29 May, 2018
Master Direction on Establishment of BO/ LO/ PO or any other place of business in India by foreign entities
On May 10, 2018, RBI updated the Master Direction on establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) or any other place of business in India by foreign entities. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed.
This Master Direction consolidates the existing instructions on the subject of “Establishment of BO/ LO/ PO or any other place of business in India by foreign entities” at one place. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated January 1, 2016).
Master Direction on External Commercial Borrowings
On May 9, 2018, RBI updated the Master Direction on External Commercial Borrowings (“ECB”) and Trade Credit. These regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications. Within the contours of the regulations, RBI also issues directions to ‘Authorised Persons’ under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. Instructions issued in respect of aforesaid borrowing transactions have been compiled in these regulations. These regulations also contain the terms and conditions related to borrowing and lending in foreign currency by authorised dealer and by persons other than authorised dealer.
SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018
On May 9, 2018, the Securities and Exchange Board of India (“SEBI”) issued the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 to further amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. These amended regulations shall come into force with effect from April 1, 2019.
Companies (Share Capital and Debentures) Amendment Rules, 2018
On May 7, 2018, the MCA issued the Companies (Share Capital and Debentures) Amendment Rules, 2018 by way of
which amendment has been made to Rule 5(3) of the Companies (Share Capital and Debentures) Amendment Rules, 2018.
The amendment states as follows:
Every certificate shall specify the shares to which it relates and the amount paid-up thereon and shall be signed by two directors or by a director and the company secretary, wherever the company has appointed company secretary: Provided that in case the company has a common seal it shall be affixed in the presence of persons required to sign the certificate.
Explanation – For the purposes of this sub-rule, it is hereby clarified that,-
a) in case of an One Person Company, it shall be sufficient if the certificate is signed by a director and the company secretary or any other person authorised by the Board for the purpose.
b) a director shall be deemed to have signed the share certificate if his signature is printed thereon as facsimile signature by means of any machine, equipment or other mechanical means such as engraving in metal or lithography or digitally signed, but not by means of rubber stamp, provided that the director shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose.
MCA issued the Companies (Meetings of Board and its Powers) Amendment Rules, 2018
On May 7, 2018, the MCA issued the Companies (Meetings of Board and its Powers) Amendment Rules, 2018 amending the Companies (Meetings of Board and its Powers) Rules, 2014. The amendment provides –
a) in Rule 4 of the Rules the following proviso shall be added – “where there is quorum presence in a meeting through physical of directors, any other director may participate through video conferencing or other audio visual means".
b) Substitution of Rule 13 to the following rule – A resolution passed at a general meeting in terms of (3) of section 186 to give any loan or guarantee or investment or providing any security or the acquisition under sub-section 2 of section 186 shall specify the total amount upto which the Board of Directors are authorized to give such loan or guarantee, to provide such security or make such acquisition provided that the company shall disclose to the members in the financial statement the full particulars in accordance with sub-section (4) of section 186.
Rationalisation and Liberalisation of External Commercial Borrowings Policy
On April 27, 2018, the RBI, in consultation with the Government of India, has decided to further rationalise and liberalize the External Commercial Borrowings (“ECB”) policy as under:
a) Rationalisation of all-in-cost for ECB under all tracks and Rupee denominated bonds (RDBs): With a view to harmonising the extant provisions of Foreign Currency and Rupee ECBs and RDBs, it has been decided to stipulate a uniform all-in-cost ceiling of 450 basis points over the benchmark rate. The benchmark rate will be 6 month USD LIBOR (or applicable benchmark for respective currency) for Track I and Track II, while it will be prevailing yield of the Government of India securities of corresponding maturity for Track III (Rupee ECBs) and RDBs.
b) Revisiting ECB Liability to Equity Ratio provisions: It has been decided to increase the ECB Liability to Equity Ratio for ECB raised from direct foreign equity holder under the automatic route to 7:1. This ratio will not be applicable if total of all ECBs raised by an entity is up to USD 5 million or equivalent.
c) Expansion of Eligible Borrowers’ list for the purpose of ECB: It has been decided to permit: (i) Housing Finance Companies, regulated by the National Housing Bank, as eligible borrowers to avail of ECBs under all tracks. Such entities shall have a board approved risk management policy and shall keep their ECB exposure hedged 100 per cent at all times for ECBs raised under Track I. (ii) Port Trusts constituted under the Major Port Trusts Act, 1963 or Indian Ports Act, 1908 to avail of ECBs under all tracks. Such entities shall have a board approved risk management policy and shall keep their ECB exposure hedged 100 per cent at all times for ECBs raised under Track I. (iii) Companies engaged in the business of Maintenance, Repair and Overhaul and freight forwarding to raise ECBs denominated in INR only.
d) Rationalisation of end-use provisions for ECBs: Currently, a positive end-use list is prescribed for Track I and specified category of borrowers, while negative end-use list is prescribed for Track II and III. It has now been decided to have only a negative list for all tracks.
Lending to Micro, Small & Medium Enterprises (MSME) Sector Directions, 2017
On April 25, 2018, the RBI issued the Lending to Micro, Small & Medium Enterprises (MSME) Sector Directions, 2017. In the past, RBI has issued a number of guidelines / instructions / circulars / directives to banks in the matters relating to lending to Micro, Small & Medium Enterprises Sector. This Direction incorporates the updated guidelines / instructions / circulars on the subject. The Directions mention, amongst other things, the Definition of Micro, Small and Medium Enterprises, the targets / sub-targets for lending to Micro, Small and Medium Enterprises (MSME) sector by domestic commercial Banks and foreign Banks operating in India, the common guidelines / instructions for lending to MSME sector, institutional arrangements.
Guidelines for issuance of debt securities by Real Estate Investment Trusts and Infrastructure Investment Trusts
On April 13, 2018, SEBI issued a circular stating that the SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”) and SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) were amended vide notifications dated December 15, 2017. The said amendments, inter-alia, clarified that REITs and InvITs can issue debt securities. The guidelines address various factors relating to issuance of debt securities by REITs/InvITs such as (i) for the issuance of debt securities REITs/InvITs shall appoint one or more debenture trustee registered with SEBI under Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993. Provided that a trustee to the REIT/InvIT shall not be eligible to be appointed as debenture trustee to such issue of debt securities; (ii) any secured debt securities issued by REITs/InvITs shall be secured by the creation of a charge on the assets of the REIT/InvIT or holdco or SPV, having a value which is sufficient for the repayment of the amount of such debt securities and interest thereon; (iii) in addition to the disclosures and compliances prescribed under circulars dated December 29, 2016 and November 29, 2016, as applicable, REITs/InvITs which have issued debt securities shall be required to comply with certain other continuous disclosure requirements.
Environment Ministry Notifies Plastic Waste Management (Amendment) Rules
On April 16, 2018, the Ministry of Environment & Forest issued a press release notifying the Plastic Waste Management (Amendment) Rules 2018 (“Rules”). The amended Rules lay down that the phasing out of Multilayered Plastic (“MLP”) is now applicable to MLP, which are “non- recyclable, or non-energy recoverable, or with no alternate use.”
For further information, please contact:
Vineet Aneja, Partner, Clasis Law
vineet.aneja@clasislaw.com
