Eligibility criteria for sponsors - ARCs

RBI has released guidelines on the fit and proper criteria for the sponsors of the asset reconstruction companies.

Determinants of fit and proper status of sponsors of ARCs

In determining whether the sponsor is fit and proper, the Bank shall take into account all relevant factors, as appropriate, including, but not limited to, the following:

(i) The sponsor’s integrity, reputation, track record and compliance with applicable laws and regulations;

(ii) The sponsor’s track record and reputation for operating business in a manner that is consistent with the standards of good corporate governance, integrity, in addition to the similar assessment of individuals and other entities associated with the sponsor;

(iii) The business record and experience of the sponsor;

(iv) Sources and stability of funds for acquisition and the ability to access financial markets;

(v) Shareholding agreements and their impact on control and management of the ARC.

Continuous monitoring arrangements for due diligence in case of existing sponsors

(i) For the purpose of ensuring that all its sponsors are fit and proper, every ARC shall

(a) obtain within one month of the close of financial year a declaration from all its sponsors in Form I as specified in the schedule to these Directions;

(b) furnish a certificate in Form III, by the end of May every year, to the Reserve Bank on the changes in the status of the sponsor.

(ii) Every ARC shall examine any information on the sponsors which may come to its notice that may render such persons not fit and proper to hold such shares and shall immediately furnish a report on the same to the Bank.

Bank notification can be found here

Badhai Ho

Watched Badhai Ho with the wifey on Sunday. watching a movie in a cinema hall after a long time, that too a Hindi movie. The movie is quite good, a dry humour on the topic of late pregnancy when the children are already adults and working or studying and could become parents themselves. Small town north India, local dialects, decent acting by people, at least no over acting, decent dialogues and not many sentimental scenes which are the bane of Hindi movies. So the content is good, decent pace for the movie, not very preachy kind of movie and best of all super acting by veterans Neena Gupta and Surekha Sikri, both of them coming to the celluloid world after a long hiatus. Good to see them back. 

12.03 kms in Aarey Forest

A 12.03 kms run in Aarey Forest on 28th October (posting late). Going to Aarey after a long time, so it was quite tough, but weather was very pleasant. No plan on any distances, but felt good so kept on running all the flat surfaces in Aarey (did not want to do too many hills). Aarey Forest is beautiful, a heaven in a mega city. Pity that the Chief Minister wants to destroy this beautiful forest for his stupid metro car shed project.

change in financial year

The Companies Act, 2013 when it was introduced had mandated that all companies will have a uniform accounting year i.e. April to March each year. But the Act had given exemptions to those companies who were holding or subsidiary or associate company of a company incorporated outside India and which were required to have a different financial year than from April to March, then such companies can make an application to the Tribunal for change in their financial year accordingly.

Many companies fell under that ambit and one of my client companies also was a subsidiary of a foreign holding company. Accordingly the application was made to the CLB (when it existed) and even the CLB officials were unaware at that time that such matters are required to come to them. The application and hearing was a farce and the request was granted automatically and mechanically. So much for ease of doing business. The companies act, 2013 when it got notified was replete with such draconian provisions.

Now vide the Companies Act, ordinance, 2018 that application process had been taken away and given to the Regional Director. Of course with the CLB having been extinguished, all such applications would have been going to the NCLT, which is a sheer waste of their time and resources.

In my view, it should be no approval and all that stuff. Company should just inform that it is changing its financial year because of the reasons specified. So much for ease of doing business. 

certificate of commencement of business

MCA has vide its Companies (Amendment) Ordinance 2018 inserted a new section 10A after the existing section 10 wherein companies incorporated after this Ordinance has come into force i.e. from 2nd November, 2018 are required to file a certificate of commencement of business before it commences business or exercises borrowing powers. Which means that unless this certificate of commencement of business is filed with the ROC, it cannot start issuing invoices and receiving moneys.

The declaration has to be filed by a Director of the company within a period of 180 days from the date of incorporation to the effect that the subscribers to the memorandum have paid in their subscription monies. The declaration will also include a verification about the registered office of the company. I guess the form of verification of the registered office i.e. form INC-22 will be modified to that extent.

Which means that the company can open a bank account and the bank account can be used only for accepting the subscription monies from the subscribers to the memorandum, but no other receipts can be made into that account unless the certificate of commencement of business has been filed. This is an onerous requirement which ensures that only genuine people start companies with an intention of doing business. We have seen many shell companies being incorporated with no business in it for years and years.

This requirement of certificate of commencement of business was there when the Companies Act, 2013 was promulgated in 2013 but subsequently removed by the MCA under the banner of "ease of doing business". Wonder what prompted the Ministry to bring this draconian requirement back into the statute books.

The penalty for non compliance with this section is huge. Rs.50,000 for the company and Rs.1000 per day for every officer in default. Max amount of penalty Rs.100,000/-

Where no declaration has been filed the ROC has now powers to strike off the name of the company from its records.

7.01 kms in Worli

7.01 kms in Worli Sea Face promenade to the Dr. Annie Beasant Road and then onto Worli Diary. It was a tough run with high humidity levels. There is lot of metro construction work going on Dr. Annie Beasant Road due to which roads were all narrow. It is only when you reach Podar Hospital that you get some space to run. Otherwise the roads are all barricaded. 

travel on S.V. Road

Today I had the opportunity to travel in an autorickshaw from Andheri to Goregaon via the S.V. Road. A couple of days ago, I had travelled via the JVPD, Link Road and it was madness to say the least. So tried a new route. First of all when I boarded the auto, there was a huge traffic jam from just after the Barfiwala flyover to the Andheri market. That is the biggest bottleneck on this road. They have not managed to increase the width of this road for whatever reasons.

After Andheri market it opens up a little and though there is traffic on the road it is a moving traffic so thank heavens for that. The next bottleneck is near the Jogeshwari station, where again the road narrows down considerably. 

Small bottlenecks again appear near the JVLR flyover signal, Behram Baug signal and the Oshiwara old furniture mart but the traffic is moving albeit slowly. At Oshiwara old furniture market, the goods have come down from the shops and footpath onto the roads without any concern or care for the people or traffic. Even the authorities have turned a blind eye to this rampant illegality going on. 

All in all, much better traffic in S.V. Road than on the Link Road though the initial jam at S.V. Road upto the Andheri market was a nightmare.