Corporate Professionals Blog

Amendment in SEBI Listing Regulations

noreply@blogger.com (Anonymous) — Sat, 28 May 2016 15:58:00 +0530

SEBI, with the intent of investor protection and enabling them to take better and well informed investment decisions, has vide its Circulars dated 25th May 2016 and 27th May 2016 brought in certain amendments to the LODR Regulations (primarily Regulations 33 & 52). These Regulations pertain to the requirements of submitting Financial Results of the Company. As per the extant provisions, alongwith the Audited results for the financial year, Form A/ Form B were needed to be submitted, depending upon there being any Auditors’ Qualifications or not.

Now, vide the above mentioned Circulars, it has been decided to streamline the process and do away with the requirement of filing these Forms. The listed Companies are now required to disseminate the cumulative impact of all the audit qualifications in a separate format, simultaneously, while submitting the annual audited financial results to the stock exchanges.

The provisions of the said Circulars are applicable for all the annual audited standalone / consolidated financial results submitted by the listed entities for the period ending on or after March 31, 2016. That is to say, even for the results for the FY 15-16-either already submitted or under the process of being submitted.

A brief gist of the said Circulars is as under:

The requirements of filing Form A/ Form B along with the annual financial results has been dispensed with.
From now on, instead of these Forms, in case of Audit Reports with modified opinions (i.e. Qualified Audit Reports), a Statement on Impact of Audit Qualifications is needed to be submitted.
The management of the listed entity shall have the option to explain its views on the audit qualifications
Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments.
Further, the said Statement is also needed to be given in the Company’s Annual Reports.
The said Statement of Impact shall be reviewed by the concerned Stock Exchange(s).
Further, in case of audit reports with unmodified opinion(s), the listed entity shall furnish a declaration to that effect to the Stock Exchange(s) while publishing the annual audited financial results.
Schedule VIII of the LODR Regulations has been deleted.
These requirements are applicable for both listed equity shares and also listed NCDs/ NCRPSs.
In case of non compliance with the requirements of this Circular, the Stock Exchange(s) may take such action, as they deem fit.

CP’s viewpoint

It’s surely an investor friendly move that will enable the investors to view and analyse the impact of any Auditors Qualifications. But the only concern from listed companys’ point of view is how to comply, if they have already submitted/ published the results; or even if yet to be submitted/ published, how to obtain quantification or impact assessment for the Qualifications, in a time gap of only 2 days for submission of results. In our opinion, the Regulators (Stock Exchanges and/ or SEBI) should provide some time extension to the Companies to comply with the said Circulars for the FY 15-16.

What's Your Business Worth ?

noreply@blogger.com (Anonymous) — Wed, 25 May 2016 11:18:00 +0530

Ever Wondered what’s your Business Worth ? Our Valuation Team has prepared a crisp Video on “How to Value a Company” for its broad understanding. Do let us know your feedback.

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Key Highlights of Insolvency & Bankruptcy Code, 2016

noreply@blogger.com (Anonymous) — Mon, 23 May 2016 11:58:00 +0530

Key highlights of SEBI Board Meeting on Thursday 20th May 2016

noreply@blogger.com (Anonymous) — Mon, 23 May 2016 11:54:00 +0530

Offshore Derivative Instruments (ODIs)
Following suitable amendments to the Regulations/circulars are proposed to be made vis-à-vis ODIs:
1. Stricter Know your client (KYC) & Anti Money Laundering (AML):
  1. Indian KYC/AML norms will now be applicable to all ODI issuers.
  2. ODI Issuers shall be required to identify and verify the beneficial owners/ the person(s) who control the operations in the subscriber entities i.e. holding more than 25% in case of a company and 15% in case of partnership firms/ trusts/ unincorporated bodies.
2. Prior permission for Transferability: ODI subscribers will have to seek prior permission of the original ODI issuer for further/onward issuance/transfer of ODIs.
3. Reporting of complete transfer trail of ODIs: in monthly reports on ODIs, all the intermediate transfers during the month would also be required to be reported
4. KYC Review:
  1. At the time of on-boarding and once every three years for low risk clients
  2. At the time of on-boarding and every year for all other clients
5. Suspicious Transactions Report: ODI Issuers to file suspicious transaction (if any) reports with the Indian FIU.
6. Periodic Operational Evaluation system to be put in place to review of its controls, systems and procedures.
Dividend distribution policy for listed companies
1. To enable the investors to take well informed investment decisions, It is decided that top 500 listed companies (by way of market capitalization) would be required to formulate and disclose in their Annual Report and websites their “Dividend Distribution Policy (DDP)”.
2. DDP to include:
  1. Circumstances under which shareholders can or cannot expect dividend;
  2. Financial parameters to be considered while declaring dividends;
  3. Internal and external factors to be considered for dividend declaration;
  4. Policy as to how the retained earnings will be utilized.
  5. Provisions for varied classes of shares.
3. When the company proposes to declare dividend on the basis of parameters other than what is mentioned in such policy or proposes to change its dividend distribution policy, the same along with the rationale shall be disclosed.
Proposed Amendments in SEBI Infrastructure investment trust (InvIts)
1. To allow InvIts to invest in up-to 2 level SPV;
2. Mandatory sponsor holding to be reduced to 10% from existing 25%;
3. Maximum number of sponsors to be allowed to be up-to 5 from existing 3;
4. Operational requirement to be aligned with provisions of Companies Act 2013 etc.
  Consultation paper will be placed on SEBI website to seek public comments on aforesaid proposed amendments.
Guidance Note on Settlement & Compounding Regulations
1. As per existing provisions of SEBI Settlement regulations 5(2)(b), serious FUTP matters having market wide impact and having caused losses to the investors were not settled/consented.
2. Due to non-clarity on interpretation of aforesaid provision, a Guidance note clarifying that “only those cases which in the opinion of the Board have a bearing on the securities market as whole and not just the listed security and its investors may be considered to have market wide impact and are to be taken up for Enforcement action only”
3. The aforesaid clarification as per guidance note is proposed to be now incorporated in the Regulations
Amendments to the SEBI Act, 1992, SC(R)Act, 1956 & Depositories Act, 1996 vis-à-vis Roofit Industries Judgement
1. Latest judgment of Supreme Court of India in the matter of Roofit Industries has created difficulties before SEBI Adjudicating Officers (AO) in passing orders for monetary penalty. As per the judgment, AOs during the period from 2002 to 2014 does not discretionary powers on deciding the quantum of monetary penalties.
2. It is decided by the Board that a proposal to be sent to Central Government seeking amendment in law to clarify the powers of Adjudicating officer in imposing monetary penalties for cases from the period 2002 to 2014

Why to go for ESOPs?

noreply@blogger.com (Anonymous) — Mon, 16 May 2016 14:13:00 +0530

Fasten up your gridles..

noreply@blogger.com (Anonymous) — Mon, 16 May 2016 13:59:00 +0530

Regularizing Pro-Trading for Commodity Brokers

noreply@blogger.com (Anonymous) — Mon, 16 May 2016 13:54:00 +0530

The merger of Forward market commission (FMC) with Security Exchange Board of India (SEBI) has enlarged the scope of market regulation for SEBI by bringing commodity derivative market into its domain. Since merger of two regulators in September 2015 in an attempt to align commodity market with equity market, SEBI has been taking several initiatives. In line with this objective, of late SEBI has issued yet another circular dated 25th April 2016 for mandating Commodity Derivative Brokers to disclose their proprietary trading and details of pro-account trading terminals to its clients.

Discloser of proprietary trading

For fulfilling the purpose of increased transparency in dealings between the commodity broker and their clients, the provision of SEBI circular (Dated 19th Nov. 2003) are extended to commodity derivative markets. The provisions of the circular requires that every broker shall disclose to his client whether he does proprietary trading as well or not. The commodity brokers are now required to disclose the above information within one month from date of this circular to its existing client and same shall be disclosed upfront in taking up any new assignments from new clients. In case of commodity brokers who was earlier not involved in the proprietary trading, but choose to do it later, then he shall disclose such intentions to his clients. The commodity derivative exchange are further required to amend their bye- laws in order to incorporate requirements of these disclosers mandated by circulars.

Discloser of Pro-account trading terminals

In order to monitor and to further regulate the pro-account trading the provision of SEBI circular dated (27TH AUG. 2003) are extended to commodity derivative trading. According to the requirements of the above dated SEBI circular the facility of pro-account trading shall be available through trading terminal at identified location only and the trading terminals located at a place other than identified location shall be utilized only for placing orders on behalf of clients. If in case the broker requires the pro-account facility to be extended to it from multiple locations then broker shall submit an undertaking to exchange and the exchange shall after proper due diligence may extend such facility. The same provisions are now mandated for Commodity derivative exchanges as well and they are required to amend their bye-laws in conformity to above provision.

In broad sense it could be viewed as an appreciable move by SEBI to regulate an important player of commodity derivative market and to lower the possibility of fraud in the market.

Single Brand Retail through e-commerce

noreply@blogger.com (Anonymous) — Wed, 27 Apr 2016 11:33:00 +0530

Vide Press Note 12 of 2015 series, issued on 24th November, 2015, DIPP allowed only those single brand retail trading entities to undertake retail trading through e-commerce, which operate through brick and mortar stores in India. The object of the press note was to bring more investments and also the high quality goods in India with the aim to growth and technological development of India. However the press note fails to define the target public for sale of the such goods through e-commerce and also defining region and coverage of the e-commerce sale considering the opening of the brick and mortar store, which leads to the interpretation of opening of one brick and mortar store in India and engaging into B2C e-commerce in the entire country thereby defeating the very purpose of the press note for brining in investments into India since the e-commerce model does not involve big investments. Thus as a result DIPP started receiving number of queries with respect to such a huge relaxation of doing e-commerce business in India through single brand retail. DIPP realizing the error in the earlier press note allowing the e-commerce business has now came up with Press Note No. 3 (2016 Series); dated 29th March, 2016 and clear guidelines on FDI in B2C e-commerce sector with respect to Marketplace e-commerce model and Inventory based e-commerce model, by which it prohibited the FDI into inventory based e-commerce B2C model. The same have been detailed herein below:

FDI in marketplace model of e-commerce

The Government allowed 100% FDI in B2C e-commerce marketplace model, which has been defined to mean providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. For undertaking FDI in e-commerce marketplace, the following conditions shall be satisfied:

An e-commerce entity will not be permitted to sell more than 25% of the sales affected through its marketplace from one vendor or their group companies.
Guidelines on cash and carry wholesale trade under the FDI Policy (as discussed above), shall apply mutatis mutandis to B2B e-commerce also.
Contact details of the sellers are to be displayed online by the e-commerce entities.
E-commerce entity providing a marketplace will not exercise ownership over the goods to be sold.
An e-commerce marketplace entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.
Support services to the sellers, like warehousing, logistics, call center etc., may also be provided by the e-commerce entities.
The warranty/guarantee of products or services sold online will be borne by the sellers, not the e-commerce entity. In addition, the seller alone shall be responsible for delivery of goods and satisfaction of customer.
Payments for sale shall be facilitated by the e-commerce entity in conformity with the RBI guidelines.
The price of goods or services shall not be, directly or indirectly, influenced by the e-commerce entities providing marketplace.
If any of the above conditions are not satisfied then approval of the FIPB shall be obtained.

FDI in inventory based model of e-commerce

It has been specifically provided that FDI is not permitted in inventory based model of e-commerce, which has been defined to mean an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to consumers directly. Thus, FDI in B2C e-commerce has been specifically restricted in case goods are owned by the e-commerce entity.

However, on review of the above there still a scope of Inventory based e-commerce B2C model to the extent of 25% of the goods imported from outside India under single brand retail by sale through whole sale trade model to a group company in India, wherein not more than 49% investment is held in the importing company, which again keeps the investee company out of the purview of the downstream investment and thus not falling under the prohibition of B2C e-commerce; 25% through Platform based e-commerce B2C model through sale from any of the group company and the balance of 50% e-commerce B2C sale can be done through the already existing franchise model.

Fema Law Newswre : Infrastructure Sector companies and certain NBFCs allowed to raise ECB (External Commercial Borrowings) for shorter duration

noreply@blogger.com (Anonymous) — Tue, 12 Apr 2016 17:16:00 +0530

Infrastructure Sector companies and certain NBFCs allowed to raise ECB (External Commercial Borrowings) for shorter duration

The Reserve Bank of India (RBI) with a view of development of Infrastructure of India has expanded the scope of funding through ECB, particularly for infrastructure sector, vide issuance of circular: A.P. (DIR Series) Circular No.56; dated 30th March, 2016.

Now, infrastructure sector companies, non-banking finance companies (NBFCs), infrastructure finance companies (NBFC-IFCs), asset finance companies (NBFC-AFCs), holding companies and Core Investment Companies (CICs) will also be eligible to raise ECB under Track I of the ECB framework issued by the RBI in November, 2015.

Earlier position:

In the said ECB framework (released in November, 2015), RBI had detailed three tracks through which Indian companies could borrow from offshore market. Track-I allowed companies to borrow foreign currency loans with a minimum maturity of three-five years, Track-II allowed long-term borrowings of minimum ten year maturity and Track-III enabled rupee-denominated ECB to be issued to offshore investors with a minimum maturity of three-five years.

Those allowed to borrow under Track-I were manufacturing companies, software companies, shipping and airlines, special economic zones, Small Industries Development Bank of India and EXIM Bank. Infrastructure companies, CICs, real estate investment trusts and infrastructure investment trusts were allowed to borrow under Track-II and Track-III which are basically the borrowings for longer duration while NBFCs were allowed only to borrow under Track-III.

Thus, until now, infrastructure companies could raise only long term external borrowings of more than ten years and all NBFCs were allowed only to borrow rupee denominated ECB with a minimum maturity of three-five years.

Present position:

RBI made adjustments to the afore-mentioned categories and permitted infrastructure companies and NBFCs to borrow for a minimum maturity of three-five years, subject to 100% hedging. Thus, the relaxed provisions, comes with the stipulation that such borrowings must be fully hedged, which may make it expensive for companies to raise funds overseas. It has been further been provided that:

The individual borrowing limit of $750 million prescribed for infrastructure companies would continue to apply;
The cost ceiling for five-year ECBs is retained at 450 basis points¹ above the six-month LIBOR² while that of a 10-year loan is retained at 500 bps above Libor;
While infrastructure companies can use the ECB proceeds raised under Track I for the end uses permitted for this Track, NBFCs-IFCs and NBFCs-AFCs will be allowed to raise ECB under Track I only for financing infrastructure;
Holding companies and CICs can use foreign loan proceeds only for on-lending to infrastructure special purpose vehicles;
The companies added under Track I should have a Board approved risk management policy which is to determine and manage for risks involved in shorter duration borrowings;
The designated AD Category-I bank shall verify that 100 % hedging requirement is complied with during the currency of ECB and report the position to RBI through ECB 2 returns.

In addition, the RBI has clarified the following concerns qua the ECB framework released on 30th November, 2015 vis-à-vis the revised framework:

The designated AD Category-I banks may allow refinancing of ECBs raised under the previous ECB framework, provided
1. the refinancing is at lower all-in-cost;
2. the borrower is eligible to raise ECB under the extant ECB framework; and
3. The residual maturity is not reduced (i.e. it is either maintained or elongated);
ECB framework is not applicable in respect of the investment in Non-convertible Debentures (NCDs) in India made by Registered Foreign Portfolio Investors (RFPIs), since such investments are governed through the schedule 5 of the FDI Regulations;
Minimum average maturity of Foreign Currency Convertible Bonds (FCCBs)/ Foreign Currency Exchangeable Bonds (FCEBs) is five years irrespective of the amount of borrowing. Further, the call and put option for FCCBs shall not be exercisable prior to five years;
Only those NBFCs which are coming under the regulatory purview of the RBI are permitted to raise ECB i.e the entities holding valid certificate of registration from RBI for carrying on the NBFC business. Further, under Track III, the NBFCs may raise ECBs for on-lending for any activities including infrastructure as permitted by the concerned regulatory department of RBI;
The provisions regarding delegation of powers to designated AD Category-I banks is not applicable to FCCBs/FCEBs;
In the forms of ECB, the term “Bank loans” shall be read as “loans” as foreign equity holders / institutions other than banks, also provide ECB as recognized lenders.

^[1] One basis point is one-hundredth of a percentage point
^[2] LIBOR i.e. London interbank offered rate, is a benchmark rate that world’s leading banks charge each other for short-term loans.

Incentivize your Team with ESOPs

noreply@blogger.com (Anonymous) — Tue, 12 Apr 2016 17:09:00 +0530

Forex Law Newswire : April 04, 2016

noreply@blogger.com (Anonymous) — Wed, 6 Apr 2016 14:06:00 +0530

DIPP issued Press Note 1 and 2 (2016 Series) - liberalizing FDI norms in insurance and pension sector

On 23rd March, 2016, the Department of Industrial Policy and Promotion (DIPP), Government of India, issued Press Note 1 and 2 of 2016 Series, thereby liberalizing the extant FDI Policy on insurance and pension sector, respectively. The amendment in the said sectors is as following:

Amendment in Insurance Sector

Prior to the issuance of Press Note 1 (2016 Series), 26% FDI was permitted in the insurance sector under the automatic route and government approval was required for FDI beyond 26% and up to 49%. Now, up to 49% FDI is permitted under the automatic route, subject to prescribed conditions.

In addition, it has now been prescribed that the investment under the automatic route up to 49% shall be subject to verification by the Insurance Regulatory and Development Authority of India.

Amendment in Pension Sector

Prior to issuance of Press Note 2 (2016 Series), FDI in the pension sector was permitted vide Press Note 4 of 2015 Series, under which 26% FDI was permitted in the pension sector under the automatic route and government approval was required for FDI beyond 26% and up to 49%. Now, up to 49% FDI is permitted under the automatic route, subject to prescribed conditions.

In addition, the condition of investment being subject to the provisions of the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013 is applicable on all kinds of foreign investment as against only FDI, prescribed earlier.

DIPP issued Press Note 3 (2016 Series) - allowing 100% FDI in B2C e-commerce marketplaces

With a view to attract more foreign direct investment (FDI) in India, the Department of Industrial Policy & Promotion (DIPP), Government of India has, subject to prescribed guidelines/conditions, allowed 100% FDI in B2C e-commerce marketplace model, vide its Press Note No. 3 (2016 Series); dated 29th March, 2016.

Marketplace model of e-commerce has been defined to mean providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.

It has been clarified that digital and electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc. In addition, the terms ‘E-commerce’ and ‘E-commerce entity’ has been defined in the following manner:

E-commerce means buying and selling of goods and services including digital products over digital and electronic network
E-commerce entity means a company incorporated under the Companies Act, 1956 or Companies Act, 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in section 2(v)(iii) of FEMA, 1999 owned or controlled by a person resident outside India and conducting the e-commerce business.

Furthermore, the Government has clearly specified that FDI is not permitted in inventory based model of e- commerce, which has been defined to mean an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to consumers directly.

Earlier, DIPP vide Press Note 12; dated 24th November, 2015, allowed only those single brand retail trading entities to undertake retail trading through e-commerce, which operate through brick and mortar stores in India. However, through the said press note, the government has issued clear guidelines on FDI in retail e-commerce marketplaces, effective from 29th March 2016. Consequently, any FDI in e-commerce marketplace shall be subject to the following conditions:

An e-commerce entity will not be permitted to sell more than 25% of the sales affected through its marketplace from one vendor or their group companies.
Guidelines on cash and carry wholesale trade, as contained in the FDI Policy, shall apply mutatis mutandis to B2B e-commerce also.
Contact details of the sellers are to be displayed online by the e-commerce entities.
E-commerce entity providing a marketplace will not exercise ownership over the goods to be sold.
An e-commerce marketplace entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.
Support services to the sellers, like warehousing, logistics, call center etc., may also be provided by the e-commerce entities.
The warranty/guarantee of products or services sold online will be borne by the sellers, not the e-commerce entity. In addition, the seller alone shall be responsible for delivery of goods and satisfaction of customer.
Payments for sale shall be facilitated by the e-commerce entity in conformity with the RBI guidelines.
The price of goods or services shall not be, directly or indirectly, influenced by the e-commerce entities providing marketplace.

It has been clarified that sale of services through e-commerce will continue to be under the automatic route, subject to applicable laws.

While 100% FDI in B2B e-commerce was already permitted; this move is aimed towards attracting more foreign investment in the country. Also it comes as a relief to the global retail giants operating through e-commerce, like Amazon and Ebay.

Highlights of the Companies (Amendment) Bill 2016 at a Glance. - Infographics

noreply@blogger.com (Anonymous) — Wed, 6 Apr 2016 14:05:00 +0530

Key Highlights of The Companies (Amendment) Bill, 2016

noreply@blogger.com (Anonymous) — Wed, 6 Apr 2016 13:39:00 +0530

The result of the long consultative process undertaken by the Company Law Committee constituted by the Ministry of Corporate Affairs in an attempt to revamp the Companies Act 2013 is out in form of the Companies (Amendment) Bill 2016 (‘Bill’).

The Bill in the wake of facilitating ease of doing business aims to bring some radical changes in the Companies Act 2013. Further the Bill will certainly bring cheer among the corporates as it address some of their major concerns.

- See more at: http://www.companiesact.in/Companies-Act-2013/News-Details/20712/Key%20Highlights%20of%20The%20Companies%20%28Amendment%29%20Bill,%202016

SEBI ENLIGHTED THE GREY AREAS UNDER SEBI (SBEB) REGULATIONS, 2014

noreply@blogger.com (Anonymous) — Mon, 30 Nov 2015 11:35:00 +0530

The Capital Market Regulator, SEBI, has cleared the air around certain grey areas that persisted under the SEBI (Share Based Employee Benefit) Regulations, 2014, which got notified on 28th October, 2014. SEBI, on 21st October, 2015, had issued a FAQ paper which clarified the ambiguities prevailing on part of Regulation 3(12) of the SBEB Regulations, i.e. with regard to appropriation of un-appropriated inventory under an Employee Benefit Scheme. Further, on 20th November, 2015, SEBI issued another FAQ document on the Regulations, thereby clarifying that Independent Directors can exercise the options granted to them before promulgation of these Regulations.

A gist of both the FAQs is given herein below:

Clarification w.r.t to Appropriation of Inventory held by the Trust as on the date of the Notification of the Regulations in the year 2014.

As per Regulation 3(12) of the SEBI (SBEB) Regulations, 2014, The un-appropriated inventory of shares which are not backed by grants, acquired through secondary acquisition by the trust under Part A, Part B or Part C of Chapter III of these regulations, shall be appropriated within a reasonable period which shall not extend beyond the end of the subsequent financial year: Provided that if such trust(s) existing as on the date of notification of these regulations are not able to appropriate the un-appropriated inventory within one year of such notification, the same shall be disclosed to the stock exchange(s) at the end of such period and then the same shall be sold on the recognized stock exchange(s) where shares of the company are listed, within a period of five years from the date of notification of these regulations.

Prior to the clarification issued by SEBI, the prima-facie interpretation of this Regulation suggested that the appropriation of un-appropriated inventory can be done only by way of sale of that inventory on the Recognised Stock Exchange. But now, SEBI has clarified that, the Company may either appropriate the inventory by selling it on the Stock Exchanges or towards individual employees by way of an ESPS/ESOP/SAR/GEBS/RBS, provided that such Plan is framed by the Company on or before 27th October, 2015. This would suffice the requirement of Regulation 3(12), and would be deemed as a compliance with proviso to Regulation 3(12).

In case, such appropriation is not done till 27th October, 2015, then the un-appropriated inventory has to be sold on the Stock Exchanges in the next four years.

Exercise of Options granted to Independent Directors before the promulgation of the Regulations

Initially, upon enactment of the Companies Act, 2013, the Independent Directors, were restricted from participating in any Employee Stock Option Plan. Subsequently, the same also got prohibited under Clause 49 of the Listing Agreement and then under the new SEBI (SBEB) Regulations, 2014. This resulted into a lot of chaos as to what shall be the treatment of grants which have already been made to the Independent Directors. The Regulator has now clarified that in case of listed entities, this restriction applies only to the fresh grants being made after the notification of SEBI (SBEB) Regulations, 2014. Accordingly, any amount of benefit granted to an Independent Director before enforcement of new norms under Companies Act, 2013 is valid and hence, it will vest and can be exercised as per the terms and conditions of the grant.

However, no fresh ESOPs shall be granted to the Independent Directors under the Plans framed after the SBEB Regulations came into picture.

Click to download FAQ

Securities Law Newswire : SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015.... COUNTDOWN BEGINS!!

noreply@blogger.com (Anonymous) — Wed, 18 Nov 2015 11:00:00 +0530

We are aware that the Capital Market Regulator, SEBI, with a view to consolidate and streamline the provisions of existing listing agreements for different segments of capital market into one single document, has came up with new Listing Regulations on September 02, 2015 for which all the listed entities have been given a time period of 90 days for complying with its provisions. That is, the new Regulations will become effective w.e.f 2nd December 2015, only 2 weeks to go.

As per the Regulations, various Policies, viz. Preservation Policy, Archival Policy and Materiality Policy are needed to be prepared by the Companies, with Archival & Materiality policies even to be uploaded on the Company’s’ websites. Since only a few days are left, so it’s advisable that Companies gear up for preparation of these Policies and making requisite disclosures.

Further, SEBI has already issued the Uniform Listing Agreement, needed to be executed between the Listed Companies and the Stock Exchanges. This Agreement is needed to be signed within 6 months of the promulgation of the Listing Regulations. Companies are already in the process of signing the same.

VALUATION NITTY-GRITTY EXPLAINED FOR YOUR BUSINESS

noreply@blogger.com (Anonymous) — Wed, 7 Oct 2015 13:19:00 +0530

Knowing what business is worth and what determines its value is prerequisite for intelligent decision making. Corporate valuations form the basis of corporate finance activity including capital raising, M&A and also to meet regulatory / accounting requirements or for voluntary purpose. Justifying the value of businesses has grown more complex and challenging as it’s been accepted that valuation is not an exact science and depends upon a number of factors like purpose, stage, financials, industry, management and promoters strengths etc. Professional experience of valuer has a big role in choosing and applying out of different methodologies and concluding value.

As of now there are no formal standards for business valuation in India (barring ICAI Valuation Standard which too is recommendatory) specifically for unlisted and private companies, numerous conceptual controversies still remain, even among the most prominent valuation practitioners. Interestingly, the answer to this lies in focusing more on basics of valuations. www.corporatevaluations.in by virtue of its extensive promoters capital markets experience, dedicated valuation team, in-house research wing and proven expertise in corporate transaction advisory has made an attempt by identifying, preparing and compiling research oriented articles on such debated issues on Business valuation, Relative valuation, SOTP valuation, ESOP valuation, DCF valuation, Enterprise valuation, Holding company discounts, Valuation in IT sector, RBI valuation, Regulatory valuations, Registered valuer, Start up valuation and Brand valuation which will guide you how to apply the range of valuation techniques, including their appropriate application, advantages and disadvantages.

Why Conventional ESOPs May Soon Loose their Sheen!!

noreply@blogger.com (Anonymous) — Wed, 10 Jun 2015 14:04:00 +0530

BACKGROUND

On 15th January, 2015, the Capital Market Regulator, SEBI, came up with a new set of Regulations that overhauled a 23-year-old regulatory regime governing the arena of Insider Trading in the Capital Markets. Though the new Regulations seem to be more promising and equipped to ensure better compliance and enforcement, however at the same time the obligations attached, the sensitivity and penalty associated under the new insider trading norms have made it a reason to worry for the Corporates and particularly the Compliance Heads.

THE GREY AREAS

Ms. Mohini Varshney

Assistant Vice President

+919971673332

mohini@indiacp.com

The new regulations have certain grey areas that need a lucid visualization. One of the most talked about ambiguity that has been pulled out of the discussions and interpretation is the ESOP ISSUE-their Grants/ Exercise. The erstwhile Insider Trading Regulations, 1992, had made a separate room to keep the ESOPs in place with the statutory requirements of these Regulations. The earlier model code of conduct under Clause 3.2-6 of the Prohibition of Insider Trading Regulations, 1992, allowed exercise of options during trading window closure period. Further, SEBI via its replies to the FAQs also clarified that the restriction on opposite transaction (contra trade) would not apply to exercise of ESOPs.No such exemptions are available under the 2015 Regulations.Infact multiple restrictions on trading of shares and all inclusive definitions have dragged ESOPs into the wheel.

Worldwide, ESOPs are one of the most attractive & contemporary Employee Rewarding strategies being adopted by Corporate Houses. Even in Indian context, ESOPs have now reached the threshold and have now gained momentum as a part of the employee compensation package.

Under ESOPs, Employees are offered a certain share in the Company based upon their performance, loyalty and hard work, so that it gives them a sense of satisfaction & motivation that their efforts towards the growth of the Company are being recognized by the management. Also that a particular employee, whether a senior managerial personnel or not, is offered a pre-determined number of optionsthat correspond to a pre determinednumber of shares,at a pre determined price, that can be taken by that employee. Therefore, it is incorrect to assume that ESOPs grants/ exercise may lead to insider trading, since ESOPs do not allow employees to deal in shares of the company according to their sweet-will, their entire life cycle is pre fixed, by virtue of an ESOP Scheme, which is duly approved even by the Shareholders of the Company.

However, the rigidity of the new norms may render plain vanilla ESOPs unattractive. Perhaps the basic idea behind ESOP, i.e. providing lock in free shares to the employees at pre determined terms and conditionsmay get affected. This is because the management officials, who are usually in possession of unpublished price-sensitive information, will be able to exercise the ESOPs and take the shares to which they are entitled, only subject to pre clearance/ trading plan norms, as provided in the new PIT Regulations.

A fact worth noting is that exercise of ESOPs is simply making of an application by an employee to the company and collecting the shares. However, the term ‘trading’, as defined in the PIT Regulations, has been made to include“subscribing” as well. Accordingly exercise of ESOPs have also been including in the trading of shares of a company, which is disallowed, if done by the persons having access to UPSI.

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Dissemination Board - not a easy road for promoters and directors

noreply@blogger.com (Anonymous) — Wed, 3 Jun 2015 18:14:00 +0530

Dissemination Board - not a easy road for promoters & directors from Corporate Professionals

Revamp Your Codes of Conduct & Get Aligned with the new Prohibition of Insider Trading Regulations, 2015

noreply@blogger.com (Anonymous) — Tue, 14 Apr 2015 11:26:00 +0530

The Market Regulator, SEBI with the objective of bringing the basic framework governing the regime of Insider Trading practices in line with the dynamic global scenario and to tighten the gaps of existing norms, has notified the New PIT Regulations to be renowned as SEBI (Prohibition of Insider Trading) Regulations, 2015, on 15th January, 2015. These Regulations will be effective w.e.f 15th May, 2015.

Ms. Anjali Aggarwal
Vice President
+919971673336
anjali@indiacp.com

Insider trading has always been an issue on the talk. SEBI’s move towards reformation of the extant Regulations is a significant step ensuring confidentiality in the operations and to provide a well governed legal system of the corporate sectors on one hand and to refrain any person from unfair trading in securities who has privilege of having access to unpublished information of any company.

The new Regulations seem to be more promising and equipped to ensure better compliance and enforcement, therefore it’s high time for listed companies, intermediaries, service providers and other market participants to relook and revamp their internal codes of conduct within a month as the new Regulations are about to come in force from 15th May, 2015.

Download the full article here - Countdown begins

Analysis of the Delisting, SAST & Buy Back Regulations

noreply@blogger.com (Anonymous) — Wed, 8 Apr 2015 10:23:00 +0530

SEBI on March 24, 2015 issued overhauling amendments to the SEBI (Delisting of Equity Shares) Regulation, 2009 (the Delisting Regulations) along with SEBI (Substantial Acquisition of Shares and Takeover) Regulation, 2011 (SAST/ Takeover Regulations) and SEBI (Buy Back of Securities) Regulation, 1998 (the Buyback Regulations).

Ms. Anjali Aggarwal
Vice President
+919971673336
anjali@indiacp.com

Taking into account the slower pace of Delisting offers in India, SEBI has revamped the norms that reduce the time taken for completing the process. It has also introduced a new concept of Delisting Offers into the SAST Regulations, 2011, which aim to provide a new opportunity to the Acquirer to even go in for delisting, by giving a Takeover Open Offer.

A major common amendment by the Board in all the three Regulations is that a Stock Exchange mechanism will be provided for facilitating the tendering of shares by the shareholders and settlement of the same by the Stock Exchanges having Nationwide Trading Terminal. This will relieve the shareholders from the levy of heavy Capital Gains Tax as compared to a nominal STT.

Main highlights of the Amendment to SEBI (Delisting of Equity Shares) Regulation, 2009

SEBI in its Board Meeting had already primarily decided upon the various amendments it proposed to promulgate in the Delisting Regulations.

Now, SEBI vide its amendment dated March 24, 2015 has inserted various new clauses as well as deleted certain Regulations and amended certain provisions.

An analysis of the amendments in the Delisting Regulations & their impact have been provided in this downloadable article. Click here

Alternative Investment Funds (AIFs) Vis-à-vis BUDGET 2015-16

noreply@blogger.com (Anonymous) — Thu, 19 Mar 2015 10:47:00 +0530

SEBI came out with Alternate Investment Fund Regulations in May 2012, though since then, no specific exemptions ever found placed under the Taxation provisions to promote these funds. By and large since the applicability of these Regulations close to 120 AIF were registered with SEBI within a span of short 2 years wherein majority of these funds had been in the nature of Trust to avail the benefit of Tax pass through following the advance ruling of AIG (in Re: Advance Ruling P. No. 10 of 1996).

Ms. Deepika Vijay Sawhney

Partner

+919818316936

deepika@indiacp.com

Lately The Central Board of Direct Taxes (“CBDT”) issued a Circular No. 1 dated July 28, 2014 (“Circular”) to provide ‘clarity’ on the taxation of Alternative Investment Funds wherein it was provided that if ‘the names of the investors’ or their ‘beneficial interests’ are not specified in the trust deed on the ‘date of its creation’, the trust will be liable to be taxed at the ‘Maximum Marginal Rate’. This said circular created lots of hue and cry in the entire AIF industry as well as proved dampening to the domestic as well as foreign investors.

Having due regard to the large number of representation received from various Industry and Investor Association(s), the present budget 2015-16 has come up with special tax regime for Investment Fund (Alternative Investment Fund (AIF) Category I and II registered under SEBI (AIF) Regulations, 2012 to improve the investment climate in the Country and also to promote the domestic manufacturing.

Find below the article on AIFs vis-a-vis Union Budget 2015-16 with all proposed tax provisions and our comments. You can also download this for future reference-

Alternative Investment Funds (AIFs) vis-à-vis BUDGET 2015-16 from Corporate Professionals

REITS vis-a-vis Budget 2015-16

noreply@blogger.com (Anonymous) — Thu, 12 Mar 2015 12:39:00 +0530

REITs /InvITs – Brief Background:

In the Finance Bill 2014-15, the Hon’ble Finance Minister first introduces the concept of Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs). Subsequently in September 2014, the Securities Exchange Board of India, came out with detailed Regulations as to the functionality and governance of these Business Trusts i.e. SEBI (Real Estate Investment Trust) Regulations 2014 and SEBI (Infrastructure Investment Trust) Regulations 2014.

Ms. Deepika Vijay Sawhney

Partner

+919818316936

deepika@indiacp.com

Since the promulgation of the aforesaid regulations, despite of high market interest, the Country has not witnessed any registration or initiation of registration of these business trust with SEBI, the same being due to less clarity on the taxation as well as disadvantageous tax position of the Sponsor/promoter of these Trusts.

Owing to the industry representation, the Hon’ble Finance Minister in its Finance Bill 2015-16 has proposed few much needed amendments in the taxation regime in respect of these Business Trusts which are discussed herein below in light of the relevant provisions of SEBI applicable Regulations:

TAX AMENDMENTS (to be effective from 1st April 2016)

A. Taxation on transfer of Sponsor Holding in SPV
B. Pass Through to the Rental Income
C. Other TAX Treatment in case of Business Trust

To read or download full article, please see here:

REITs vis a vis Budget 2015-16 from Corporate Professionals

CP COMMENTS:

By amending the tax law with respect to Sponsor transfer of holding, the sponsors have been brought in par with other investors and also in par with the exit provisions as applicable in case of IPOs. The removal of disparity and extending benefit of beneficial tax regime (STT) to the Sponsors is a welcome change and will surely encourage corporates towards these Business Trusts. Further, the rental income directly received by the REIT which was earlier taxable at REIT level has been given pass through benefit, which will surely benefit the Real estate players, to bring in action, this potentially powerful tool which was lying dormant since its inception.

Non-Equity Incentive Plans

noreply@blogger.com (Anonymous) — Tue, 10 Mar 2015 11:16:00 +0530

It is rightly said that inculcating a feeling among the Employees that management is not just concerned about their value addition to the organization but is very well concerned in accretion of their personal wealth, would not just create a sense of belongingness among Employees but would enhance their overall productivity. Besides cash rewards, it is important for any organization to make its employees believe that their personal growth is linked to the growth of the organization. Employee Stock Option Plans /Equity Incentive Plans (commonly referred to as ESOPs) are one of the most important tools to attract, encourage and retain Employees.

Ms. Mohini Varshney

Assistant Vice President

+919971673332

mohini@indiacp.com

Long-term growth potential of a business is directly proportional as to how well it is able to maintain a balance between satisfaction of its employees and preservation of its assets and financial resources. Generally, the Companies opt for one or more modes with some permutation & combination to align it with the needs & objectives of its business with the sole intent to incentivize the valuable asset of their business i.e. Employees for their association and performance.

Click to read more »

Union Budget 2015: Investment Environment and Tax Aspects

noreply@blogger.com (Anonymous) — Tue, 3 Mar 2015 10:36:00 +0530

The 2015 budget had long list of expectations. On one hand; the Government has addressed major issues surrounding the foreign investors which would certainly boost capital market inflows and revive the private equity industry (by deferring GAAR by 2 years and clarifying Permanent Establishment & Indirect Transfer of Assets). On other hand; it has just rationalized the subsidies. Probably as we see growth coming in and more job creation; subsidy burden can be better dealt with by the Government. Though there are no direct benefits for the middle class. However incentives have been introduced to encourage savings. These savings are expected to fuel the infrastructure and other investment plans laid out by the Government. Certainly Foreign investors have a reason to cheer for this Pro Business; Pro Growth Government budget.

View our paper on Investment Environment and Tax Aspects of Union Budget 2015 here:

Union budget 2015 Investment Environment and Tax Aspects from Corporate Professionals

Functioning of Employee Welfare Trusts- Now Regularized

noreply@blogger.com (Anonymous) — Sat, 28 Feb 2015 10:54:00 +0530

Growth, development, and broadening horizons of business in India as well as overseas have awakened the entrepreneurs towards employee recognition and retention. Companies are extensively focusing on providing various kinds of benefits to their employees over and above the fixed salary.

Thought behind setting up Employee Welfare Trusts

Ms. Mohini Varshney

Assistant Vice President

+919971673332

mohini@indiacp.com

Organizations set up Employee Welfare Trusts in order to provide various kinds of benefits and incentives to their human assets. These benefits usually include medical benefits, educational benefits, provision for sports facilities, provisions for facilities for leisure, vacation & travel and it includes shares based benefits also. Listed entities create Employee Welfare Trusts, which acquire shares from secondary market and then these shares are either allotted to the employees in the form of stock options or resold in the market and the funds generated out of it is utilized for providing medical, educational & other benefits as the case may be. Earlier these Employee Welfare Trust were neither regulated by SEBI Guidelines nor by the provisions of Company Law. Since there was no regulatory regime to govern the functioning of Employee Welfare Trusts, therefore it resulted into continuous market transactions by such Trusts, thereby resulting into manipulative trade practices.

Click to read more »

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BACKGROUND

THE GREY AREAS

Dissemination Board - not a easy road for promoters and directors

Revamp Your Codes of Conduct & Get Aligned with the new Prohibition of Insider Trading Regulations, 2015

Download the full article here - Countdown begins

Analysis of the Delisting, SAST & Buy Back Regulations

Main highlights of the Amendment to SEBI (Delisting of Equity Shares) Regulation, 2009

Alternative Investment Funds (AIFs) Vis-à-vis BUDGET 2015-16

REITS vis-a-vis Budget 2015-16

REITs /InvITs – Brief Background:

TAX AMENDMENTS (to be effective from 1st April 2016)

A. Taxation on transfer of Sponsor Holding in SPV B. Pass Through to the Rental Income C. Other TAX Treatment in case of Business Trust

CP COMMENTS:

Non-Equity Incentive Plans

Union Budget 2015: Investment Environment and Tax Aspects

Functioning of Employee Welfare Trusts- Now Regularized

Thought behind setting up Employee Welfare Trusts

A. Taxation on transfer of Sponsor Holding in SPV
B. Pass Through to the Rental Income
C. Other TAX Treatment in case of Business Trust