technologies, Artificial Intelligence, Big data, Enhance/Virtual Reality, E-gaming, Exoskeleton, Robotics, Holographic Technology, Genetic Engineering, Variable Computers Inside body computer technology and any other Hi-tech based company.

The criteria for listing on “BSE Startup Platform” is as follows:

1.       The pre issue paid up Equity share Capital of the company should be minimum of Rs. 1 crore.

2.       The company should be in existence for a minimum period of 3 years on the date of filing the draft prospectus with BSE

3.       There should preferably have investment by QIB investors (as defined under SEBI ICDR Regulations, 2009) / Angel Investors for a minimum period of 2 years at the time of filing of draft prospectus with BSE and such aggregate investment should be at least Rs. 1 crore

4.       The company should have positive net-worth

5.       The Company should not have been referred to National Company Law Tribunal (NCLT) under Insolvency and Bankruptcy Code, 2016

6.       There should be no winding up petition against the company that has been accepted by the National Company Law Tribunal (NCLT)

The companies listing on BSE Startup Platform with the above mentioned criteria will follow all the other conditions applicable for listing of SME Companies under Chapter XB of “SEBI (ICDR) Regulations, 2009”, relating to disclosures, migration to main Board, etc.

10K race in Vile-parle

Ran a 10K race after years yesterday at the Keep on Running India 10K which was held at Vile-Parle East, suburb of Mumbai. It was a flat track with two loops of 5K, the weather was okay and drizzling to slightly light showers. There were too many twists and turns for a 10K, but the roads were okay and crowds were non existent for a sunday morning. There were sufficient volunteers at every corner so a possibility that a runner might get lost was not there. Since I was racing after a long time, and not much of strength training in the interregnum, was pleasantly surprised that I was able to maintain the pace for a long time. The whole ideas was to treat it as a long tempo run, so that was good in the end. 

Companies Amendment Act 2018 -

MCA has vide its notification dated 13th June, 2018 allowed commencement of amendment to five sections of the Companies Act, 2013, vide Companies (Amendment) Act, 2018. These amendments come into effect from 13th June, 2018. These are:

section 90: this section has been substituted by a new section in toto. This deals with significant beneficial ownership for which separate rules have been notified also. This section is basically to find out who is the actual owner of shares on which beneficial interest lies not with the person whose name is entered in the register of members but with somebody else. This is important from the point of view of compliance thereto in respect of individuals or one or two individuals who are having beneficial interest in shares of the company.

section 93: Deletion of this section. This section required promoters to give details of shares held by them and top ten promoters and any change made therein to the extent of two percent or more shareholding to be reported to the Ministry in the prescribed format. This was a cumbersome section and rightly done away with.

section 94: this section deals with place of keeping and inspection of registers & records etc. There was a proviso which said that the annual returns may also be kept at a place other than the registered office in India in a city where more than 1/10th of the total number of members reside, if approved by a special resolution passed at a general meeting. There was a requirement that the ROC be given an advance copy of the proposed special resolution. This requirement of providing advance copy of the special resolution to the ROC has been done away with. 

Sub-Section (3) of section 94 provided that any member, debenture holder, other security holder or beneficial owner or any other person may (a) take extracts from any register or index or return without payment of fee, or (b) require a copy of such register or entries thereon or return on payment of such fees as may be prescribed.

Now a proviso has been added to this sub-section which says that - such particulars of the register or index or return as may be prescribed shall not be available for inspection under sub-section (2) or taking extracts or copies under this sub-section. 

Section 96- This section pertains to annual general meeting. Now a provision has been added in sub-section (2) that the annual general meeting of an unlisted company may be held at any place in India, provided consent is given in writing or by electronic mail by all the members in advance. 

So, this is is a liberalised move to allow private companies and unlisted public companies to hold annual general meeting at any place in India, provided consent is taken thereof in advance.

Section 216: This section pertains to investigation of ownership of the company. Pursuant to the enactment of the new section 90 regarding significant beneficial ownership, a clause has been added empowering central government to appoint one or more inspectors to investigate and report on matters relating to the company or persons "who have or had beneficial interest in shares of a company or who are or have been beneficial owners or significant beneficial owner of a company"

ECB reporting - ECB2

RBI has vide its circular dated 7th June, 2018 modified the monthly ECB-2 in respect of external commercial borrowings by capturing hedging of ECBs in the ECB2 return. Details of hedging in part E.1 of the return and foreign exchange earnings & expenditure in part E.2 of the return to be furnished in addition to the existing details in ECB-2

Gist of RBI circular given below:

Attention of Authorized Dealer Category I (AD Category I) banks is invited to Annex III of Part V of Master Direction No.18/2015-16 dated January 01, 2016 on Reporting under Foreign Exchange Management Act, 1999, as amended from time to time. The said Master Direction, inter alia, stipulates the reporting arrangement for ECBs through ECB-2 Return.

2. It has been decided to capture the details of the hedges for ECBs through a simplified format of ECB 2 Return. Part E of the Return, accordingly, is modified so as to include only standard information on hedged/unhedged ECB exposure (Annex). Details of hedging in Part E.1 of the Return and foreign exchange earnings and expenditure in Part E.2 of the Return should be furnished in additive format. Further, for reporting in respect of natural hedge, provisions contained in paragraph 2 (iii) of A.P. (DIR Series) Circular No. 15 dated November 07, 2016 should be followed.

3. Revised monthly reporting format of ECB 2 Return would be applicable from month-end June 2018. It is reiterated that any lapse at the time of reporting through this return and / or failure to adhere to the time line of its submission and / or any lapse at the time of reporting through Form 83 is a contravention of the provision of Foreign Exchange Management Act, 1999 (42 of 1999).

4. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers. The aforesaid Master Direction No. 18 dated January 01, 2016 is being updated to reflect the changes.

5. The directions contained in this circular have been issued under sections 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11296&Mode=0

Foreign Investment in India - Reporting

RBI circular dated 7th June, 2018 on the above subject - important for compliance by companies accepting foreign investment in India.

As announced in the First Bi-monthly Monetary Policy Review dated April 5, 2018, Reserve Bank, with the objective of integrating the extant reporting structures of various types of foreign investment in India, will introduce a Single Master Form (SMF). The SMF would be filed online.

2. SMF would provide a facility for reporting total foreign investment in an Indian entity {as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2017, dated November 7, 2017}, as also investment by persons resident outside India in an Investment Vehicle.

3. Prior to the implementation of the SMF, Reserve Bank would provide an interface to the Indian entities, to input the data on total foreign investment in a specified format. The interface will be available on RBI website www.rbi.org.in from June 28, 2018 to July 12, 2018. Indian entities not complying with this pre-requisite will not be able to receive foreign investment (including indirect foreign investment) and will be non-compliant with Foreign Exchange Management Act, 1999 and regulations made thereunder.

4. The entities may be in readiness with the requirements to be provided in the Entity Master at Annex 1. The format of the SMF is at Annex 2. The final form, when hosted, will be available in the Master Direction-Reporting under FEMA, 1999.

5. AD Category-I banks may bring the contents of this circular to the notice of their customers / constituents concerned.

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

RBI circular is available at
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11297&Mode=0

Liberalised Remittance Scheme

RBI has vide its circular dated 19th June, 2018 mandated that furnishing of PAN is necessary document while allowing all remittances outside India under the Liberalised Remittance Scheme (LRS). Hitherto, for remittances under US$25,000/- PAN was not mandatory, Now it has become mandatory for any amount being remitted under the Scheme.

Gist of RBI circular is given below:

Please refer to paragraph 18 of the Statement on Developmental and Regulatory Policies of the Second Bi-monthly Monetary Policy Statement for 2018-19released on June 6, 2018. As indicated therein, it has been decided that furnishing of Permanent Account Number (PAN), which hitherto was not to be insisted upon while putting through permissible current account transactions of up to USD 25,000, shall now be mandatory for making all remittances under Liberalised Remittance Scheme (LRS).

2. Further, in the context of remittances allowed under LRS for maintenance of close relatives, it has been decided, in consultation with Government, to align the definition of ‘relative’ with the definition given in Companies Act, 2013 instead of Companies Act, 1956.

3. Master Direction No. 7/2015-16 dated January 01, 2016 on LRS is being updated simultaneously to reflect the above changes.

4. The directions contained in this circular have been issued under Sections 10(4), 11(1) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11309&Mode=0

Bank customer service to pensioners

RBI circular dated 21st June, 2018 on this subject.

Please refer to our circular no.DGBA.GAD.H-3085/45.01.001/2008-09 dated October 1, 2008 on the captioned subject.

2. We are receiving complaints from various quarters that pensioners are not being treated with due consideration by bank officials, specifically the old pensioners, when they come to the branches for pension related transactions.

3. Thus, all agency banks disbursing pension are advised to provide considerate and sympathetic customer service to the pensioners, specially to those pensioners who are of old age.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11310&Mode=0

SEBI order reg appointment of Directors by listed companies

Bombay Stock Exchange (BSE) has issued a circular dated 20th June, 2018 wherein it has referred to the SEBI order dated 14th June, 2018 debarring entities/ individuals from accessing the capital markets and/ or restraining from holding position of a director in listed companies.

1.      SEBI has issued certain directions for the Listed Companies which are as follows:

·         Listed companies and its Nomination Committee while considering a person for appointment as director shall verify that the said person is not debarred from holding the office of director pursuant to any SEBI order.  

·         The Listed Companies shall, while informing the Exchange through corporate announcements for appointment of Director, specifically affirm that the Director being appointed is not debarred from holding the office of director by virtue of any SEBI order or any other such authority.

Non-inclusion of such fact will be regarded as inadequate submission and the same would be subject to action as deemed fit under Regulation 30 of the LODR.  

·         In case an existing director is restrained from acting as a director by virtue of any SEBI order or any other such authority, the director shall voluntarily resign with immediate effect.

Failing which the listed entity shall initiate the process of removal of such director in terms of relevant sections of the Companies Act, 2013, and inform the Exchange about the same.  

https://www.bseindia.com/corporates/Displaydata.aspx?Id=d30893b5-8e5e-4842-a37d-da3e595ff58c&Page=cir

with inputs from my team member Amita Jadav. 

SEBI bans physical transfer of shares

SEBI has vide its notification dated june 8, 2018 effectively banned physical transfer of shares. This has been made via an amendment to the Listing Obligations and Disclosure Requirements, Regulations, 2015

Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2018

1.      These regulations shall come into force on the one hundred and eightieth day from the date of its   publication in the Official Gazette i.e. from 5^th Day of December, 2018

2.      Requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository.

o   This means with effect from 5^th December, 2018 all the securities which are held in physical from shall be prohibited for transfer and shall be required to be done compulsorily in dematerialized form

o   Securities shall only be processed if it is in dematerialized form

*However this shall not affect the transmission or transposition of shares in physical form

3.      With effect of above following shall be omittedfrom Schedule 7 i.e. Transfer of securities

(For securities market transactions and/or for off-market or private transactions involving transfer of shares in physical form, the transferee(s) as well as transferor(s) shall furnish copy of PAN card to the listed entity for registration of such transfer of securities.)

4.      With effect of change in regulation 40(1) the following change in 7(2) shall take place:

The listed entity shall ensure that all activities in relation to both physical and electronic share transfer facility are maintained either in house or by Registrar to an issue and share transfer agent registered with the Board

https://www.sebi.gov.in/legal/regulations/jun-2018/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-fourth-amendment-regulations-2018_39263.html

* with inputs from my team member Amita Jadav.

The Chase by Richard Unekis

Finally a book that's pulsating with action. The Chase by Richard Unekis begins with a robbery at a departmental store in a small town America, followed by a high speed chase through a maze around the corn fields near by to Chicago. The police superintendent is a maths addict so he uses game theory and probability to close in on the robbers. Almost succeeds on two occasions when police cars try to intercept the fleeing robbers in a Chevrolet. The car driver in the robber car is a highly skilled driver, the police is using maths, there are corn fields around in a maze so the following police cars are in a blind and the robbbers are listening into the police radios. Makes for an interesting read. Goodreads 5/5 

Significant Beneficial Ownership Rules

MCA has vide its notification dated 13th June, 2018 notified the Companies (Significant Beneficial Owners), Rules, 2018. The salient features of these Rules are as under:

Companies (Significant Beneficial Owners) Rules, 20l8

In exercise of the powers conferred by Section 90 read with sub-section (l) of section 469 of the Companies Act, 2013, the Central Government hereby makes the following rules, namely:

Significant Beneficial Ownership:

Significant Beneficial Owner means an individual holding ultimate beneficial interest of not less than 10% in a company. The definition in the Rules gives reference to section 90(1) of the Act which is more elaborate. The said section 90(1) refers to an individual, acting alone or together, or through one or persons or trusts (including persons or trusts resident outside India) and holds beneficial interest in the shares of a company or the right to exercise or the actual exercising of significant influence or control (control as defined in section 2(27).

Control as defined in section 2(27) shall include the right to appoint majority of directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Further the definition in the Rules also refers to section 89(10) of the Act. Now section 89(10) says beneficial interest includes, directly or indirectly through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any person to (i) exercise or cause to be exercised any or all of the rights attached to such shares, or (ii) receive or participate in any dividend or other distribution in respect of such share.

Further in the definition of Significant Beneficial Ownership, as per the Rules above, in case of persons other than individuals or natural persons shall be determined as under:

(i)                 where the member is a company, the significant beneficial owner is the natural person,who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent. share capital of the company or who exercises significant influence or control in the company through other means;

(ii)               where the member is a partnership firm, the significant beneficial owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent. of capital or has entitlement of not less than ten per cent. of profits of the partnership;

(iii)             where no natural person is identified under (i) or [ii), the significant beneficial owner is the relevant natural person who holds the position of senior managing official;

(iv)            where the member is a trust (through trustee), the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with not less than ten per cent. interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership;

Global Depository Receipts, Compulsorily Convertible preference shares or compulsorily convertible debentures shall be treated as “shares” for the purpose of this Rules.

Declaration of significant beneficial ownership in shares under section 90

Every significant beneficial owner shall file a declaration in Form No. BEN-I to the Company in which he holds the significant beneficial ownership on the date of commencement of these rules within ninety days from such commencement and within thirty days in case of any change in his significant beneficial ownership

Return of significant beneficial owners in shares

Where any declaration under is received by the company, it shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty days from the date of receipt of declaration by it, along with the fees as prescribed in companies (Registration offices and fees) Rules, 2014.

Register of significant beneficial owners

The company shall maintain a register of significant beneficial owners in Form No. BEN-3.

The register shall be open for inspection during business hours, at such reasonable time of not less than two hours, on every workingday as the board may decide, by any memberof the company on payment of such fee as may be specified by the company but not exceeding fifty rupeesfor each inspection.

Notice seeking information about significant beneficial owners

A company shall give notice seeking information in accordance with under sub-section (5) of section 90, in Form No. BEN-4.

Application to the Tribunal

The company may apply to the Tribunal in accordance with sub-section (7) of section 90, for order directing that the shares in question be subject to restrictions, including -

o    restrictions on the transfer of interest attached to the shares in question;

o    suspension of the right to receive dividend in relation to the shares in question;

o    suspension of voting rights in relation to the shares in question;

o    any other restriction on all or any of the rights attached with the shares in question.

Non-Applicability

These rules are not made applicable to the holding of shares of companies/body corporates, in case of pooled investment vehicles/investment funds such as Mutual Funds, Alterative Investment Funds (AIFs), Real Estate Investment Trusts(REI'rs) and Infrastructure Investment Trusts (lnv ITs) regulated under SEBI Act.

Companies (Management & Administration) Rules Amendment

MCA has vide its notification dated 13th June, 2018 amended the Companies (Management and Administration) Rules, 2014 as follows:

1) Rule 13 has been deleted - Rule 13 pertained to return of changes in the shareholding position of promoters and top 10 shareholders for listed companies. They were required to intimate changes of 2% or more in their shareholdings within 15 days of such change. A form MGT-10 was required to be filed for this purpose.

This has been done away with which is good

2) Rule 15(6) has been omitted. - Rule 15 pertains to preservation of register of members and annual return etc. Rule 15(6) specified that the special resolution which is proposed to be filed under section 94(1) should be filed one day before the general meeting of the company. Section 94(1) says that the registers and returns are to be kept at the registered office of the company. Proviso to section 94(1) says that such registers or returns can also be kept at any other city where more than 1/10th of the members reside, provided special resolution has been passed at a general meeting of the company.

So its a kind of a roundabout provision, which has been done away with. It should not have been in the statute books in the first place.

3) Explanation after Rule 18(3)(ix) has been omitted. - Rule 18 pertained to notice of meeting and how it can be sent via electronic route and the precautions to be taken thereunder and electronic records to be maintained. The explanation below Rule 18(3)(ix) said that "for the purpose of this rule, it is hereby declared that the extra ordinary general meeting shall be held in India". This is a totally redundant explanation which should not have been there in the first place.

So now extra-ordinary general meeting can be held anywhere in India. That was the provision in the 1956 Act, but somehow this explanation got mischievously embedded in the aforesaid Rules.

4) Amendment to Rule 22 - Rule 22 pertains to procedure to be followed for conducting business through postal ballot. Rule 22(16) gives a list of items for which business shall be transacted only by means of voting through postal ballot. Now a proviso has been added below this Rule 22(16) and this proviso now stipulates that these items of business which is mandatorily required to be transacted only through postal ballot may be transacted by e-voting also.

It is not clear whether companies should give both options i.e. postal ballot and e-voting or one to the exclusion of another.

I guess one more amendment will be required for that!! Sigh!!

new DIR-3 form

MCA has vide its notification dated 12th June, 2018 released the new DIN form in DIR-3. The new DIN form now allows DIN to be obtained for a designated partner in an existing LLP. But it still does not solve the problem of two completely fresh entrepreneurs coming together to form a LLP. That is because the existing new LLP name reservation form and LLP incorporation form i.e. form 1 LLP and form 2 LLP still asks for DIN of the proposed director.

So there is an anomaly still persisting. Hope MCA looks into it because LLP is the preferred form for doing business these days. LLP incorporation has been stuck for so many months. This is not ease of doing business by the MCA. 

The Boat

The Boat is a true story of survival of Walter Gibson at sea for a whole month in a small boat meant to carry only 28 passengers but in which 135 people clung on in the hope that rescue will come. Days pass, weeks go on and one by one people start dying in horrendous conditions. Its is a miracle of a story that Walter survives with another Chinese girl Doris Lim. This was about the time when the Japs were invading Singapore, Malaysia and taking prisoners. Its is a simple story, and the narrative is good, fast paced and riveting. Its unfortunate that so many horrors were taking place due to war. But as the title suggests, there is only instance of cannibalism in the entire narrative. Goodreads 5/5 

CSR spends - MCA clarification

The Ministry of Corporate Affairs has vide its notification dated 28th May, 2018 clarified that the CSR (Corporate Social Responsibility) spend shall be preferably made in the local area or areas around which the company operates. The notification says that the provision need to be followed in letter and in spirit.

Very strange notification this one and probably for the first time that i am seeing such a thing but shows the seriousness of the government in tackling the under development issue. CSR could be a game changer if the private sector expertise is brought into creating much needed social assets, generate employment, give skills training etc. to sectors where the government cannot enter due to its inherent defects such as size, inefficiency, bureaucracy etc.

Let's hope private sector energies are channelled into this much needed areas such as education, health, rural development, agriculture, sports, environment etc.