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.