mergers/ amalgamations

Ministry of Corporate Affairs has issued a circular today clarifying the import of section 232(6) of the Companies Act, 2013, which deals with the requirement of indicating an “appointed date” in the scheme of mergers and amalgamations, which would also be the effective date of the merger/amalgamation coming into force.

A view was being taken in some quarters that the “appointed date” in the scheme need always be a definite calendar date, which led to difficulties for companies intending to give effect to their merger at a future/event-linked date, based on business considerations, fulfilling legal requirements such as procurement of license from sectoral regulators, etc. Besides this, IndAS 103 (Business Combinations), which deals with the accounting treatment, uses the expression “acquisition date”, as a date when the acquirer takes control of the acquiree, also required clarification.

The circular clarifies that the companies may choose the “appointed date” of the merger/amalgamation based on occurrence of an event, which is relevant to the merger between companies. This would allow the companies concerned to function independently till such event is actually materialised. The circular further clarifies that the term “appointed date” used in section 232(6) shall be deemed to be the “acquisition date” for the purpose of conforming to IndAS 103 standard dealing with business combinations.

This clarification would lead to harmonisation of practices in ascertaining the “appointed date” of merger/amalgamation and provide due clarity on the accounting treatment, thereby allowing stakeholders to align the “appointed date” of merger/amalgamation in accordance with their business considerations or legal requirements. This would also contribute significantly in the ease of Doing Business.

Debenture Redemption Reserve

The Ministry of Corporate Affairs has amended the Companies (Share Capital & Debentures) Rules by removing Debenture Redemption Reserve requirement for Listed Companies, NCFCs and HFCs.

The decision has been taken in pursuance of the Budget announcements for 2019-20 by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman and the Government’s objectives of providing greater ‘Ease of Doing Business’ to companies in the country, as part of its 100 Days Action Plan.

Through these amendments, the provisions relating to creation of Debenture Redemption Reserve (DRR) have been revised with the objective of;

1. removing the requirement for creation of a DRR of 25% of the value of outstanding debentures in respect of listed companies, NBFCs registered with RBI and for Housing Finance Companies registered with National Housing Bank (NHB) both for public issue as well as private placements;
2. Reduction in DRR for unlisted companies from the present level of 25% to 10% of the outstanding debentures.

Hitherto, Listed Companies had to create a DRR for both Public Issue as well as Private Placement of Debentures, while NBFCs & HFCs had to create DRR only when they opted for Public Issue of Debentures.  It is aimed at creating a level-playing field between NBFCs, HFCs and listed companies’ on the one hand and also between them and Banking Companies & All India Financial Institutions on the other, which are already exempted from DRR.

The measure has been taken by the Government with a view to reducing the cost of the capital raised by companies through issue of debentures and is expected to significantly deepen the Bond Market.

The rules, while retaining DRR requirement for Unlisted Companies, provide for reduction from a DRR of 25% to a DRR of 10% for such companies, so as to safeguard interests of investors.

differential voting rights

PIB press release dated 16th August, 2019

The Ministry of Corporate Affairs has amended the provisions relating to issue of shares with Differential Voting Rights (DVRs) provisions under the Companies Act with the objective of enabling promoters of Indian companies to retain control of their companies in their pursuit for growth and creation of long-term value for shareholders, even as they raise equity capital from global investors.

            The key change brought about through the amendments to the Companies (Share Capital & Debentures) Rules brings in an enhancement in the previously existing cap of 26% of the total post issue paid up equity share capital to a revised cap of 74% of total voting power in respect of shares with Differential Voting Rights of a company.

Another key change brought about is the removal of the earlier requirement of distributable profits for 3 years for a company to be eligible to issue shares with Differential Voting Rights.

            The above two initiatives have been taken by the Government in response to requests from innovative tech companies & startups and to strengthen the hands of Indian companies and their promoters who have lately been identified by deep pocketed investors worldwide for acquisition of controlling stake in them to gain access to the cutting edge innovation and technology development being undertaken by them.

The Government had noted that such Indian promoters have had to cede control of companies which have prospects of becoming Unicorns, due to the requirements of raising capital through issue of equity to foreign investors.

Alongside the above two changes, another major step taken is that the time period within which Employee Stock Options (ESOPs) can be issued by Startups recognized by the Department for Promotion of Industry & Internal Trade (DPIIT) to promoters or Directors holding more than 10% of equity shares, has been enhanced from 5 years to 10 years from the date of their incorporation.

GI tag for 4 new products

PIB press release dated 16th August, 2019

The Geographical Indication (GI) under the Department for Promotion of Industry and Internal Trade hasrecenly registered 4 new GIs. PalaniPanchamirtham from Palani Town in Dindigul District of Tamil Nadu State, Tawlhlohpuan and Mizo Puancheifrom the state of Mizoram and Tirur Betel leaf from Kerala are the latest additions to the list of registered GIs.

GI is an indication used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin. Such a name conveys an assurance of quality and distinctiveness which is essentially attributable to its origin in that defined geographical locality.

PalaniPanchamirtham, an abishegaPrasadam, from Palani Town is one of the main offerings in the Abisegam of Lord Dhandayuthapani Swamy, the presiding deity of ArulmiguDhandayuthapaniswamy Temple, situated in palani Hills, Palani Town in Dindigul District of Tamil Nadu. It is a combination of five natural substances, namely, banana, jaggery sugar, cow ghee, honey and cardamom in a definite proportion. It is prepared in a natural method without addition of any preservatives or artificial ingredients and is well known for its religious fervour and gaiety. This is the first time a temple ‘prasadam’ from Tamil Nadu has been bestowed with the GI tag.

Tawlhlohpuan, a medium to heavy, compactly woven, good quality fabric from Mizoram is known for warp yarns, warping, weaving & intricate designs that are made by hand. Tawlhloh, in Mizo language, means 'to stand firm or not to move backward’. Tawlhlohpuan, which holds high significance in the Mizo society, is produced throughout the state of Mizoram, Aizawl and Thenzawl town being the main centre of production.

Mizo Puanchei, a colourful Mizo shawl/textile, from Mizoram, is considered as the most colourful among the Mizo textiles. It is an essential possession for every Mizo lady and an important marriage outfit in the state. It is also the most commonly used costume in Mizo festive dances and official ceremonies. The weavers insert the designs and motifs by using supplementary yarns while weaving to create this beautiful and alluring textile.

Tirur betel vine from Kerala, which is mainly cultivated in Tirur, Tanur, Tirurangadi, Kuttippuram, Malappuram and Vengara block panchayaths of Malappuram District, is valued both for its mild stimulant action and medicinal properties. Even though it is commonly used for making pan masala for chewing, it has many medicinal, industrial and cultural usagesand is considered as a remedy for bad breath and digestive disorders.

GI products can benefit the rural economy in remote areas, by supplementing the incomes of artisans, farmers, weavers and craftsmen. India’s rural artisans possess unique skills and knowledge of traditional practices and methods, passed down from generation to generation, which need to be protected and promoted.The Department for Promotion of Industry and Internal Trade has taken several initiatives in this regard and is actively involved in promotion and marketing of GIs.

transparency in tax administration

PIB press release dated 14th August, 2019

With a view to bringing greater transparency in the functioning of the tax-administration and improvement in service delivery, almost all notices and orders of Income Tax Department are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (CBDT) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as “communication”) were found to have been issued manually, without maintaining a proper audit trail of such communication.

In order to prevent such instances and to maintain proper audit trail of all communication, the CBDT has, vide Circular No.19/2019 dated 14.08.2019 laid down parameters specifying the manner in which any communication issued by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person will be dealt with. All such communication issued on or after the 1st of October, 2019 shall carry a computer-generated Document Identification Number (DIN) duly quoted in the body of such communication.

CBDT has also specified exceptional circumstances where the communication may be issued manually but only after recording reasons in writing and with the prior written approval of the Chief Commissioner / Director General of Income-Tax concerned. In cases where manual communication is required to be issued, the reason for issue of manual communication without DIN has to be specified alongwith the date of obtaining written approval of the Chief Commissioner / Director General of Income-Tax in a particular format. Any communication which is not in conformity with the prescribed guidelines shall be treated as invalid and shall be deemed to have never been issued. Further, CBDT has also laid down the timelines and procedure by which such communication issued manually will have to be regularised and intimated to the Principal Director General of Income-tax (Systems).

            In addition to the above, in all pending assessment proceedings, where notices were issued manually, prior to issuance of the above referred Circular, all such cases would be identified and the notices so sent would be uploaded on ITBA by 31st October, 2019.

This is another step taken by CBDT towards better delivery of taxpayer services while ensuring accountability in official dealings.

free ATM transactions

RBI circular dated 14th August, 2019

Usage of ATMs – Free ATM transactions – Clarifications

Please refer to our circulars DPSS.CO.PD.No. 316/02.10.002/2014-2015 dated August 14, 2014 and DPSS.CO.PD.No. 659/02.10.002/2014 -2015 dated October 10, 2014 on the subject.

2. It has come to our notice that transactions that have failed due to technical reasons, non-availability of currency in ATMs, etc., are also included in the number of free ATM transactions.

3. It is hereby clarified that transactions which fail on account of technical reasons like hardware, software, communication issues; non-availability of currency notes in the ATM; and other declines ascribable directly / wholly to the bank / service provider; invalid PIN / validations; etc., shall not be counted as valid ATM transactions for the customer. Consequently, no charges therefor shall be levied.

4. Non-cash withdrawal transactions (such as balance enquiry, cheque book request, payment of taxes, funds transfer, etc.), which constitute ‘on-us’ transactions (i.e., when a card is used at an ATM of the bank which has issued the card) shall also not be part of the number of free ATM transactions.

5. This directive is issued under Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

The Last Cop Out

The Last Cop out by Mickey Spillane, my first one by him, is an edge of the seat thriller of gangster wars gone wrong. Nobody knows who is killing the mobsters off one by one in clinical fashion. Gillian Burke is a knocked off ex-cop with a grudge against the underworld. He gets to come back to the police force to find out the goings on, because ostensibly he is the one who knows more about these gangsters. Frank Verdun is a Frenchman with a penchant for killing and Mark Shelby is eyeing the top spot after everybody is wiped out. Papa Menes is an old wizened hat at these matters. Couple of female characters as well, love as well as lust interest. Few oddball characters as well in the story. Goodreads 5/5