Insolvency and Bankruptcy Amendment Ordinance 2018

The President today gave assent to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.

The Ordinance provides significant relief to home buyers by recognizing their status as financial creditors.  This would give them due representation in the Committee of Creditors and make them an integral part of the decision making process.  It will also enable home buyers to invoke Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 against errant developers.   Another major beneficiary would be Micro, Small and Medium Sector Enterprises (MSME), which form the backbone of the Indian economy as the biggest employer, next only to the agriculture sector.  Recognizing the importance of MSME Sector in terms of employment generation and economic growth, the Ordinance empowers the Government to provide them with a special dispensation under the Code.  The immediate benefit it provides is that, it does not disqualify the promoter to bid for his enterprise undergoing Corporate Insolvency Resolution Process (CIRP) provided he is not a willful defaulter and does not attract other disqualifications not related to default.  It also empowers the Central Government to allow further exemptions or modifications with respect to the MSME Sector, if required, in public interest.

In order to protect the sanctity of the CIRP, the Ordinance lays down a strict procedure if an applicant wants to withdraw a case after its admission under IBC 2016.  Henceforth, such withdrawal would be permissible only with the approval of the Committee of Creditors with 90 percent of the voting share.  Furthermore, such withdrawal will only be permissible before publication of notice inviting Expressions of Interest (EoI).  In other words, there can be no withdrawal once the commercial process of EoIs and bids commences. Separately, the Regulations will bring in further clarity by laying down mandatory timelines, processes and procedures for corporate insolvency resolution process.  Some of the specific issues that would be addressed include non-entertainment of late bids, no negotiation with the late bidders and a well laid down procedure for maximizing value  of assets. 

With a view to encouraging resolution as opposed to liquidation, the voting threshold has been brought down to 66 percent from 75 percent for all major decisions such as approval of resolution plan, extension of CIRP period, etc.  Further, in order to facilitate the corporate debtor to continue as a going concern during the CIRP, the voting threshold for routine decisions has been reduced to 51%.

The Ordinance also provides for a mechanism to allow participation of security holders, deposit holders and all other classes of financial creditors that exceed a certain number, in meetings of the Committee of Creditors, through the authorized representation. 

The existing Section 29(A) of the IBC, 2016 has also been fine-tuned to exempt pure play financial entities from being disqualified on account of NPA.  Similarly, a resolution application holding an NPA by virtue of acquiring  it  in the past under the IBC, 2016, has been provided with a three-year cooling-off period, from the date of such acquisition.  In other words, such NPA shall not disqualify the resolution application during the currency of the three-year grace period.

Taking into account the wide range of disqualifications contained in Section 29(A) of the Code, the Ordinance provides that the Resolution Applicant shall submit an affidavit certifying its eligibility to bid.  This places the primary onus on the resolution applicant to certify its eligibility. 

The Ordinance provides for a minimum one-year grace period for the successful resolution applicant to fulfil various statutory obligations required under different laws.  This would go a long way in enabling the new management to successfully implement the resolution plan.

The other changes brought about by the Ordinance include non-applicability of moratorium period to enforcement of guarantee; introducing the requirement of special resolution for corporate debtors  to themselves trigger insolvency resolution under the Code; liberalizing terms and conditions of interim finance to facilitate financing of corporate debtor during CIRP period; and giving the IBBI a specific development role along with  powers to levy fee in respect of services rendered.

The above mentioned changes are expected to further strengthen the Insolvency Resolution Framework in the country and produce better outcomes in terms of resolution as opposed to liquidation, time taken, cost incurred and recovery rate.

http://pib.nic.in/PressReleseDetail.aspx?PRID=1534497

Birth of Thunder

Birth of Thunder is a 1963 novel written by Robin Cranford. It is a story of an young airman Carraday who is basically an introvert and shy unlike the garrulous ones that you find in the services. He is the butt of jokes in his regiment. He flies a sortie with his team over enemy territory, but unfortunately his plane gets hit, he has to eject into enemy territory in Yugoslavia. He gets captured by a friendly enemy force of locals who are fighting the Germans themselves, a ragtag bunch of brave soldiers with barely fighting experience but brave nevertheless. He gets drawn to a young soldier Jelena and then trouble starts for him all over again. But first he gets some hits against enemies so Carraday becomes strongly confident fighter. How they escape then forms part of the rest of the story.

The narrative by Robin Cranford is absolutely brilliant. I tried to Wiki on Robin, but could find no entry whatsoever anywhere, which is strange, unless this is his pseudonym. The book cover says he was born in South Africa in 1923 and has flown with the South African Air Force    

Monitoring of foreign investment limits in listed entities

Gist of RBI notification dated 3rd May, 2018 follows

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Foreign Exchange Management (Transfer or Issue of Security by a person Resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017 and as amended from time to time, in terms of which the onus of compliance with the sectoral/ statutory caps on foreign investment lies with the Indian investee company.

2. Currently, Reserve Bank of India receives data on investment made by Foreign Portfolio Investors (FPI) and Non-resident Indians (NRI) on stock exchanges from the custodian banks and Authorised Dealer Banks for their respective clients, based on which restrictions beyond a threshold limit is imposed on FPI/ NRI investment in listed Indian companies.

3. In order to enable listed Indian companies to ensure compliance with the various foreign investment limits, Reserve Bank in consultation with Securities and Exchange Board of India (SEBI), has decided to put in place a new system for monitoring foreign investment limits, for which the necessary infrastructure and systems for operationalizing the monitoring mechanism, shall be made available by the depositories. The same has been notified by SEBI vide Circular-IMD/FPIC/CIR/P/2018/61 dated April 05, 2018 read with Circular- IMD/FPIC/CIR/P/2018/74 dated April 27, 2018.

4. In terms of para 6 of Annexure A of the circular dated April 05, 2018, all listed Indian companies are required to provide the specified data/ information on foreign investment to the depositories. The requisite information may be provided before May 15, 2018. The listed Indian companies, in non-compliance with the above instructions will not be able to receive foreign investment and will be non-compliant with Foreign Exchange Management Act, 1999 (FEMA) and regulations made thereunder.

5. All Authorised Dealer Banks are advised to instruct their clients and respective Indian companies, about the system requirement at para 4 of this circular.

6. Further, upon implementation of the new monitoring system, all Authorised Dealer banks would be required to provide the details of investment made by their respective NRI clients to the depositories in the format as provided by the depositories/ SEBI. In addition, the reporting to Reserve Bank in the existing system, viz., LEC (NRI) and LEC (FII), would continue.

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

8. 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.

Copy of this notification can also be found here

Setting up of IFSC Banking Units (IBUs)

RBI notification dated 17th May on the subject

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. In terms of para 2.3 of the circular, the parent bank will be required to provide a minimum capital of USD 20 million or equivalent in any foreign currency to start their IBU operations and the IBU should maintain the minimum prescribed regulatory capital on an on-going basis as per regulations amended from time to time.

3. In this regard, we have received suggestions from the stakeholders to consider minimum prescribed regulatory capital at the parent level rather than at the IBU level. The issue has been examined and the directions stand modified as follows:

4. The existing paragraph No.2.3 of Annex I of the aforesaid circular dated April 1, 2015 is amended to read as follows:

With a view to enabling IBUs to start their operations, the parent bank will be required to provide a minimum capital of USD 20 million or equivalent in any foreign currency to its IBU which should be maintained at all times. However, the minimum prescribed regulatory capital, including for the exposures of the IBU, shall be maintained on an on-going basis at the parent level.

5. The existing paragraph No.2.3 of Annex II of the aforesaid circular dated April 1, 2015 is amended to read as follows:

With a view to enabling IBUs to start their operations, the parent bank will be required to provide a minimum capital of USD 20 million or equivalent in any foreign currency to its IBU which should be maintained at all times. However, the minimum prescribed regulatory capital, including for the exposures of the IBU, shall be maintained on an on-going basis at the parent level as per regulations in the home country and the IBU shall submit a certificate to this effect obtained from the parent on a half-yearly basis to RBI (International Banking Division, DBR, CO, RBI). The parent bank will be required to provide a Letter of Comfort for extending financial assistance, as and when required, in the form of capital / liquidity support to IBU.

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

7. An updated copy of the RBI circular on IBU dated April 01, 2015 incorporating the amendments made on January 07, 2016, November 10, 2016, April 10, 2017and May 17, 2018 is available on RBI’s website.

Full notification is available at here

11.40 kms in Aarey Forest

11.40 kms in Aarey Forest, Mumbai. Weather inside the forest is at least 3 to 4 degrees lower than on the outside. Beautiful trees, fresh oxygen, serene atmosphere, chirping birds, buzzing insects, winding roads, nature at its very best. Don't know why these morons want to destroy such a beautiful forest for the purpose of their ill planned metro car shed, when there is so much land available at other place like in Kanjur Marg, plus Indian Railways has so much unutilised land. Politicians are destroying this country. 

Additional fee structure for MCA e-forms

The MCA has vide its notification dated 7th May, 2018 amended the Companies (Registration Offices and Fees) Rules, 2014 wherein w.e.f. 1st July, 2018 the additional fee structure would be Rs.100 per day instead of the slab wise additional fees that was applicable. In fact the slab wise additional fees will still be applicable in respect of the specified forms upto 30th June, 2018. Therefore if the event date of the form is before 30th June, 2018, then the slab wise additional fee structure will be applicable upto 30th June, 2018 and thereafter it will go up by Rs.100 per day. However, if the event date of the form is after 30th June, 2018 then additional fee structure will be straightaway Rs.100 per form. 

This additional fee structure is applicable only for the statutory annual e-forms like AOC-4 (annual audited accounts), MGT-7 (annual return of shareholders/ directors/ debts etc.), AOC-4 XBRL and AOC-4 (CFS).  It is not applicable for event based forms like MGT-14, PAS-3, CHG-1, CHG-4 etc. 

The additional fee structure is also applicable in respect of old version of the annual e-forms under the previous Companies Act, 1956 i.e. forms 23AC, 23ACA, 20B, 23AC (XBRL), 21A etc. 

So in case you have any annual e-forms still to be filed, the period upto June is the best time to file and upload the same as otherwise from 1st July, 2018 the additional fees will be Rs.100 per day. 

The Edge of Seventeen

Watched this movie called "The Edge of Seventeen" yesterday on Amazon Prime Video. Its a teenage coming of age kinda movie. At first i thought it would be irrelevant and got ready to get bored. But as the movie went along it was quite a pleasant surprise. It was a good movie. Hailee Steinfeld is a young kid growing up with no emotional support. She has an elder brother who is more loved and more popular and she has no friends at all. Only her dad is her emotional support which is quite natural with the Oedipus complex and all. As she grows up, she then befriends one girl Kyra Sedgwick and that's it. Then her dad unexpectedly passes away. So there you are - lone girl, no friends, introvert - how she copes up with loneliness, trauma and decision to commit suicide is what makes up the rest of the movie. The movie treats all these aspects very well without being very preachy and all. Pretty good acting by Hailee Steinfeld and decent by others. Rating 5/5