25 July, 2019
Proposal for FDI inflows into India in 2018-19
On July 5, 2019, the Department for Promotion of Industry and Internal Trade issued a press release, proposing the following steps:
(a) The Government will examine suggestions of further opening up of foreign direct investment (FDI) in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.
(b) 100% FDI will be permitted for insurance intermediaries.
(c) Local sourcing norms will be eased for FDI in single brand retail sector
(d) Increase the statutory limit for Foreign Portfolio Investors (FPIs) investment in a company from 24% to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs.
The Companies (Significant Beneficial Owners) Second Amendment Rules, 2019
The Ministry of Corporate Affairs (“MCA”) vide its notification dated July 1, 2019 issued the Companies (Significant Beneficial Owners) Second Amendment Rules, 2019 thereby further amending the Companies (Significant Beneficial Owners) Rules, 2018. By way of amendment Rules, the MCA has substituted the form BEN-2 specified under the original Rules. The form BEN-2 is required to be filed as a return to the Registrar of Companies by Indian companies which have received declaration(s) of interest from significant beneficial owner(s) in form BEN-1. Form BEN-2 is available on the MCA portal for filing since July 2, 2019.
Annual Return on Foreign Liabilities and Assets Reporting by Indian Companies
On June 28, 2019, RBI issued a circular replacing the present email- based reporting system for submitting the Annual Return on Foreign Liabilities and Assets (“FLA”) with the web based online reporting portal. For the purpose of making the FLA filings, the reporting entities are required to register themselves with the RBI's web- portal interface https://flair.rbi.org.in/. The information for the financial year 2018-19 is to be furnished as per the revised process since the existing mechanism has been discontinued by the RBI with effect from June 28, 2019.
Permission to acquire financial asset from other Asset Reconstruction Companies (ARCs)
On June 28, 2019, RBI, in view of the amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, issued a circular, permitting Asset Reconstruction Companies (ARCs) to acquire financial asset from other ARCs on following conditions:
(a) The transaction is settled on cash basis;
(b) Price discovery for such transaction shall not be prejudicial to the interest of security receipt holders;
(c) The selling ARC will utilize the proceeds so received for the redemption of underlying security receipts; and
(d) The date of redemption of underlying security receipts and total period of realisation shall not extend beyond 8 years from the date of acquisition of the financial asset by the first ARC.
The Companies (Appointment and Qualification of Directors) Rules, 2014
The Ministry of Corporate Affairs (“MCA”) vide its circular dated June 27, 2019 issued a clarification towards Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014. The said circular inter alia provides for extension to be allowed for filing e-form DIR-3 KYC by directors of Indian companies and introduction of a simple web based verification service for completing KYC by directors who have already filed the e-form DIR-3 KYC.
Reduction in contribution – Employees' State Insurance Act 1948
On June 13, 2019, the Ministry of Labour & Employment issued a press release reducing the rate of contribution under the Employees' State Insurance Act 1948 from 6.5 per cent to 4 per cent (employers' contribution being reduced from 4.75 per cent to 3.25 per cent and employees' contribution being reduced from 1.75 per cent to 0.75 percent).
The reduced rates will be effective from 1 July 2019. The objective behind the revision in contribution rates is to inter alia enhance the social security coverage, increase compliance of law and facilitate enrolment of more workers under the ESI scheme. Although the revision in the ESI contribution rates may appear to be small, it is expected to have a huge impact on the economy. The reduced contribution rates would also ensure a greater take home pay for covered employees and reduced costs for employers.
Discussion Paper on amendments to SEBI (Prohibition of Insider Trading) Regulations 2015
On June 10, 2019, the Securities and Exchange Board of India (“SEBI”) issued a discussion paper on amendments to SEBI (Prohibition of Insider Trading) Regulations 2015, to provision for an informant mechanism. Direct evidence of insider trading is not easily available and that which is generally available is almost completely circumstantial. Since criminal law requires proof to be established beyond reasonable doubt, it is a challenge for SEBI to successfully prosecute such cases. As a further step towards strengthening the mechanism for early detection of insider trading and better enforceability, it is desirable and prudent that SEBI considers instituting a process that enables timely reporting of instances of insider trading violations and also provide for grant of reward with adequate checks and balances that could incentivize timely reporting of information relating to insider trading to SEBI at the first available opportunity.
Hence a mechanism which also provides 'near absolute confidentiality' along with appropriate safeguards is proposed to enable reporting of such information and in light of this SEBI has issued this discussion paper.
Prudential Framework for Resolution of Stressed Assets
On June 7, 2019, the Reserve Bank of India (“RBI”) issued the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019 with a view to providing a framework for early recognition, reporting and time bound resolution of stressed assets. The provisions of these directions shall apply to the following entities:
(a) Scheduled Commercial Banks (excluding Regional Rural Banks);
(b) All India Term Financial Institutions (NABARD, NHB, EXIM Bank, and SIDBI);
(c) Small Finance Banks; and,
(d) Systemically Important Non-Deposit taking Non-Banking Financial Companies (NBFC-ND-SI) and Deposit takin Non-Banking Financial Companies (NBFC-D)
The Companies (Incorporation) Sixth Amendment Rules, 2019
The Ministry of Corporate Affairs (“MCA”) vide its notification dated June 7, 2019 issued the Companies (Incorporation) Sixth Amendment Rules, 2019 thereby substituting form no. INC. 12 in place of Form INC-32 which can be submitting for obtaining license under section 8 (as a not for profit company) of the Companies Act, 2013.
For further information, please contact:
Vineet Aneja, Partner, Clasis Law
vineet.aneja@clasislaw.com
