Business Resposibility Reports

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

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.

Legal Terms

Racketeering

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

MCA Updates

- Companies (Indian Accounting Standards) Amendment Rules, 2020.

SEBI Updates

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

IT Updates

GST Updates

Investment Adviser

Updation of Knowledge

CS Saranya Deivasigamani,

CEO

Investment Adviser

SEBI, on it’s notification dated 3rd of July, 2020 amended
the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 with various amendments. In this article, we will be seeing specifically about the qualification and certification requirement newly inserted for the investment advisers.

Investment Adviser

An investment adviser is a person, who for consideration, is engaged in the business of providing investment advice to clients or other persons or group of persons.

Eligibility Criteria

To become an investment adviser, one should obtain a certificate of registration from the Board under SEBI (Investment Advisers) (Amendment) Regulations, 2013. manner specified in Second Schedule.

However, SEBI allows exemptions for the following persons to obtain the certificate such as:

Any person who do not specify any particular securities or investment product;
Any insurance agent registered with IRDA
Any pension advisor registered with Pension Fund Regulatory and Development Authority for such activity; 4
Any distributor of mutual funds, who is a member of a self regulatory organisation recognised by the Board
Any advocate, solicitor or law firm, who provides investment advice to their clients, incidental to their legal practices
Any member of ICAI, ICSI, ICWAI, Actuarial Society of India or any other professional body as may be specified by the Board
Any stock broker or sub-broker, portfolio manager registered, merchant banker
Any fund manager
Any person who provides investment advice exclusively to clients based out of India:
Any representatiAmeve and partner of an investment adviser which is registered under these regulations:
Any other person as may be specified by the Board.

Qualification and certification requirement

The entire regulation 7 has been substituted with the following:

Minimum qualification, at all times-

“(a) A professional qualification or post-graduate degree or post graduate diploma (minimum two years in duration) in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university or an institution recognized by the Central Government or any State Government or a recognised foreign university or institution or association or a CFA Charter from the CFA Institute.

(b) An experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.

(i) a professional qualification as provided in clause (a) of sub-regulation (1) of regulation 7

(ii) an experience of at least two years in activities relating to advice in financial products or securities or fund or asset or portfolio management:

Provided that investment advisers registered under these regulations as on the date of commencement of these regulations shall ensure that the individual investment adviser or principal officer of a non-individual investment adviser registered under these regulations and persons associated with investment advice comply with such qualification and experience requirements within three years

Provided further that the requirements at clauses (a) and (b) shall not apply to such existing individual investment advisers as may be specified by the Board.

(2) An individual investment adviser or principal officer of a non-individual investment adviser, registered under these regulations and persons associated with investment advice shall have, at all times a certification on financial planning or fund or asset or portfolio management or investment advisory services-

(a) from NISM; or

(b) from any other organization or institution including Financial Planning Standards Board of India or any recognized stock exchange in India provided such certification is accredited by NISM.

Provided that fresh certification must be obtained before expiry of the validity of the existing certification to ensure continuity in compliance with certification requirements.

Provided further that fresh certification before expiry of the validity of the existing certification shall not be obtained through a CPE program.”

CPE here means continuing professional education in terms of clause (f) of sub regulation (1) of regulation 2 of the SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007.

The investment advisers have be cautious about the expiry of certificate and arrange for the new certificate well in advance than the expiry of the existing certificate. Although Continuing Professional Education (CPE) is require to a professional to enhance their skills, it cannot be considered as the certification requirement for retaining the registration of Investment Adviser.

Legal Terms

Sine die

adv. (with reference to business or proceedings that have been adjourned) with no appointed date for resumption.

MCA Updates

SEBI Updates

RBI Updates

IT Updates

GST Updates

DTVSV Scheme 2020

More Relaxations

IBBI has suspended initiation of corporate insolvency process temporarily for 6 months, MCA has extended the time limit for conducting AGMs for FYE 31st December, 2020 and EGMs through VC or OAVM upto 30th September, 2020. As like various departments are providing various relaxations to support us to handle this COVID-19 situations.

In this edition, we will be seeing one such relaxation provided by the Income Tax Department. Vivad Se Vishwas Scheme 2020 a bridge to dispute-trust divide for minimizing Tax-related Litigation. 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

DTVSV Scheme 2020

To provide for resolution of disputed tax and for matters connected therewith or incidental thereto, The Direct Tax Vivad Se Vishwas Scheme (DTVSV) Act 2020 has been passed by Parliament. This act intends to reduce litigation and for settling matters that have been pending for several years.

The Bill was introduced in the Parliament on 5 February 2020 and the Parliament received the assent of the President and the scheme got enacted into law on 17 March 2020 and the relevant rules were prescribed on 18 March 2020.

Objective of the Scheme

Reduce income tax pending litigation.
Generate timely revenues for the Government.
Help taxpayers end their tax disputes with the department by paying disputed tax and get waiver from payment of interest and penalty. Also get immunity from prosecution.

Features

Key dates – date of opening / closing, payment dates.
Eligibility – class of taxpayers eligible to settle disputes.
Payment terms – what is the amount to be paid for settlement of dispute.
Exclusion – class of taxpayers excluded from the Bill.
Consequences – Benefits, immunity etc under the Bill.
Delegated Legislation – power to make rules, remove difficulty etc.
Start date – Date on which the Bill gets the assent of Hon’ble President after being passed by the Parliament.
Last Date – Date to be notified by the Government (Likely to be 30th June 2020)
Payment – Required by 31st March 2020. After this date and before closure of scheme the payment shall be at higher rate.

Eligibility

Appeals, writs, SLPs, arbitration (filed by Department or taxpayer) filed on or before 31 Jan 2020.
Orders for which time for filing appeal has not expired on 31 Jan 2020.
Cases pending before Dispute Resolution Panel (DRP).
Cases where DRP issued direction on or before 31 Jan 2020 but order has not yet been passed.
Cases where assessee filed revision application under section 264 on or before 31 Jan 2020.
Dispute where payment has already been made shall also be eligible.
The pending appeal, writ, SLP, arbitration could be against-
- Disputed tax (including interest or penalty on such disputed tax) in relation to an assessment or reassessment order
- Disputed interest, disputed penalty or disputed fees where there is no disputed tax.
Disputed tax can also include the tax determined on default in respect of tax deducted at source (TDS) or tax collected at source (TCS).
Disputed tax shall include tax on enhancement notice.

Payment Terms

If an issue in taxpayer’s pending appeal already decided in favor of taxpayer by higher appellate forum or if Department has filed appeal, amount payable is 50% of aforesaid amounts.

Exclusion

The cases that cannot avail the scheme are:

Search cases if disputed tax in a year is more than Rs.5 crore.
Cases where prosecution has been initiated by the department under Income-tax Act or under Indian Penal Code.
Cases involving undisclosed foreign income and assets.
Cases completed on the basis of information received from foreign jurisdiction.
Cases where person is notified under Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 or detained under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
Cases covered under Narcotic Drugs and Psychotropic Substances Act, Unlawful Activities (Prevention) Act, Prevention of Corruption Act, Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, Prevention of Money Laundering Act, Prohibition of Benami Property Transactions Act.

Consequences

The scheme is consequent to such declaration and on fulfillment of conditions, all appeals, writs, SLPs, arbitration to be withdrawn (both by taxpayer and by department). Immunity will be granted from levy of interest, penalty and institution of any proceeding for prosecution for any offence under the Income-tax Act in respect of matters covered in the declaration. If excess payment made before filing declaration, refund shall be issued without interest.

Delegated Legislation

CBDT is proposed to be given power to issue such orders, instructions and directions to the income-tax authorities for the proper administration of the Act. Central Government is proposed to be given power to make rules for carrying out provision of this scheme. Central Government is proposed to be given power to remove difficulties by issuing appropriate orders not inconsistent with the scheme.

For all disputes in Income Tax Department, we shall avail relief through DTVSV Scheme 2020.

Legal Terms

Trial de novo

n. a form of appeal in which the appeals court holds a trial as if no prior trial had been held. A trial de novo is common on appeals from small claims court judgments.

MCA Updates

SEBI Updates

RBI Updates

IT Updates

GST Updates

ICDR Compliances and Relaxations

Relaxations are there but not everywhere

Various departments and institutions have given various relaxations and exemptions due to Covid-19. However, there are certain important forms that do not have extension or clarification on extension. Like there are no extension announced or relaxation mentioned for Form 11 LLP which is due on 30th May 2020. Do not ignore those small forms and file them in time.

In this edition, we will be seeing about a topic suggested by CS Renu Wadekar, the temporary relaxations given by SEBI in Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (SEBI (ICDR) Regulations). Our usual Legal Terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST follows the article.

CS Saranya Deivasigamani,

CEO

ICDR Compliances and Relaxations

A listed company shall issue capital be it through an IPO, FPO, rights issue or any other means, it shall do only in terms of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (SEBI (ICDR) Regulations). In this article we will see the regular procedures and compliance as per ICDR and the temporary relaxation given by SEBI in the wake of developments relating to the Covid-19 pandemic.

These temporary relaxations are applicable for Right Issues that open on or before March 31, 2021 and are not applicable for issuance of warrants. This relaxation came into force with effect from April 21, 2020.

Applicability of the regulation

Let us see for which all activities do these regulations apply for.

an initial public offer by an unlisted issuer;
a rights issue by a listed issuer; where the aggregate value of the issue is ten crore rupees or more;
a further public offer by a listed issuer;
a preferential issue by a listed issuer;
a qualified institutions placement by a listed issuer;
an initial public offer of Indian depository receipts;
a rights issue of Indian depository receipts;
an initial public offer by a small and medium enterprise;
a listing on the innovators growth platform through an issue or without an issue; and
a bonus issue by a listed issuer.

Provided that in case of rights issue of size less than ten crore rupees, the issuer shall prepare the letter of offer in accordance with requirements as specified in these regulations and file the same with the Board for information and dissemination on the Board’s website.

Provided further that these regulations shall not apply to issue of securities under clause (b), (d) and (e) of sub-regulation (1) of regulation 9 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Rights Issue

Relaxations with respect to the eligibility conditions related to Fast Track Rights Issues:

Regulation

Regular Compliance

Temporary Relaxation

Unless otherwise specified, nothing contained in sub-regulations (1), (2), (4) and (5) of regulation 71 shall apply if the issuer satisfies the following conditions for making a rights issue through the fast track route-

a) the equity shares of the issuer have been listed on any stock exchange for a period of at least three years immediately preceding the reference date;

b) the entire shareholding of the promoter group of the issuer is held in dematerialised form on the reference date;

c) the average market capitalisation of public shareholding of the issuer is at least two hundred and fifty crore rupees;

d) the annualised trading turnover of the equity shares of the issuer during six calendar months immediately preceding the month of the reference date has been at least two per cent. of the weighted average number of equity shares listed during such six months‘ period: Provided that for issuers, whose public shareholding is less than fifteen per cent. of its issued equity capital, the annualised trading turnover of its equity shares has been at least two percent. of the weighted average number of equity shares available as free float during such six months‘ period;

e) the annualized delivery-based trading turnover of the equity shares during six calendar months immediately preceding the month of the reference date has been at least ten per cent. of the annualized trading turnover of equity shares during such six months‘ period;

f) the issuer has been in compliance with the equity listing agreement or the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as applicable, for a period of at least three years immediately preceding the reference date:

g) the issuer has redressed at least ninety five per cent. of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date;

h) that no show-cause notices have been issued or prosecution proceedings have been initiated by the Board and pending against the issuer or its promoters or whole-time directors as on the reference date;

i) the issuer or promoter or promoter group or director of the issuer has not settled any alleged violation of securities laws through the consent or settlement mechanism with the Board during three years immediately preceding the reference date;

j) the equity shares of the issuer have not been suspended from trading as a disciplinary measure during last three years immediately preceding the reference date;

k) there shall be no conflict of interest between the lead manager(s) and the issuer or its group companies in accordance with the applicable regulations.

l) The promoters and promoter group shall mandatorily subscribe to their rights entitlement and shall not renounce their rights, except to the extent of renunciation within the promoter group or for the purpose of complying with minimum public shareholding norms prescribed under the Securities Contracts (Regulation) Rules, 1957;

m) there are no audit qualifications on the audited accounts of the issuer in respect of those financial years for which such accounts are disclosed in the letter of offer

Unless otherwise specified, nothing contained in sub-regulations (1), (2), (4) and (5) of the Regulation 71 shall apply if the issuer satisfies the conditions mentioned under Regulation99of ICDR Regulations for making a rights issue through the fast track route. Certain temporary relaxations with respect to Regulation 99 of ICDR Regulations are extended as follows:

a) the equity shares of the issuer have been listed on any stock exchange for a period of at least eighteen months immediately preceding the reference date;

b) the entire shareholding of the promoter group of the issuer is held in dematerialised form on the reference date;

c) the average market capitalisation of public shareholding of the issuer is at least one hundred crore rupees;

d) the annualised trading turnover of the equity shares of the issuer during six calendar months immediately preceding the month of the reference date has been at least two per cent. of the weighted average number of equity shares listed during such six months‘ period: Provided thatfor issuers, whose public shareholding is less than fifteen per cent. of its issued equity capital, the annualised trading turnover of its equity shares has been at least two percent. of the weighted average number of equity shares available as free float during such six months‘ period;

f) the issuer has been in compliance with the equity listing agreement or the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as applicable, for a period of at least eighteen months immediately preceding the reference date:

g) the issuer has redressed at least ninety five per cent. of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date;

h) no show-cause notices, excluding under adjudication proceedings, have been issued by the Board and pending against the issuer or its promoters or whole-time directors as on the reference date;

In cases where against the issuer or its promoters/ directors/ group companies,

i) A show cause notice(s) has been issued by the Board in an adjudication proceeding or

ii) prosecution proceedings have been initiated by the Board; necessary disclosures in respect of such action (s) along-with its potential adverse impact on the issuer shall be made in the letter of offer.

i) the issuer or promoter or promoter group or director of the issuer has fulfilled the settlement terms or adhered to directions of the settlement order(s) in cases where it has settled any alleged violation of securities laws through the consent or settlement mechanism with the Board

j) the equity shares of the issuer have not been suspended from trading as a disciplinary measure during last eighteen months immediately preceding the reference date;

k) there shall be no conflict of interest between the lead manager(s) and the issuer or its group companies in accordance with the applicable regulations.

m) For audit qualifications, if any, in respect of any of the financial years for which accounts are disclosed in the letter of offer, the issuer shall provide the restated financial statements adjusting for the impact of the audit qualifications. Further, that for the qualifications wherein impact on the financials cannot be ascertained the same shall be disclosed appropriately in the letter of offer.

Minimum Subscription

Relaxation with respect to Minimum Subscription:

(1) The minimum subscription to be received in the issue shall be at least ninety per cent. of the offer through the offer document.

(2) In the event of non-receipt of minimum subscription referred to in sub-regulation (1), all application monies received shall be refunded to the applicants forthwith, but not later than fifteen days from the closure of the issue.

(1) The minimum subscription to be received in the issue shall be at least seventy-five per cent of the offer through the offer document. Provided that if the issue is subscribed between 75% to 90%, issue will be considered successful subject to the condition that out of the funds raisedatleast75% of the issue size shall be utilized for the objects of the issue other than general corporate purpose.

Minimum Threshold for Letter of Offer

Relaxation with respect to the minimum threshold required for not filing draft letter of offer with SEBI:

(b) a rights issue by a listed issuer; where the aggregate value of the issue is ten crore rupees or more;

(b) a rights issue by a listed issuer; where the aggregate value of the issue is twenty-five crores rupees or more;

The eligibility and general conditions as specified in Regulation 61 & 62 respectively shall continue to apply.

Legal Terms

Moratorium

n. 1) any suspension of activity, particularly voluntary suspension of collections of debts by a private enterprise or by government or pursuant to court order. 2) in bankruptcy, a halt to the right to collect a debt. In times of economic crisis or a natural disaster like a flood or earthquake, there may be a moratorium on foreclosures or mortgage payments until the public can get back to normal activities and earnings.

MCA Updates

SEBI Updates

RBI Updates

IT Updates

GST Updates

File FORM GST PMT 09, to transfer/shift the money available in Electronic Cash ledger, between various major and minor heads of GST.