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In this edition, we will be seeing about the Co-Lending by Banks and NBFCs to Private Sector Guidelines issued by RBI. 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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CO-LENDING MODEL

To promote those sectors of the economy which may not get timely and adequate credit, RBI introduced Priority Sector Lending for 8 broad categories in 2016.

In order to provide the much-needed competitive edge for credit to the priority sector, RBI decided that all scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) may co-originate loans with Non-Banking Financial Companies – Non-Deposit taking- Systemically Important (NBFC-ND-SIs), for the creation of eligible priority sector assets.

The Banks and NBFCs shall enter into a co-origination arrangement which shall entail joint contribution of credit by both lenders at the facility level.

It should also involve sharing of risks and rewards between the banks and the NBFCs for ensuring appropriate alignment of respective business objectives, as per their mutual agreement.

As a continuous efforts to facilitate the model, on September 21, 2018, RBI issued a detailed guidelines for Co-origination of loans by Banks and NBFCs for lending to priority sector and on November 05, 2020 based on the feedback received from the stakeholders, the RBI decided to provide greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC, etc. and rechristened as “Co-Lending Model” (CLM)

Priority Sectors

8 Sectors under priority sector are:

1. Agriculture
2. Micro, Small and Medium Enterprises
3. Export Credit
4. Education
5. Housing
6. Social Infrastructure
7.  Renewable Energy
8. Others

Banks involved

All scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) may engage with NBFC-ND-SIs (hereinafter referred to as NBFC) to co-originate loans for the creation of priority sector assets. The arrangement should entail joint contribution of credit at the facility level, by both lenders. It should also involve sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, as per the mutually decided agreement between the bank and the NBFC, inter-alia, covering the essential features

CLM

In terms of the CLM, banks are permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement. The co-lending banks will take their share of the individual loans on a back-to-back basis in their books. However, NBFCs shall be required to retain a minimum of 20 per cent share of the individual loans on their books.

The banks and NBFCs shall formulate Board approved policies for entering into the CLM and place the approved policies on their websites. Based on their Board approved policies, a Master Agreement may be entered into between the two partner institutions which shall inter-alia include, terms and conditions of the arrangement, the criteria for selection of partner institutions, the specific product lines and areas of operation, along with provisions related to segregation of responsibilities as well as customer interface and protection issues, as detailed in the Annex.

The Master Agreement may provide for the banks to either mandatorily take their share of the individual loans originated by the NBFCs in their books as per the terms of the agreement, or to retain the discretion to reject certain loans after their due diligence prior to taking in their books, subject to the conditions specified in the Annex.

The banks can claim priority sector status in respect of their share of credit while engaging in the CLM adhering to the specified conditions.

The CLM shall not be applicable to foreign banks (including WOS) with less than 20 branches.

Essential Features

The Master Agreement entered into by the banks and NBFCs for implementing the CLM may provide either for the bank to mandatorily take their share of the individual loans as originated by the NBFC in their books or retain the discretion to reject certain loans subject to its due diligence.

Banks shall not be allowed to enter into co-lending arrangement with an NBFC belonging to the promoter Group.

The NBFC shall be the single point of interface for the customers and shall enter into a loan agreement with the borrower, which shall clearly contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.

All the details of the arrangement shall be disclosed to the customers upfront and their explicit consent shall be taken.

The ultimate borrower may be charged an all-inclusive interest rate as may be agreed upon by both the lenders conforming to the extant guidelines applicable to both.

The extant guidelines relating to customer service and fair practices code and the obligations enjoined upon the banks and NBFCs therein shall be applicable mutatis mutandis in respect of loans given under the arrangement.

The NBFC should be able to generate a single unified statement of the customer, through appropriate information sharing arrangements with the bank.

With regard to grievance redressal, suitable arrangement must be put in place by the co-lenders to resolve any complaint registered by a borrower with the NBFC within 30 days, failing which the borrower would have the option to escalate the same with the concerned Banking Ombudsman/Ombudsman for NBFCs or the Customer Education and Protection Cell (CEPC) in RBI.

The co-lending banks and NBFCs shall maintain each individual borrower’s account for their respective exposures.

The Master Agreement may contain necessary clauses on representations and warranties which the originating NBFC shall be liable for in respect of the share of the loans taken into its books by the bank.

The co-lenders shall establish a framework for monitoring and recovery of the loan, as mutually agreed upon.

The co-lenders shall arrange for creation of security and charge as per mutually agreeable terms.

Each lender shall adhere to the asset classification and provisioning requirement, as per the respective regulatory guidelines applicable to each of them including reporting to Credit Information Companies, under the applicable regulations for its share of the loan account.

The loans under the CLM shall be included in the scope of internal/statutory audit within the banks and NBFCs.

Any assignment of a loan by a co-lender to a third party can be done only with the consent of the other lender.

Both the banks and the NBFCs shall implement a business continuity plan to ensure uninterrupted service to their borrowers till repayment of the loans under the co-lending agreement, in the event of termination of co-lending arrangement between the co-lenders.

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Legal Terms

Subpoena

1. an order of the court for a witness to appear at a particular time and place to testify and/or produce documents in the control of the witness (if a “subpena duces tecum”).

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MCA Updates

• Extension of LLP Settlement Scheme, 2020.
• Residency Status.
  

  SEBI Updates

• SEBI (AIF) Regulations, 2020.
• SEBI (FUTP to SM), Regulations, 2020.
• SEBI (Mutual Funds) Regulations, 2020.
• SEBI (Prohibition of Insider Trading) Regulations, 2020.

RBI Updates

• Co-Lending by Banks and NBFCs to Priority Sector.
• Discontinuation of Returns/Reports under FEMA, 1999
• Compounding of Contraventions under FEMA, 1999

IT Updates

• Equalisation Levy.
• Income-tax (23rd Amendment) Rules, 2020.

GST Updates

• Auto-populated Form GSTR 3B (PDF) for the taxpayers, from the month of October 2020 onwards.
• Due dates for filing of Form GSTR-3B for the Tax Pe-riods from October, 2020 till March, 2021.
• Autopopulation of e-invoice details into GSTR-1
• Update on Blocking of E-Way Bill (EWB) generation facility, after 1st December, 2020.
• Updates on e-invoicing.

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In this edition, we will be seeing about the Faceless Appeal Scheme, 2020 passed by CBDT. 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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FACELESS APPEAL SCHEME, 2020

The Government of India in the Ministry of Finance, Department of Revenue, Introduced Faceless Appeal Scheme, 2020 for Income Tax Appeals with effect from 25th September 2020 enabling faceless filing and hearing of appeals in income tax matters.

The appeals filed under this Scheme will be disposed of in respect of territorial area or persons or class of persons or incomes or class of incomes or cases or class of cases, as may be specified by the Board.

Boards

The Board may set up a National Faceless Appellate Centre (NFAC), Regional Faceless Appellate Centres (RFAC) and Appeal Units (AU).

As the name implies, NFAC deals with e-appeal proceedings in a centralized manner, which shall be vested with the jurisdiction to dispose appeal in accordance with the provisions of this Scheme.

RFAC deals with e-appeal proceedings, which shall be vested with the jurisdiction of specified region.

AUs deal with e-appeal proceedings, to perform the function of disposing appeal, which includes admitting additional grounds of appeal, making further inquiry as thinks fit, directing the National e-Assessment Centre (NAC) or the Assessing Officer (AO), as the case may be, for making further inquiry, seeking information or clarification on admitted grounds of appeal, providing opportunity of being heard to the appellant, analysis of the material furnished by the appellant, review of draft order, and such other functions as may be required for the purposes of this Scheme.

The AU shall have one or more Commissioner (Appeals) and other income-tax authority, ministerial staff, executive or consultant to assist the Commissioner (Appeals) as considered necessary by the Board.

Procedure to File an Appeal

NFAC assign the appeal to a specific AU in any one RFAC through an automated allocation system.

Where the appellant has filed the appeal after the expiration of time RFAC shall either admit the appeal in case there are satisfying reasons that the appellant had or reject the appeal and intimate to the NFAC.

Where the appellant has applied for exemption from the operation, the AU may either admit the appeal and exempt the appellant from the operation of provisions of said clause for any good and sufficient reason to be recorded in writing or reject the appeal, under intimation to the NFAC.

NFAC shall intimate the admission or rejection of appeal, as the case may be, to the appellant

Procedure on admission of appeal

The AU may request the NFAC –

(a) To obtain such further information, document or evidence from the appellant or any other person, as it may specify.

(b) To obtain a report of the NAC or the AO, as the case may be, on grounds of appeal or information, document or evidence filed by the appellant.

(c) To direct the NAC or the AO, as the case may be, for making further inquiry and submit a report thereof.

(d) The NFAC shall serve a notice upon the appellant or any other person, as the case may be, or the NAC or the AO, as the case may be, to submit such information, document or evidence or report, as the case may be, as may be specified by the AU or as may be relevant to the appellate proceedings, on a specified date and time.

The appellant or any other person, as the case may be, shall file a response to the notice within the date and time specified or as extended by NFAC on such application for extension.

The NAC or the AO, as the case may be, shall furnish a report in response to the notice within the date and time specified or as extended by NFAC on such application for extension.

Where response is filed by the appellant or any other person, as the case may be, or a report is furnished by the NAC or the AO, as the case may be, the NFAC shall send such response or report to the AU, and where no such response or report is filed, inform the AU.

Any application related to appeal, extension of time, additional ground of appeal, additional evidence, etc., the applicant will submit such application to NFAC. NFAC shall then assign the application to the AU or NAC or the AO as the case may be.

On verifying the details of the application AU or NAC or AO as the case maybe either furnish their comments or accepts or rejects the application and provide the report or intimate the rejection to the NFAC. In return, NFAC intimates the admission or rejection of the application to the Appellant.

Where the aggregate amount of tax, penalty, interest or fee, including surcharge and cess, payable in respect of issues disputed in appeal, is more than a specified amount, send the draft order to an AU, other than the AU which prepared such order, in any one RFAC through an automated allocation system, for conducting review of such order.

In any other case, examine the draft order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to — finalise the appeal as per the draft order; or send the draft order to an AU, other than the unit which prepared such order, in any one RFAC through an automated allocation system, for conducting review of such order;

The AU shall review the draft order, referred to it by the NFAC, whereupon it may decide to – concur with the draft order and intimate the NFAC about such concurrence; or suggest such variation, as it may deem fit, to the draft order and send its suggestions to the NFAC;

The NFAC shall, upon receiving concurrence of the AU, finalise the appeal as per the draft order.

The NFAC shall, upon receiving suggestion for variation from the AU, assign the appeal to an AU, other than the AU which prepared or reviewed the draft order, in any one RFAC through an automated allocation system.

The AU, to whom appeal is assigned shall, after considering the suggestions for variation —

(a) where such suggestions intend to enhance an assessment or a penalty or reduce the amount of refund and prepare a revised draft order as per the procedure. or

(b) in any other case, prepare a revised draft order as per procedure and send the such order to the NFAC along with the details of the penalty proceedings, if any, to be initiated therein.

The NFAC shall after finalising the appeal, pass the appeal order and-

(a) communicate such order to the appellant;

(b) communicate such order to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as per sub-section (7) of section 250 of the Act.

(c) communicate such order to the NAC or the AO, as the case may be, for such action as may be required under the Act.

(d) where initiation of penalty has been recommended in the order, serve a notice on the appellant calling upon him to show cause as to why penalty should not be imposed upon him under the relevant provisions of the Act;

(e) The Principal Chief Commissioner or the Principal Director General, in charge of NFAC, may at any stage of the appellate proceedings, if considered necessary, transfer, by an order, the appeal with the prior approval of the Board to such Commissioner (Appeals) as may be specified in the order.

Penalty proceedings

AU may send recommendation for initiation of any penalty proceedings to the NFAC.

The NFAC shall, upon receipt of recommendation serve a notice on the appellant or any other person, as the case may be, calling upon  to show cause as to why penalty should not be imposed upon under the relevant provisions of the Act.

The appellant or any other person, as the case may be, shall file a response to the show-cause notice within the date and time specified in such notice, or such extended date and time as may be allowed on the basis of an application made in this behalf, to the NFAC.

The NFAC shall assign the recommendation for initiation of penalty proceedings, along with the response filed, if any, by the appellant or any other person, as the case may be, to a specific AU in any one RFAC through an automated allocation system.

The AU shall, after taking into account all the relevant material available on the record, including the response filed, if any, by the appellant or any other person, as the case may be, — prepare a draft order and send a copy of such order to the NFAC. or drop the penalty after recording reasons, under intimation to the NFAC.

Where the AU has dropped the penalty, the NFAC shall send an intimation thereof, or where the AU sends a draft order, the NFAC shall pass the order for imposition of penalty as per such draft, and communicate such order, to, — the appellant or any other person, as the case may be; and the NAC or the AO for such action as may be required under the Act.

Rectification Proceedings

With a view to rectifying any mistake apparent from the record the NFAC may amend any order passed by it, by an order to be passed in writing.

Subject to the other provisions of this Scheme, an application for rectification of mistake may be filed with the NFAC by the, — appellant or any other person, as the case may be; or AU preparing or reviewing or revising the draft order; or the NAC or the AO, as the case may be.

Where any such application is received by the NFAC, it shall assign such application to a specific AU in any one RFAC through an automated allocation system.

Appellate Proceedings

An appeal against an order passed by the NFAC under this Scheme shall lie before the Income Tax Appellate Tribunal having jurisdiction over the jurisdictional AO.

Exchange of communication exclusively by electronic mode

All communications between the NFAC and the appellant, or authorised representative, the RFACs, the NAC, the AO and the AO shall be exchanged exclusively by electronic mode.

Authentication of electronic record

NFAC by affixing its digital signature. The appellant or any other person, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case by affixing digital signature or under electronic verification code.

Delivery of electronic record 

Every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee, by way of- placing an authenticated copy thereof in the appellant’s registered account or sending it to the registered email address of the appellant or the authorised representative or uploading it  on the appellant’s Mobile App and followed by a real time alert.  The time and place of dispatch and receipt of electronic record shall be determined in accordance with the provisions of section 13 of the Information Technology Act, 2000 (21 of 2000).

No personal appearance in the Centres or Units.

As the name implies Faceless Appellate Centres work with no physical appearances. The hearings are conducted through telecommunication application software which supports video conferencing or video telephony.

Power to specify format, mode, procedure and processes. The Principal Chief Commissioner or the Principal Director General, in charge of the NFAC shall, with the prior approval of Board, lay down the standards, procedures and processes for effective functioning of the NFAC,RFACs and the AU set-up under this Scheme, in an automated and mechanised environment.

 

 

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Legal Terms

Novation

n. The replacement of an old contract with a new one, usually substituting a new party for one of the original ones.

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MCA Updates

• Clarification with regard to creation of deposit repayment reserve of 20% u/s. 73 (2) (C).
• Companies (Meeting of Boards and its powers) Third Amendment Rules 2020.
• Companies (Appointment and Qualification of Directors) 4th Amdt Rules 2020.
• Extension of time for EGM through OAVM.
• Extension of time – Scheme for relaxation of time for filing forms related to creation.
• Extension of time- LLP Settlement Scheme, 2020.
• Extension of Companies Fresh Start Scheme, 2020
• Companies (Amendment) Act, 2020

SEBI Updates

• SEBI (Debenture Trustees) (Amendment) Regulations, 2020
• Securities Contracts (Regulation) (SE and CC) (Amendment) Regulations, 2020
• SEBI (LODR) (Third Amendment) Regulations, 2020
• SEBI (ILDS) (Amendment) Regulations, 2020
• SEBI (ICDR) (Fourth Amendment) Regulations, 2020

RBI Updates

• EDPMS Module for ‘Caution/De-caution Listing of Exporters’ – Review.
• Master Circular – Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM).

IT Updates

• ​Income-tax (22nd Amendment) Rules, 2020
• Notification No. 81/2020
• Notification No. 80/2020
• Notification No. 79/2020
• Notification No. 78/2020
• Notification No. 77/2020
• Faceless Appeal Scheme, 2020​

GST Updates

• Due dates for filing of Form GSTR-3B for the Tax Period of September, 2020
• Blocking of E-Way Bill (EWB) generation facility for taxpayers with AATO over Rs 5 Cr., after 15th October, 2020
• e-invoicing – Relaxation and latest changes
• Relief in late fees to Taxpayers filing Form GSTR-4 or 10 and change in navigation of Comparison of liability declared and ITC claimed report
• Using Matching Offline Tool to compare ITC auto drafted in Form GSTR-2B with Purchase Register
• Delinking of Credit Note/Debit Note from invoice, while reporting them in Form GSTR 1/GSTR 6 or filing Refund
• Updates on e-invoicing

 

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