Introduction
In the past few weeks, there have been small but important changes in rules and regulations of SEBI, FEMA and Companies Act. This article will provide you with a summary of these newly introduced changes.
FEMA
Annual Return on Foreign Liabilities and Assets (FLA Return) – Reporting by Limited Liability Partnerships
- Earlier the FLA Return needed to be filed only by Indian companies which had received FDI and/or made FDI abroad in the previous year(s) including the current year in soft form to the Reserve Bank of India (“RBI”).
- Now, through A.P. (DIR Series) Circular No. 22 dated 21st October, 2015, in order to capture the statistics relating to Foreign Direct Investments (“FDI”), both inward and outward, by Limited Liability Partnerships (“LLP”) in India, it has been decided that henceforth all LLPs that have received FDI and/or made FDI abroad (i.e. overseas investment) in the previous year(s) as well as in the current year, shall submit the FLA return to the RBI by 15th July every year, in the format as prescribed in the A.P (DIR Series) Circular No. 145 dated June 18, 2014.
- Since, LLPs do not have21-Digit CIN (Corporate Identity Number), they are to enter ‘A99999AA9999LLP999999’ against CIN in the FLA Return.
SEBI
- Amendments in SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB” Regulations”)
- The amendments in SBEB Regulations have been introduced through Securities and Exchange Board of India (Share Based Employee Benefits) (Amendment) Regulations, 2015 dated 18th September, 2015 (“SBEB Amendment Regulations”)
- The definition of “Employee” has been amended to mean
- a permanent employee of the company who has been working in India or outside India;
- a director of the company, whether a whole time director or not but excluding an independent director; or
- an employee as defined in clause (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company. (Earlier an employee of an associate company was also included in the definition of “employee”. However the same has now been deleted. Hence all references for issue of shares to employee of an associate have been removed from these Regulations.)
- but does not include-
- an employee who is a promoter or a person belonging to the promoter group; or,
- a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than 10% of the outstanding equity shares of the company.
- Where a company implements its schemes by setting up an irrevocable trust
- In the SBEB Regulations, it had been stated that the shareholding of the trust shall be shown as “non-promoter and non-public shareholding”, meaning thereby that shares held by the trust shall not form part of the public shareholding which needs to be maintained at a minimum of 25%.
- All the companies are required to comply with the SBEB Regulations within 1 year of its publication, subject to a few exceptions.
- One such exception is for the purposes of ensuring compliance with 1(b)(i) above and the requirement of maintaining adequate public shareholding. Those trusts holding shares of the company which are shown either as ‘promoter’ or ‘public’ shareholding, would be permitted to continue to be shown as such for a further period of 5 years. Through the SBEB Amendment Regulations, this period of 5 years has now been reduced to 3 years.
- A new clause has been inserted whereby it is stated that trustees of a trust may continue to vote in respect of shares held by such trust for a period of 3 years, commencing from 28th of October, 2014.
- Condition added for investment by Anchor Investors in book building process under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“ICDR Regulations”)
- Investment by Anchor Investors in Book Building Regulations is regulated by para (10) in Part A of Schedule XI of ICDR Regulations
- An Anchor Investor shall make an application of a value of at least Rs. 10 crore in the public issue. The allocation to Anchor Investors is on a discretionary basis and subject to certain conditions. Such conditions were written only for investment upto Rs 250 crores by Anchor Investors. The following condition has been added for investment by Anchor Investors above Rs. 250 crores by Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Sixth Amendment) Regulations, 2015 dated 10th September, 2015.
- in case of allocation above Rs.250 crore
- For upto Rs. 250 crores
- minimum no. of investors = 5
- maximum no. of investors = 15
- For every additional 250 crores or part thereof, additional no. of investors = 10
- Minimum allotment for each such investor = Rs 5 crores.
- For upto Rs. 250 crores
- Securities and Exchange Board of India (Procedure for Search and Seizure) Regulations, 2014
The Securities and Exchange Board of India (Procedure for Search and Seizure) Regulations, 2014 has been repealed with effect from 17th September, 2015.
Companies Act, 2013
- Companies (Accounts) Second Amendment Rules, 2015
- As per Rule 12(1) the Companies (Accounts) Rules, 2014, every company needs to file its financial statements with the Registrar together with Form AOC-4. Now a new Form AOC-4 CFS has been introduced which a company having consolidated financial statement must file.
- Also, Form AOC-4 has been replaced by a new form.
- Companies (Filing of documents and forms in Extensible Business Reporting Language) Rules, 2015
- Companies (Filing of documents and forms in Extensible Business Reporting Language) Rules, 2015 (“XBRL Rules”) have been notified on 9th September 2015.
- As per these rules, the following class of companies shall file their financial statements and other documents with the Registrar in e-form AOC-4 XBRL for financial years commencing from 1st April, 2014:
- All companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or
- All companies with a paid-up capital >= Rs. 5 crores; or
- All companies with turnover >= Rs 100 crores; or
- All companies which were covered under the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.
- The following companies are exempted from XBRL filing:
- Banking Companies; or
- Insurance Companies; or
- Power Sector Companies; or
- Non-Banking Financial Companies
- A company required to submit cost audit report and other documents to the Central Government shall file such report and other documents using the XBRL taxonomy given for the financial years commencing on or after 1st April, 2014 in e-form CRA-4 specified under the Companies (Cost Records and Audit) Rules, 2014.
- Companies (Acceptance of Deposits) Second Amendment Rules, 2015
- Change in definition of deposit
- Earlier only the amount received from the director of the company (only if such amount was not out of funds borrowed or by accepting loans or deposits from others) was exempted from the definition of “Deposit”.
- Now, through Companies (Acceptance of Deposits) Second Amendment Rules, 2015 dated 15th September, 2015, not only amount received from director but also from any of director’s relatives (only if such amount was not out of funds borrowed or by accepting loans or deposits from others) has been exempted from falling under the definition of “Deposit”.
- Maximum Deposits accepted
- Earlier, the maximum amount of deposits acceptable by a company, in various situations, was defined in terms of percentage of “paid-up capital and free reserves”.
- Now, it shall be defined as a percentage of “paid-up capital, free reserves and securities premium account”.
- Minimum Investment Grade Rating: The minimum investment grade rating required for acceptance of deposits has been changed from “BWR F A” to “BWR FBBB”.
- Change in definition of deposit