CNK Knowledge Tracker · 27th November 2015 Format for financial results (FR) for listed entities...
Transcript of CNK Knowledge Tracker · 27th November 2015 Format for financial results (FR) for listed entities...
CNK & Associates, LLP www.cnkindia.com
Company Law, SEBI, RBI,
Accounting & Audit etc. January 2016
OCOctober20142014
CNK Knowledge Tracker ……Be a Step Ahead
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Contents Corporate Law Updates
Companies (Amendment) Act, 2015 3
Companies Act, 2013- Rules and Amendment Rules 3
Circulars from the Ministry of Corporate Affairs 5
Circulars from SEBI 6
Circulars from IRDA 9
Accounting and Auditing
Guidance Notes 12
Exposure Drafts 12
Reserve Bank of India/ FEMA
RBI Notifications/ Orders & Circulars 14
Other Regulatory Announcements 20
Disclaimer and Statutory Notice 21
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Corporate Law Updates
Companies (Amendment) Act, 2015
The MCA had notified the above Act on 25th May 2015, which states that the amendment
Act will come into force on such date as the Central Government (CG) may, by notification
in the Official Gazette, appoint. Different dates may be appointed for different provisions of
this Amendment Act.
The MCA has now appointed 14th December 2015 as the date on which Section 13 and 14
of the above Act will come into force.
The corresponding section under Companies Act, 2013 are-
Section 143 (12)- relating to fraud reporting by auditors (including the threshold for such
reporting) and
Section 177(4)(iv)- relating to omnibus approval for related party transactions (RPT)by
Audit Committee (AC).
Companies Act, 2013 – Rules and Amendment
Rules
Companies (Audit and Auditors) Amendment Rules, 2015
Amendment of Paragraph 13 - Reporting of frauds by auditor and other matters
Paragraph 13 of the Companies (Audit and auditors) Rules, 2014 has been substituted. The
amended paragraph states, among other matters, that if an auditor, has reason to believe that
an offence of fraud, which involves or is expected to involve individually an amount of Rs. 1
crore or above, is being or has been committed against the company by its officers or
employees, the auditor should report the matter to the CG.
The auditor should report the matter to the CG as under:
The auditor should report the matter to the Board or the AC, as the case may be,
immediately but not later than 2 days of his knowledge of the fraud, seeking their reply
or observations within 45 days.
On receipt of such reply or observations, the auditor should forward his report and the
reply or observations of the Board or the AC along with his comments to the CG within
15 days from the date of receipt of such reply or observations.
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In case the auditor fails to get any reply or observations from the Board or the AC
within the stipulated period of 45 days, he should forward his report to the CG along
with a note containing the details of his report that was earlier forwarded to the Board or
the AC for which he has not received any reply or observations.
If the amount is less the Rs.1 crore, the auditor should report the matter to the Board or
the AC immediately but not later than 2 days of his knowledge of the fraud.
Each fraud reported to the AC or the Board during the year should be disclosed in the
Board’s Report with the prescribed details.
The provision of this rule will also apply, mutatis mutandis, to a Cost Auditor and a
Secretarial Auditor during the performance of his duties under Section 148 (CG to specify
audit of items of cost in respect of certain companies) and Section 204 (Secretarial Audit of
bigger companies) of the Companies Act, 2013 respectively
For details refer: http://mca.gov.in/Ministry/pdf/Amendement_Rules_14122015.pdf
Companies (Meetings of Board and its Powers) 2nd Amendment Rules,
2015
Omnibus approval for RPT by AC
The Companies (Amendment) Act, 2015 contains provision relating to omnibus approval of
RPT by AC, which is applicable from 14th December 2015.
The MCA has notified Companies (Meetings of Board and its Powers) 2nd Amendment
Rules, 2015, which contains specific requirements relating to omnibus approval for RPT by
AC. Accordingly, after Rule 6 , another Rule 6A pertaining to Omnibus approval for RPT
on annual basis has been inserted.
For details refer: http://mca.gov.in/Ministry/pdf/Amendement_Rules_14122015_1.pdf
Companies (Share Capital and Debentures) 3rd Amendment Rules, 2015
Insertion of additional class of company which can issue secured debentures for a
period of 10-30 years
In Clause 18 pertaining to Debentures, in sub-rule (1), in clause (a) following sub-clause has
been inserted –
(iv) Companies permitted by a Ministry or Department of the CG or by Reserve Bank of
India or by the National Housing Bank or by any other statutory authority to issue
debentures for a period exceeding 10 years.
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Companies (Management and Administration) 3rd Amendment Rules,
2015
Amendment of Annual Return
In the Companies (Management and Administration) Rules, 2014 Form No. MGT-7
(Annual Return) has been substituted.
The substituted form is available on:
http://mca.gov.in/Ministry/pdf/Amendement_Rules_16112015.pdf
Limited Liability Partnership (Amendment) Rules, 2015
Removal of the requirement to intimate RoC on conversion into LLP
The MCA has issued the above Rules which came into force from 19th October 2015. The
amendment rules, among other matters, have removed the requirement of intimating the
Registrar of Companies (RoC) where a private company or unlisted public company has
been converted into a Limited Liability Partnership (LLP).
Circulars from the Ministry of Corporate Affairs
(MCA)
Relaxation of additional fees and extension of last date of in filing of
forms MGT-7 (Annual Return) and AOC-4 (Financial Statement) under
the Companies Act, 2013- State of Tamil Nadu and UT of Puducherry
General Circular No. 16/2015 dated 30th December 2015
Due to heavy rains and floods in the State of Tamil Nadu and UT of Puducherry, the normal
life/work was affected, it has been decided to relax the additional fees payable for the State
of Tamil Nadu and UT of Puducherry on e-forms AOC-4, AOC (CFS) AOC-4 XBRL and
e- Form MGT-7 up to 30th January 2016, wherever additional fee is applicable.
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Circulars from Securities and Exchange Board of
India (SEBI)
FAQs on SEBI (Share Based Employee Benefits) Regulations
SEBI has issued FAQ on SEBI (Share Based Employee Benefits) Regulations, 2014 –
Relating to un-appropriated inventory of shares
Clarifying that the restriction on grant of ESOPs to independent directors will apply only
on fresh grants of ESOPs after the commencement of the SEBI (Share Based Employee
Benefits) Regulations, 2014 and the Companies Act, 2013. Any grant already made prior
to commencement of these provisions will remain valid, i.e., an independent director can
exercise such ESOPs, subject to fulfillment of terms and conditions of the ESOP
schemes framed by the companies in terms of the relevant regulations.
For details refer: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1448017049051.pdf
Disclosures in the Abridged Prospectus and Price Information of
past issues handled by Merchant Bankers
SEBI has prescribed the disclosure requirements in the abridged prospectus in accordance
with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations,
2009 and the Companies Act, 2013.
The disclosure requirements in the abridged prospectus have been rationalised in
consultation with Investor Associations and market participants. The revised abridged
prospectus improves the readability and contains relevant information for the investor to
take well informed investment decision.
The revised format of abridged prospectus according to Regulation 58 (1) and Part D of
Schedule VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, is
placed at Annexure I of this circular. The formats for disclosure of price information of past
issues handled by merchant bankers as specified vide SEBI Circular no.
CIR/CFD/DIL/5/2011 dated 27th September 2011 has been revised and is placed at
Annexure II of this circular. Pursuant to applicability of this Circular, this SEBI Circular
dated 27th September 2011 will be rescinded.
This Circular will be applicable on issues opening for subscription from 1st December 2015
and a copy of abridged prospectus will be filed with SEBI.
For details refer: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1446196585797.pdf
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Format of uniform Listing Agreement
SEBI has issued format of a simplified listing agreement which is uniform across all types of
securities/listed entities. A listed entity which has previously entered into agreement(s) with a
recognised Stock Exchange(s) to list its securities is required to execute a fresh listing
agreement with such Stock Exchange by 1st March 2016 (within 6 months of the date of
notification of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
i.e. 2nd September 2015).
For details refer: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1444737188833.pdf
Various circulars pertaining to the Listing Regulations.
On 2nd September 2015, SEBI notified the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (Listing Regulations). Subsequently, SEBI has issued
various circulars pertaining to the Listing Regulations. They are-
Dated Particulars
4th November 2015 Format for Business Responsibility Report
27th November 2015 Format for financial results(FR) for listed entities which have listed their debt instruments and /or non-cumulative redeemable preference shares
Format for statements/reports to be submitted to Stock Exchange(s)by listed entity which has listed its securitised debt instruments
30th November Schemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957
Formats for publishing FR
Manner of achieving minimum public shareholding
Disclosure of holding of specified securities and Holding of specified securities in dematerialised form
Non-compliance with certain provisions of Listing Regulations and Standard Operating Procedure for suspension and revocation of trading of specified securities
Issue of No Objection Certificate for release of 1% of issue amount
The above circulars are applicable from 1st December 2015.
For details of the above circular refer:
http://cnkindia.com/SEBI%20Listing%20Regulations%202015.pdf
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SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2015
In the Listing Regulations, there has been an amendment in Regulation 34 (Annual Reports)
sub regulation (2) which states the details which the Annual Report should include.
In clause (f), for the words top 100 listed entities, the word ‘for the top 500 listed
entities’ has been substituted;
In the proviso to clause (f), for the words top 100 listed companies, the words ‘top 500
listed entities’ has been substituted
Clause (f) now reads as-
For the top 500 listed entities based on market capitalization (calculated as on March 31 of every financial
year), business responsibility report describing the initiatives taken by them from an environmental, social and
governance perspective, in the format as specified by the Board from time to time:
Provided that listed entities other than top 500 listed companies based on market capitalization and listed
entities which have listed their specified securities on SME Exchange, may include these business
responsibility reports on a voluntary basis in the format as specified.
This circular will come into force on 1st April 2016.
For details refer:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1450865541906.pdf
FAQs on SEBI (Listing Obligations and Disclosure Requirements)
(Amendment) Regulations, 2015
SEBI issued the above FAQs on 8th January 2016 to clarify certain aspects of ambiguities. It
clarifies on following, among other issues:
Definition of ‘associate company’ and ‘related party’ as per Companies Act 2013 or
applicable Accounting Standards.
Certification of Compliance Certificate in the absence of CEO/CFO
Related party abstain from voting in case of approval of material RPT
Designating independent director of listed entity on the Board of ‘unlisted subsidiary’ or
only on ‘unlisted material subsidiary’
Effective date of posting of disclosures on listed entity's website have been clarified by
the regulator.
For details refer:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1452241689373.pdf
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Circulars from Insurance Regulatory and
Development Authority (IRDA)
Constitution of Implementation Group on Ind-AS in the Insurance
Sector
IRDA has taken a stand that insurance sector in India would be converged with IFRS after
the revised standard on Insurance Contracts i.e. IFRS 4 is pronounced by IASB. The same
was also conveyed to MCA. The MCA has considered the same and vide notification dated
16th February 2015 has exempted the insurance sector from the applicability of Ind-AS
(equivalent of IFRS in India). While the revised standard IFRS 4 is still under finalisation, in
order to prepare the Indian insurance sector towards convergence with Ind-AS, IRDA, has
constituted an Implementation Group (IG) to lay down a roadmap for the same.
The IG should examine the implications of implementing Ind-AS, address the
implementation issues and facilitate formulation of operational guidelines to converge with
Ind-AS in the Indian Insurance sector.
Some of the terms of reference of the IG are as under:
Review the applicability of Ind-AS notified by MCA in the insurance sector
Study the impact of Ind-AS on the insurance sector
Provide the roadmap in addressing the IT system requirements on an ongoing basis
Identify IRDAI Regulations/stipulations which need to be reviewed in the light of Ind-
AS implementation
Prepare formats for the financial statements of insurers under Ind-AS
For details refer:
https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2678&f
lag=1
Exposure draft (ED) on IRDAI (Assets, Liabilities, and Solvency Margin
of General Insurance Business) Regulation, 2015
The Insurance Laws (Amendment) Act, 2015 has amended the Insurance Act 1938. This has
led to existing Regulations on Assets, Liabilities and Solvency Margin of Insurers being
defunct.
The major changes in the draft Regulations as compared with current Regulations are listed
below:
Introduction of “Control Level of Solvency Margin”
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Introduction of Technical Reserve Committee
Introduction of 27 lines of business
Allowance for other forms of capital in the calculation of Solvency Margin.
Changes are also been made in format of Statement of Assets, Statement of Liabilities and
Statement of Solvency margin.
For details refer:
https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2666&f
lag=1
ED on Regulations on Preparation of Financial Statements and Auditor’s
Report of Insurance companies
The IRDAI in consultation with the Insurance Advisory Committee has proposed to notify
the regulations as per draft IRDAI (Preparation of Financial Statements and Auditor’s
Report of Insurer) Regulations, 2015
The draft regulations include the following:
Formats to capture “Preference Share Capital”
Format for Head Office Account applicable to foreign reinsurer operating through
branch office established in India)
Separation of Shareholders funds and Policyholders funds of other than life insurance
companies
New Schedule to capture “Policy Liabilities” under “Other than life Insurance” is
introduced
Stipulation that no investment property is to be purchased for self-use from funds of
participating business is expressly quoted
For details refer:
https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2676&f
lag=1
Insurance Regulatory and Development Authority of India (Other forms
of Capital) Regulations, 2015
These regulations allows an insurer to have other forms of capital in the form of preference
shares, debentures and other debt instruments as may be approved by the IRDAI.
For details refer:
https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2683&f
lag=1
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Discussion Paper on Convergence to Ind-AS in Insurance Sector
In the Budget Speech for FY 2014-15, the Finance Minister had indicated a need to
converge Ind-AS with International Financial Reporting Standards (IFRS). Indian
companies are to adopt new Ind-AS from the FY 2015-16 voluntarily and from FY 2016-17
on mandatory basis.
This discussion paper covers the approach towards convergence towards Ind-AS in the
insurance sector from the date which will be notified by IRDA separately. The Standing
Committee on Accounting Issues of IRDA has recommended draft of the Regulations on
Financial Statements and Auditors’ Report which are compliant to Ind-AS. Additionally, it
has been recommended that certain Ind-AS will not be applicable while, in some cases carve
outs are recommended.
The draft is open for comments from all the stakeholders. The date of applicability of these
recommendations along with any other recommendations of the IG on Ind-AS will be
notified in due course.
For details refer:
https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2693&f
lag=1
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Accounting and Auditing
Guidance Notes
Withdrawal of 5 Guidance Notes on Accounting
The ICAI has, vide announcement dated 21st October 2015, decided to withdraw the
following 5 Guidance Notes (GN) on Accounting as the same are no longer relevant in the
present day context in view of the requirements of the Companies Act, 2013:
GN No
Issued in
Nomenclature
3 1982 GN on treatment of reserve created on revaluation of fixed assets
7 1989 GN on accounting for depreciation in companies
8 1994 GN on some important issues arising from the amendments to Schedule XIV to the Companies Act, 1956
26 2008 GN on applicability of Accounting Standard (AS) 20, Earnings Per Share
27 2008 GN on remuneration paid to Key Management Personnel-Whether a Related Party Transaction
Exposure Drafts
ED of GN on Some Important Issues arising from Schedule II to the
Companies Act, 2013
This Guidance Note is issued with the objective to provide guidance on certain significant
issues that may arise from the practical application of Schedule II with a view to establish
consistent practice with regard to the accounting for depreciation.
For details refer: http://resource.cdn.icai.org/39829research29402.pdf
ED of the Accounting Standard (AS) 8, Accounting Policies, Changes in
Accounting Estimates and Errors
The ICAI has issued the above ED of the revised AS 8, to be applied under Indian GAAP.
The revisions are being done to bring Indian GAAP nearer to Ind-AS.
For details refer:
http://online.icai.org/comments/asb/viewdetailcomment.html?commentdoc_id=35
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ED of new /revised Standards on Auditing (SA)
In order to converge with the newly issued International Standards on Auditing (ISA) the
following SA on reporting would need to be amended. ICAI has, therefore, issued ED of
the following new/revised SA:
Revised
SA 700
Forming an Opinion and
Reporting on Financial Statements
http://resource.cdn.icai.org/40071aasb29
713-1.pdf
New
SA 701
Communicating Key Audit Matters
in the Independent Auditor’s
Report
http://resource.cdn.icai.org/40072aasb29
713-2.pdf
Revised
SA 705
Modifications to the Opinion in
the Independent Auditor’s Report
http://resource.cdn.icai.org/40073aasb29
713-3.pdf
Revised
SA 706
Emphasis of Matter Paragraphs
and Other Matter Paragraphs in
the Independent Auditor’s Report
http://resource.cdn.icai.org/40074aasb29
713-4.pdf
Revised
SA 260
Communication with Those
Charged with Governance
http://resource.cdn.icai.org/40075aasb29
713-5.pdf
Revised
SA 570
Going Concern http://resource.cdn.icai.org/40076aasb29
713-6.pdf
ED on Amendments in Transitional Provisions of AS
The existing AS which were notified under the Companies Act, 1956 under the Companies
(AS Rules) 2006 have to be notified afresh under Section 133 of the Companies Act, 2013.
Certain existing AS which were notified in 2006 contain ‘Transitional Provisions’ (TP). The
objective of these TP is to prescribe the accounting treatment when an AS becomes
applicable for the first time. Accordingly, in 2006, there was some justification to include
these 'transitional provisions'. As now the AS are being notified afresh, so from the
perspective of their re-notification, TP are being re-examined.
The Accounting Standards Board of ICAI has issued the above ED of following AS for
comments:
AS (Revised ) 10 Property, Plant and Equipment
AS 11 The Effects of Changes in Foreign Exchange Rates
AS 21 Consolidated Financial Statements
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AS 22 Accounting for Taxes on Income
AS 23 Accounting for Investments in Associates in Consolidated Financial
Statements
AS 25 Interim Financial Reporting
AS 26, Intangible Assets
AS 28 Impairment of Assets
AS 29 Provisions, Contingent Liabilities and Contingent Assets
For details refer:
http://online.icai.org/comments/asb/viewdetailcomment.html?commentdoc_id=39
Reserve Bank of India (RBI)/Foreign
Exchange Management Act, 1999
(FEMA)
Notifications/ Orders & Circulars
Following amendments are made to Notification No. FEMA 20/2000-
RB dated 3rd May 2000-
The RBI vide Notification No.353/2015 RB dated 6th October 2015 has now allowed
Non- Resident Indian to subscribe to the National Pension System governed and
administered by Pension Fund Regulatory and Development Authority (PFRDA) on
repatriable basis. The subscriptions should be in conformity with the PFRDA Act and
should be made through normal banking channels either by inward remittance or out of
funds held in his NRE/FCNR/NRO account.
The RBI vide Notification No. 355/2015-RB dated 16th November 2015 has inserted
new schedule 11, amending the Transfer Regulations, thereby allowing foreign investment
through investment vehicles, subject to certain terms and conditions. An "investment
vehicle" is defined to be an entity that is registered and regulated under relevant regulations
governing the said Investment Vehicle.
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The RBI vide Notification No. 354/2015-RB dated 30th October 2015 and DIPP press
note no. 12 dated 24th November 2015 has introduced key amendments /
clarifications in FDI Policy, as follows:
Amendment /Clarification in Sectoral Cap for Foreign Investments in India.
Sector Revised Liberalised Position
Agriculture &
Animal
husbandry
Need for meeting additional conditions by the companies dealing in
development of transgenic seeds/vegetables which was previously
provided has been dispensed with.
Plantation
In addition to tea plantations, the Government has decided to open
certain other plantation activities namely; coffee, rubber, cardamom,
palm oil tree and olive oil tree plantations with 100% foreign
investment under automatic route.
Defence
manufacturing
Foreign investment up to 49% was previously allowed under
Government approval route. Now, foreign investment up to 49% is
allowed under automatic route (subject to some conditions). However,
the Government approval will be required when it results in change in
ownership or transfer of stake from existing shareholder to a new
foreign investor.
Portfolio investment and foreign venture capital investment have now
been hiked from 24% to 49% and that too through the automatic route.
Broadcasting
Carriage
Services
Earlier Foreign investment up to 49% was allowed under automatic
route and government approval was required for investment beyond
49% and up to 74%. Now foreign investment up to 49% continues
under automatic route and beyond 49% and up to 100% Government
approval will be required.
Broadcasting
Content
Services
Earlier for Terrestrial Broadcasting FM (FM Radio) and up-linking of
‘News & Current Affairs’ TV Channels, the FDI cap up to 26% was
allowed. Now the said limit is increased to 49% under Government
approval.
Earlier for Up-linking / Down-linking of Non-‘News & Current
Affairs’ TV Channels FDI up to 100% was subject to Government
approval. The same is now 100 % under automatic route.
Air Transport
Earlier foreign investment up to 49% was allowed only in Scheduled Air
Transport Service/ Domestic Scheduled Passenger Airline services
under automatic route. Now Regional Air Transport Services will also
be eligible for foreign investment up to 49% under automatic route.
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Sector Revised Liberalised Position
Further FDI cap of 74% under automatic route for non-scheduled air
transport services has now been increase to 100% Automatic Route.
Ground
Handling
Services
(“GHS”)
Earlier for GHS FDI was allowed up to 49% under Automatic Route
and beyond that up to 74 % under government route, subject to
Sectoral regulations and security clearance. Under the Revised policy
100 % FDI under automatic route is allowed.
Construction
Development
Sector
Under the revised FDI policy, several conditions which were prescribed
earlier have been removed including the area restriction of floor area of
20,000sq.mtr. in construction development projects and minimum
capitalisation of USD 5 million which needed to be brought in within
six months of the commencement of business. Also, foreign investors
have been allowed to exit and repatriate their investment under
automatic route before the completion of the project provided they
complete a lock-in period of three years.
Further, transfer of stake from NR to NR, without repatriation of
investment will neither be subject to any lock-in period nor any
government approval. Nonetheless, exit is permitted at any time if
project or trunk infrastructure is completed before the lock-in period. It
has also been provided that each phase of the construction
development project would be considered as a separate project for the
purposes of the FDI policy.
Further, with the amendment in the definition of real estate business, it
is specified that earning of rental income on lease of property, not
amounting to transfer will not be regarded as real estate business, which
was earlier prohibited.
The FDI is Real Estate Investment Trusts (REIT) is also permitted
under Schedule 11 of the revised FDI Policy.
Wholesale trade
Earlier, wholesale cash and carry though was under 100% automatic
route they were not allowed to open retail shops to sell the commodity
directly to consumers. Under the revised policy a single entity will be
permitted to undertake both the activities of Single Brand Retail
Trading and wholesale cash and carry, provide:
it maintains separate books of accounts for the two arms of the
business and has them audited by statutory auditors and;
Each arm of the business complies with the conditions attached to
the FDI policy relating to wholesale Cash & Carry businesses and
for retail businesses.
Single-brand
Retail trading
So far, single-brand retailers with FDI were not allowed online trading
in any form. Now, an entity which has been granted permission to
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Sector Revised Liberalised Position
(SBRT)
undertake SBRT will be permitted to undertake ecommerce activities.
It has been clarified that Indian brands are equally eligible for
undertaking SBRT.
It has been decided that certain conditions of the FDI policy on the
SBRT Sector such as, products to be sold under the same brand internationally
and investment by non-resident entities as the brand owner or under legally tenable
agreement with the brand owner, will not be made applicable in case of FDI
in Indian brands.
The rule that mandates single-brand retailers to locally procure 30% of
their goods sold in India over a span of five years remains; however, the
new policy will allow the retailer to meet the said 30% norm from the
time it opens the first store. Until now, the five-year deadline started
from the date of receipt of foreign direct investment (FDI). Further, in
case of ‘state-of-art’ and ‘cutting edge technology’ sourcing norms can
be relaxed subject to Government approval.
Therefore for the purposes of FDI policy, Indian manufacturer would
be the investee company, who would be the owner of the Indian brand
and; manufactures in value terms at least 70% of its products in-house,
and sources at most 30 %from other Indian manufacturers.
Manufacturing
and E-
commerce
The term ‘manufacture’ has been introduced and it reads as a change in
a non-living physical object or article or thing- (a) resulting in
transformation of the object or article or thing into a new and distinct
object or article or thing having a different name, character and use; or
(b) bringing into existence of a new and distinct object or article or
thing with a different chemical composition or integral structure.
Now, the manufacturer will be permitted to sell its product through
wholesale and/or retail, including through e-commerce under automatic
route
Banking –
Private Sector
Earlier the FDI in Private Sector banks (including investments by
FII/FPI/QFI) was allowed up to 74% of which up to 49% was allowed
under the automatic route and beyond that through the Government
approval.
Under the revised FDI a composite cap is introduced by removing the
sub-limits for FDI and FII, thereby allowing Private sector banks
/FIIs/FPIs/QFIs to invest up to the Sectoral limit of 74% under
automatic route, provided there is no change of control and
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Sector Revised Liberalised Position
management of the investee company.
Credit
Information
Companies
(CIC)
Earlier FDI up to 74%as allowed under automatic route which has now
been increase to 100 %under the Automatic route.
Sub Limit of 24% investment by a FII/FPI under the PIS in case of
listed CIC has now been removed
Duty Free
Shops
100% FDI is permissible under automatic route in duty free shops
located and operated in the customs bonded areas which was earlier not
permitted under FDI Policy.
As per press note 12 dated 24th November 2015 of DIPP following amendments to
consolidated FDI policy has also been made.
Sector Revised Liberalised Position
Dormant /
Shell Company
Earlier, FDI in any company without operations required prior approval of
the Government.
Under the revised policy, Indian company which does not have any
operations and also does not have any downstream investments, which is
having business activities under automatic route and without FDI-linked
performance conditions, will be permitted to have infusion of foreign
investment under automatic route.
However approval of the Government will be required for such companies
for infusion of foreign investment for undertaking activities which are under
Government approval route, regardless of the amount or extent of foreign
investment.
Further, as and when such a company commences business(s) or makes
downstream investment, it will have to comply with the relevant Sectoral
conditions on entry route, conditionalities and caps.
Share Swap
For Investments in Sectors under Automatic Route, no Government
approval will be required for FDI by way of swap of shares.
However, Government approval will still be required for FDI by way of
swap of shares in Sectors under government approval route.
The condition of valuing the shares as per the extant pricing guidelines still
needs to be complied with.
CNK Knowledge Tracker, January 2016 For Private Circulation only Co Law, SEBI, RBI, Accounting & Audit etc.
CNK & Associates LLP Page 19 of 22
Sector Revised Liberalised Position
NRI Entity
Earlier investments by foreign companies/ trusts etc. would tantamount to
FDI and accordingly were subject to Sectoral caps and pricing guidelines etc.
In other words, beneficial treatment given to NRIs in the FDI policy was
available only if they invested in their individual capacity.
Investment by companies/ trusts/ partnerships owned & controlled by
NRIs on non-repatriation basis will now be treated as domestic investment.
Conditionalities
for the
purposes of
FDI in LLP
FDI in Limited Liability Partnerships (LLP) which was earlier allowed under
Government approval route is now permitted automatic route, subject to the
following conditions:
FDI is permitted under the automatic route in LLPs operating in
sectors/ activities where 100% FDI is allowed, through the automatic
route and there are no FDI-linked performance conditions.
An Indian company or LLP having foreign investment will be permitted
to make downstream investment in another company or LLP in sectors
in which 100% FDI is allowed under the automatic route and there are
no FDI- linked performance conditions.
FDI in LLP is subject to the compliance of the conditions of LLP Act,
2008.
Downstream
Investments
Downstream investments, which was earlier restricted only to companies,
have been extended to LLPs with similar conditionality’s as given in the
relevant FEMA notification.
Definition of
"Control"
The definition of term “control” for the purposes of FDI in LLP has now
been defined and will mean right to appoint majority of the designated
partners, where such designated partners, with specific exclusion to others,
have control over all the policies of the LLP.
Definition of
"Owned"
The definition of “owned” has now been extended to LLPs whereby, a LLP
will be considered as owned by resident Indian citizens if more than 50% of
the investment in such an LLP is contributed by resident Indian citizens and
/ or entities which are ultimately ‘owned and controlled by resident Indian
citizens' and such resident Indian citizens and entities have majority of the
profit share.
CNK Knowledge Tracker, January 2016 For Private Circulation only Co Law, SEBI, RBI, Accounting & Audit etc.
CNK & Associates LLP Page 20 of 22
Other Regulatory Announcements
Removing of grace period of 5 days on payment of Provident Fund (PF)
contribution by the employers by 15th of the following month
As per EPF Scheme, 1952, EPS Scheme, 1995 and EDLI Scheme, 1976, the employers are
required to pay the contributions and administrative charges within 15days of the close of
every month. The employer is allowed 5 days grace to remit the contribution.
Since in the present era, employers compute the wages and EPF liabilities electronically and
file Electronic Challan-cum-Return (ECR), the time taken for calculation of PF dues and its
remittance in the bank has also reduced. Therefore, it has been decided that the concession
of 5 days available to the employers for depositing the contribution and other dues be
withdrawn from February 2016 (contributions for month of January 2016 and payable in
February 2016).
The Payment of Bonus (Amendment) Act, 2015
The Payment of Bonus (Amendment) Act, 2015 (Bonus Act, 2015) has been published in
the Gazette of India on 1st January, 2016. The provisions of the Bonus Act, 2015 will be in
force from 1st April 2014.
The Bonus Act, 2015 envisages the following –
Enhancement of eligibility limit under Section 2(13) from Rs.10,000/- per month to
Rs.21,000/- per month; and
Calculation Ceiling under Section 12 from Rs. 3,500 to Rs.7000 or the minimum wage
for the scheduled employment, as fixed by the appropriate Government, whichever is
higher.
CNK Knowledge Tracker, January 2016 For Private Circulation only Co Law, SEBI, RBI, Accounting & Audit etc.
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DISCLAIMER AND STATUTORY
NOTICE This e-publication is published by CNK & Associates, LLP Chartered
Accountants, India, solely for the purposes of providing necessary information
to employees, clients and other business associates. This publication summarises
the important statutory and regulatory developments. Whilst every care has been
taken in the preparation of this publication, it may contain inadvertent errors for
which we shall not be held responsible. The information given in this
publication provides a bird’s eye view on the recent important select
developments and should not be relied solely for the purpose of economic or
financial decision. Each such decision would call for specific reference of the
relevant statutes and consultation of an expert.
This document is a proprietary material created and compiled by CNK &
Associates LLP. All rights reserved. This newsletter or any portion thereof may
not be reproduced or sold in any manner whatsoever without the consent of the
publisher.
This publication is not intended for advertisement and/or for solicitation of
work.
CNK Knowledge Tracker, January 2016 For Private Circulation only Co Law, SEBI, RBI, Accounting & Audit etc.
CNK & Associates LLP Page 22 of 22
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