Beware of OPC and AGM due dates

Despite of the 3 month extension given by MCA to hold AGM, the due date has to be calculated duly as per the prevailing Acts. Caution to be taken by OPCs, LLPs and Companies that have conducted previous AGM before 29th June 2019.

In this edition, we will be seeing about the Portfolio Managers in International Financial Services Centres (IFSC’) it’s applicability, registration and a brief about the same. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.

 CS Saranya Deivasigamani,

CEO

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Portfolio Managers in IFSC

Based on the representations received from various stakeholders, SEBI has put in place ‘Operating Guidelines for Portfolio Managers in International Financial Services Centres (IFSC’).

Applicability

1. SEBI (Portfolio Managers) Regulations, 2020 (‘PMS Regulations’) All provisions of the PMS Regulations, the guidelines and circulars issued thereunder, shall apply mutatis mutandis to Portfolio Managers setting up/ operating in IFSC subject to these operating guidelines. Further, subsequent amendments, if any, in PMS Regulations, guidelines and circulars issued by SEBI for portfolio managers shall be applicable to Portfolio Managers in IFSC.
2. SEBI (International Financial Services Centres) Guidelines, 2015 (‘IFSC Guidelines’) The provisions of IFSC Guidelines and relevant circulars shall also apply to Portfolio Managers (PM) setting up/ operating in IFSC subject to these operating guidelines.

Registration of Portfolio Managers

1. An application for grant of certificate of registration shall be made in accordance with the provisions of Chapter II of the PMS Regulations, accompanied by a non-refundable application fee.
2. An entity, being a company or a limited liability partnership (LLP), which has the minimum prescribed net worth as specified herein can act as a PM in IFSC, in the following forms-
3. Any SEBI-registered intermediary (except trading member or clearing member) or its international associates in collaboration with such SEBI-registered intermediary may provide portfolio management services in IFSC, by setting up a branch in IFSC, subject to the prior approval of the Board. Further, it shall ensure that:

• Exclusive manpower shall be allocated for providing portfolio management services from the branch in IFSC.
• The branch shall comply with all the provisions (except obtaining Registration) specified in the operating guidelines.
• The parent entity shall be required to ring fence its domestic operations, legally, financially, operationally and technologically, from its operations at IFSC.

1. Other entities (that is in the form of a corporate or LLP or any other similar structure recognised under the laws of its parent jurisdiction), based in India or in a foreign jurisdiction, desirous of operating in IFSC as a PM, may form a company or LLP to provide portfolio management services. However, the formation of a separate company or LLP shall not be applicable in case the applicant is already a company or LLP in IFSC.
2. The obligation of ensuring that the branch complies with PMS Regulations, IFSC Guidelines, and Circulars issued thereunder, shall be onthe parent entity.
3. The Board may grant certificate/ approval if it is satisfied that the applicant fulfils the requirements as specified in the PMS Regulations read with these operating guidelines.
4. Where the PM in IFSC proposes to change its status or constitution, it shall obtain prior approval of the Board for continuing to act as such after the change.

Operational Compliances

1. Certification Requirement—Principal officer and employee having decision making authority related to fund management and who are resident outside India may have certification from any other organization or institution or association or stock exchange which is recognized/ accredited by a Financial Market regulator in that foreign jurisdiction.

However, certification from NISM shall be mandatory in case the aforesaid persons deal in Indian securities markets.

1. Net Worth Requirement—
2. Applicants referred to in para 2 shall have a net worth of not less than USD 750,000.
3. In case the PM is set up as a branch, the net worth requirement is to be met by the parent entity.

iii. In case the PM is set up as a subsidiary, the net worth requirement is to be met by the subsidiary itself. However, if the subsidiary does not meet the criteria, the net worth of the parent entity will be considered.

1. The PM/ parent entity shall fulfil the aforesaid net worth requirement, separately and independently for each activity undertaken by it under the relevant regulations.
2. Eligibility of the client to avail portfolio management services PM operating in IFSC shall provide portfolio management services only to those persons referred in Clause 9(3) of the IFSC Guidelines. Further, PMs shall ensure that, when dealing with persons resident outside India and non-resident Indians seeking portfolio management services from them, the PM complies with the applicable guidelines issued by the relevant overseas regulator/ authority.
3. Minimum investment amount—PM operating in IFSC shall not accept from the client, funds or securities worth less than USD 70,000.
4. Segregation of funds—PM operating in IFSC shall keep the funds of all clients in a separate account to be maintained by them in the IFSC Banking Unit (IBU) as permitted by RBI.

Conditions of RBI

The applicability of these operating guidelines is subject to such conditions that may be prescribed by the Board, Reserve Bank of India and other appropriate authority from time to time.

Amount to be Paid

Application Fees	USD 1,500
Registration fee for grant of certificate	USD 15,000
Registration fee every three years  from date of grant of certificate	USD 7,500

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Legal Terms

Mala Fides

n. bad faith; intent to deceive. mala fide purchaser is one who buys property from another with the knowledge that it has been stolen.

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MCA Updates

• Relaxation of CRA-4.
• Companies (Acceptance of Deposits) Rules, 2020.
• Amendment of the Companies (CSR Policy) Rules, 2014 of the Companies Act, 2013.
• Amendment of item no. (ix) in the Schedule VII of the Companies Act, 2013.

SEBI Updates

• Corrigendum to Master Circular for Depositories dated October 25, 2019 on preservation of records.
• SEBI (International Financial Services Centres) Guidelines, 2015- Amendments.
• SEBI (International Financial Services Centres) Guidelines, 2015 – Amendments.
• Temporary relaxation in processing of documents pertaining to FPIs due to COVID-19.
• Relaxation from default recognition due to restructuring of debt.
• Review of debt and money market securities transactions disclosure.
• Operating Guidelines for Portfolio Managers in International Financial Services Centre.
• Automation of Continual Disclosures under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015 – System driven disclosures
• Circular on Asset Allocation of Multi Cap Funds.

RBI Updates

• Compliance functions in banks and Role of Chief Compliance Officer (CCO).
• Resolution Framework for COVID-19-related Stress – Financial Parameters.
• Long Form Audit Report (LFAR) – Review.
• Master Directions – Priority Sector Lending (PSL) – Targets and Classification.
• New Definition of Micro, Small and Medium Enterprises – clarifications

IT Updates

• Amendment of Income-tax Rules, 1962 rules for providing conditions and guidelines for Pension Funds u/s 10(23FE) of the Income-tax Act, 1961- reg.

GST Updates

• Update regarding enabling on e-invoice portal (https://einvoice1.gst.gov.in/).
• System computed values of GSTR-1 Statement (Monthly filers), made available in Form GSTR-3B, as PDF statement on GST Portal.
• New functionalities made available for TCS and Composition taxpayers.
• Filing Form GSTR-4 Annual Return by Composition Taxpayers on GST Portal.
• ITC Statement Form GSTR-2B.
• Provision for Aadhar Authentication in GST Registration.
• Downloading document-wise details of Table 8A of Form GSTR-9.

Professionals have the ability to learn conscientiousness, interpersonal skills, adaptability and integrity. In this competitive world, to retain the professionalism, one has to undergo CPDs and CPEs to enhance their job performance and to sustain the market. Various authorities and institutions has understood the importance of CPD and CPE and started adapting them into their regulations to their professional members.

In this edition, we will be seeing about the (Investment Advisers) and the regulations that SEBI made in relation to their qualification and certification requirements. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.

 CS Saranya Deivasigamani,

CEO

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Business Responsibility Reports

Business Responsibility Reports (BRR) is a new reporting system recommended by the Ministry of Corporate Affairs (MCA) to better reflect the intent and scope of reporting on non-financial parameters. The BRR would be integrated with the MCA 21 portal. The information captured through BRR filings should be used to develop a Business Responsibility-Sustainability Index for companies.

The top 1000 listed companies are to undertake this reporting mandatorily. The reporting requirement may be extended by MCA to unlisted companies above specified thresholds of turnover and/or paid-up capital.

Evolution of Business Responsibility Reporting in India:
1. Corporate Voluntary Guidelines in 2009;

2. Endorsement of United Nations Guiding Principles on Business & Human Rights by India in 2011;

3. MCA issued ‘National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business’ which encourages reporting on environment, social and governance issues in 2011;

4. SEBI mandates top 100 listed companies by market capitalization to file Business Responsibility Reports (BRR) based on NVGs in 2012;

5. SEBI extends BRR reporting to top 500 companies by market capitalization in 2015;

6. National Guidelines on Responsible Business Conduct (NGRBC) released in 2019.

The BRR framework is divided into five sections:

Section A: General Disclosures

The objective of this section is to obtain basic information about the company – size, location, products, number of employees, CSR activities, etc. The proposed formats include additional disclosures on proximity of a company’s operations to environmentally sensitive sites such as protected areas, water-stressed zones, etc.

In the proposed format, this section includes:

1. Company Details

2. Products/Services

3. Operations

4. Employees

5. Holding, Subsidiary and Associate Companies (including joint ventures)

6. CSR Details

7. Transparency and Disclosures Compliances

Section B: Management and Process

In this section, the company is required to disclose information on policies and processes relating to the NGRBC Principles concerning leadership, governance, and stakeholder engagement. Wherever relevant, companies have been asked to provide links to their websites where these policies are available.

The purpose of this section is to understand whether the company has the building blocks in place that will enable and ensure responsible business conduct. It reflects the belief that policies and processes are foundational in nature to ensuing action.

In the proposed format, this section includes:

1. Policy and Procedures

2. Governance, leadership and oversight

3. Stakeholder Engagement

Section C: Principle-wise performance

Responses to Section C indicate how a company is performing in respect of each Principle and Core Element of the NGRBCs. This section requires companies to demonstrate their intent and commitment to responsible business conduct through actions and outcomes. The questions in this section have been divided into two categories:

1. Essential: Those that are mandatory for all companies.

2. Leadership: Those that are voluntary and which provide an opportunity for companies to present their impacts and outcomes. It is expected that in the next cycle of review, questions from the Leadership category would be moved to the Essential category and so companies should see this as a pathway to transitioning to a more comprehensive disclosures regime.

In the proposed format, this section includes:

1. PRINCIPLE 1 Businesses should conduct and govern themselves with integrity in a manner that is Ethical, Transparent and Accountable.

2. PRINCIPLE 2 Businesses should provide goods and services in a manner that is sustainable and safe

3. PRINCIPLE 3 Businesses should respect and promote the well-being of all employees, including those in their value chains

4. PRINCIPLE 4 Businesses should respect the interests of and be responsive to all its stakeholders

5. PRINCIPLE 5 Businesses should respect and promote human rights

6. PRINCIPLE 6 Businesses should respect and make efforts to protect and restore the environment

7. PRINCIPLE 7 Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent

8. PRINCIPLE 8 Businesses should promote inclusive growth and equitable development

9. PRINCIPLE 9 Businesses should engage with and provide value to their consumers in a responsible manner

The detailed format of the report can be viewed at MCA Portal.

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Legal Terms

Racketeering

n. the federal crime of conspiring to organize to commit crimes, particularly as a regular business (“organized crime” or “the Mafia”).

 

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MCA Updates

• • Companies (Indian Accounting Standards) Amendment Rules, 2020.​

SEBI Updates

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• Relaxation from compliance with provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (“ILDS Regulation”), SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 (“NCRPS Regulations”) and SEBI Circulars relating to Listing of Commercial Papers .
• Manner and mechanism of providing exit option to dissenting unit holders pursuant to Regulation 22(5C) and Regulation 22(7) of SEBI (Infrastructure Investment Trusts Regulations), 2014
• Manner and mechanism of providing exit option to dissenting unit holders pursuant to Regulation 22(6A) and Regulation 22(8) of SEBI (Real Estate Investment Trusts Regulations), 2014
• Securities and Exchange Board of India (Settlement Proceedings) (Amendment) Regulations, 2020.
• Extension of time for submission of financial results for the quarter/half year/ financial year ended 30th June 2020
• Guidance Note on SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015
• Procedural Guidelines for Proxy Advisors
• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2020
• Securities and Exchange Board of India (Employees’ Service) (Amendment) Regulations, 2020
• Administration and Supervision of Investment Advisers
• SEBI (International Financial Services Centres) Guidelines, 2015 – Amendment

RBI Updates

• • Fair Practices Code for Asset Reconstruction Companies.
  • Implementation of Indian Accounting Standards.
  • Resolution Framework for COVID-19-related Stress.
  • Micro, Small and Medium Enterprises (MSME) sector – Restructuring of Advances.
  • Online Dispute Resolution (ODR) System for Digital Payments.
  • Review of Guidelines for Core Investment Companies.

IT Updates

• Amendment of rule 31​​AA, Form 27EQ​.​
  
• Notification u/s 138 of the Income Tax Act, 1961 in respect of Competition Commission of India.
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• Amendment of Income-tax Rules, 1962 rules for providing conditions and guidelines for Pension Funds u/s 10(23FE) of the Income-tax Act, 1961- reg.Income-tax (15th Amendment) Rules, 2020

GST Updates

• Filing Form GSTR-4 Annual Return by Composition Taxpayers on GST Portal.
• Downloading document-wise details of Table 8A of Form GSTR-9