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Company Law, SEBI, Accounting

& Audit and RBI/FEMA October 2015

OCOctober20142014

CNK Knowledge Tracker ……Be a Step Ahead

CNK Knowledge Tracker, October 2015 For Private Circulation only Co Law, SEBI, Accounting & Audit and RBI/FEMA

CNK & Associates LLP of 28

Contents Corporate Law Updates

Companies Act, 2013- Rules and Amendment Rules 3

Circulars/Notifications/Announcements from the

Ministry of Corporate Affairs

6

Circulars from SEBI 8

Circulars from IRDA 12

Accounting and Auditing

Guidance Notes 16

Exposure Drafts 17

Reserve Bank of India/ FEMA

RBI Notifications/ Orders & Circulars 19

Disclaimer and Statutory Notice 27



Corporate Law Updates

Companies Act, 2013 – Rules and Amendment

Rules

Companies (Management and Administration) Amendment Rules, 2015

Changes in the qualifying limit for signatories for Special Notice

In the Companies (Management and Administration) Rules, 2014, in Rule 23 (1), for the

words ‘not more than Rs. 5 lakh’, the words ‘not less than Rs. 5 lakh’ shall be substituted.

Therefore the amended Rule will read as,

‘A special notice required to be given to the company shall be signed, either individually or collectively by such

number of members holding not less than 1% of total voting power or holding shares on which an aggregate

sum of not less than Rs. 5 lakh has been paid up on the date of the notice’.

Note:

Special Notice which is given to the company will have to be signed by the members holding

at least 1% of the total voting power or holding shares on which at least Rs. 5 lakh has been

paid on the date of the notice.

Companies (Accounts) Second Amendment Rules, 2015

Miscellaneous Amendments

In the Companies (Accounts) Rules, 2014, amongst others, following amendment have been

incorporated-

In Rule 2 pertaining to Definitions, in sub-rule (1), after clause (d), clause (da) defining ‘Indian

Accounting Standard’ has been inserted.

After Rule 4, Rule 4A pertaining to Forms and items contained in FSs has been inserted.

In Rule 8 pertaining to Matters to be included in Board’s Report, in sub- rule 3 a proviso has been

inserted exempting the government company engage in the producing the defence

equipment

In Rule 12, sub-rule (1) will now reads as every company shall file the FS with registrar

together with Form AOC-4 and consolidated FS with Form AOC-4CFS.

For details refer: http://www.mca.gov.in/Ministry/pdf/Rules_09072015.pdf

http://www.mca.gov.in/Ministry/pdf/Rules_09072015.pdf



Companies (Filing of Documents and Forms in Extensible Business

Reporting Language) Rules, 2015.

The above Rule supersedes Companies (Filing of Documents and Forms in Extensible

Business Reporting Language (XBRL)) Rules, 2011.

The Rules pertain to –

Filing of Financial Statement (FS) with Registrar

The following class of companies should file their FS and other documents under Section

137 of the Companies Act, 2013 (Act), with the Registrar in e-form AOC-4 XBRL given in

Annexure-l for the financial years (FYs) commencing on or after 1st April 2014 using the

XBRL taxonomy given in Annexure II, namely:-

all companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or

all companies having paid up capital of Rs. 5 crore or above;

all companies having turnover of Rs. 100 crore or above; or

all companies which were up till now covered under the Companies (Filing of

documents and Forms in Extensible Business Reporting Language) Rules, 2011.

Companies in Banking, Insurance, Power Sector and Non-Banking Financial companies

are exempted from XBRL filing

Filing of Cost Audit Report (CAR)

A company required to furnish CAR and other documents to the Central Government (CG)

under Section 148(6) of the Act and Rules made there under should file such report and

other documents using the XBRL taxonomy given in Annexure III for the FYs 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

Relaxation in deposits accepted from relative of director of a private company

In the Companies (Acceptance of Deposits) Rules, 2014, amongst others, following have

been substituted-

In Rule 2, sub-rule (1), clause (c) , pertaining to definitions of ‘deposits’, for sub-clause (viii),

following has been substituted-

‘any amount received from a person who, at the time of the receipt of the amount, was a

director of the company or a relative of the director of the private company:



Provided that the director of the company or a relative of the director of the private company, as the

case may be, from whom money is received, furnishes to the company at the time of giving the

money, a declaration in writing to the effect that the amount is not being given out of funds

acquired by him by borrowing or accepting loans or deposits from others and the company shall

disclose the details of money so accepted in the Board's report;’

In Rule 3 pertaining to terms and conditions of acceptance of deposits by companies, for the words

‘paid -up share capital and free reserves’, wherever they occur, the words ‘paid-up share

capital, free reserves and securities premium account’ should be substituted.

Note:

With the above change, now the company can accept amounts from following persons and

the same will not be considered as deposits:

who was director at the time of receipt of amount and;

relative of such directors in case of private company

This exemption is subject to obtaining a declaration in writing that the amount is not being

given out of funds acquired by him by borrowing or accepting loans or deposits from others.

Companies (Management and Administration) Second Amendment

Rules, 2015

Insertion of PAN in Annual Return

In the Companies (Management and Administration) Rules, 2014 in Form MGT-7 (Annual

Return) in paragraph I under the serial no (i), after ‘Global Location Number (GLN) of the

company ’, Permanent Account Number (PAN) of the company has been inserted.

The Annual Return is required to be filed pursuant to Section 92(1) of the Companies Act,

2013 and Rule 11(1) of the Companies (Management and Administration) Rules, 2014.



Circulars/Notification/Announcements from the

Ministry of Corporate Affairs (MCA)

Circulars

Relaxation of additional fees and extension of last date of filing of forms

MGT-7 (Annual Return) and AOC-4 (FS) under the Companies Act, 2013

General Circular No. 10/2015 dated 13th July 2015

The MCA has stated that the electronic versions of Forms AOC-4, AOC-4 XBRL and

MGT-7 are being developed and shall be made available for electronic filing latest by 30th

September 2015. In addition, a separate form for filing of Consolidated FS with the

nomenclature AOC-4 CFS will be made available latest by October 2015. MGT-7 has been

notified while AOC-4, AOC-4 XBRL and AOC-4 CFS will be notified shortly.

Therefore, it has been decided to relax the additional fee payable on Forms AOC-4, AOC-4

XBRL and Form MGT-7 up to 31st October 2015. Further, a company which is not required

to file its FS in XBRL format and is required to file its CFS would be able to do so in the

separate form for CFS without any additional fees up to 30th November 2015

Clarification with regard to circulation and filing of FS under relevant

provisions of the Companies Act, 20l3

General Circular No. 11/2015 dated 21st July 2015

The MCA has issued the above circular which provides the following relaxations-

The MCA has clarified that a company holding a general meeting after giving a shorter

notice (21 days) as provided under Section 101(Notice of meeting) of the Act may also

circulate FSs (to be laid/considered in the same general meeting) at such shorter notice.

The MCA has clarified that in case of a foreign subsidiary, which is not required to get its

accounts audited as per legal requirements prevalent in the country of its incorporation and

which does not get such accounts audited, the holding/parent Indian may place/file such

unaudited accounts to comply with requirements of Section 136(1) (Right of a member to

copies of audited FS) and 137(1) (copy of FS to be filed with Registrar) as applicable. These,

however, would need to be translated in English, if the original accounts are not in English.

However, the format of accounts of foreign subsidiaries should be in accordance with

requirements under the Act. In case this is not possible, a statement indicating the reasons

for deviation may be placed/ filed along with such accounts.



Notifications

Notification regarding Section 467(1) of the Companies Act, 2013

Section 467(1) states that –

Subject to the provisions of this section, the CG may, by notification, alter any of the regulations, rules,

Tables, forms and other provisions contained in any of the Schedules to this Act.

In exercise of the powers conferred by the above Section, the CG has made further

alterations in Schedule III to the Act, in Part I pertaining to Balance Sheet, namely:-

Under the heading “Equities and Liabilities”, Trade Payable shall be substituted as follows:

Trade Payable

Total outstanding dues of micro enterprises and small enterprises; and

Total outstanding dues of creditors other than micro enterprise and small enterprise

Under the heading “Notes: General Instructions for preparation of Balance Sheet” under

Trade Payable disclosure, now the company need to provide detailed disclosure relating to

Micro, Small and Medium enterprises.

For details refer: http://mca.gov.in/Ministry/pdf/Notification_07092015.pdf

Note: Disclosure necessary for all FS adopted on or after 4th September 2015

Notification regarding Section 129(6) of the Companies Act, 2013

As per the above notification, Government companies producing Defence Equipment

including the Space Research subject to fulfillment of conditions stated in the notifications

which includes, amongst others that the company shall not comply with the prescribed

Accounting Standards and should ensure that its FSs represent a true and fair state of affairs

of its finances.

This notification shall be applicable in respect of FS prepared in respect of the FYs ending

on or after the 31st March 2016.

For details refer: http://mca.gov.in/Ministry/pdf/Notification_07092015_1.pdf

http://mca.gov.in/Ministry/pdf/Notification_07092015.pdf

http://mca.gov.in/Ministry/pdf/Notification_07092015_1.pdf



Announcements

Ease of Doing Business/Use of INC - 29 for Formation of Company

For ease of doing business, the MCA has introduced a simplified Incorporation Form-INC-

29. The form offers a number of advantages over traditional incorporation forms in terms of

reduced number of procedures, time taken and the cost involved in getting approval. With

this integrated single form, a company can be registered in India, get allotment of Director

Identification Number, name availability, incorporation of company and commencement of

business. This form can also generate PAN and TAN.

Instead of 8 different forms earlier, now with one single form, setting up of new business

would be easier and convenient. Further, the mandatory requirement of having a common

seal has also been done away with the amendment in the Act vide Companies (Amendment)

Act 2015 applicable from 29th May 2015

Circulars from Securities and Exchange Board of

India (SEBI)

SEBI (Prohibition on Raising Further Capital from Public and Transfer

of Securities of Suspended Companies) Order, 2015.

General Order No. 1 of 2015

In order to ensure effective enforcement of listing conditions and improve compliance

environment among listed companies and taking into account the interests of investors in

securities and the securities market, the SEBI has issued the above order. It states that:

A suspended company, its holding and/or subsidiary, its promoters and directors will not,

issue prospectus, any offer document, or advertisement soliciting money from the public for

the issue of securities, directly or indirectly; till the suspension is revoked by the concerned

recognised stock exchange or securities of such company are delisted in accordance with the

applicable delisting requirement, whichever is earlier;

The suspended company and the depositories will not effect transfer, by way of sale, pledge,

etc., of shares of a suspended company held by promoters/promoter group and directors till

3 months after the date of revocation of suspension by the concerned recognised stock

exchange or till securities of such company are delisted in accordance with the applicable

delisting requirements, whichever is earlier.



For the aforesaid purposes, ‘suspended company’ means a listed company in whose shares

trading is suspended from trading by the recognized stock exchange due to non-compliance

with listing requirements.

For details refer: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1437394655681.pdf

Securities and Exchange Board of India (Issue Of Capital And

Disclosure Requirements) (4th Amendment) Regulations, 2015

The SEBI has issued the above Regulations which among other matters include following:

The words “group companies,” wherever they occur, will include such companies as covered

under the applicable accounting standards and also other companies as considered material

by the board of the issuer

Institutional Investor means:

qualified institutional buyer

family trust or systematically important Non- Banking Financial Companies (NBFCs)

registered with the RBI or intermediaries registered with the Board, all with net-worth of

more than Rs. 500 crores, according to the last audited FSs.

For details refer:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1439551592983.pdf

SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015 (Listing Regulations)

SEBI has notified the above Listing Regulations as on 2nd September 2015.A period of

90 days has been given for implementing the above regulations. However, 2 provisions of

the regulations, which are facilitating in nature, are applicable with immediate effect.

These pertain to:

Passing of ordinary resolution instead of special resolution in case of all material related

party transactions subject to related p arties abstaining from voting on such resolutions, in

line with the provisions of the Companies Act, 2013 and

Re-classification of promoters as public shareholders under various circumstances.

The Listing Regulations consolidate and streamline the provisions of existing listing

agreements for different segments of the capital market viz. Equity (including convertibles)

issued by entities listed on the Main Board of the Stock Exchanges, Small and Medium

Enterprises listed on SME Exchange and Institutional Trading Platform, Non-Convertible

Debt Securities, Non-Convertible Redeemable Preference Shares, Indian Depository

Receipts, Securitized Debt Instruments and Units issued by Mutual Fund Schemes. The

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1437394655681.pdf




Regulations have thus been structured to provide ease of reference by consolidating into one

single document across various types of securities listed on the Stock exchanges.

Among other matters, the regulations require that the quarterly and year-to-date results will

be prepared in accordance with the recognition and measurement principles laid down in AS

25 or Ind AS 34 (Interim Financial Reporting), as applicable, specified in Section 133 (CG to

prescribe Accounting Standards) of the Companies Act, 2013 read with relevant rules framed

thereunder or as specified by the Institute of Chartered Accountants of India, whichever is

applicable. The regulations also require ordinary resolution instead of special resolution to

approve material related party transactions.

Wherever necessary, the provisions in Listing Regulations have been aligned with those of

the Companies Act, 2013. More than 125 old SEBI circulars issued so far regarding Listing

Agreements have also been rescinded.


Continuous Disclosure Requirements for Listed Entities - Regulation 30

of SEBI Listing Regulations, 2015

Regulation 30 of Listing Regulations deals with disclosure of material events by the listed

entity whose equity and convertibles securities are listed. The Listing Regulations divide the

events that need to be disclosed broadly in 2 categories. The events that have to be

necessarily disclosed without applying any test of materiality are indicated in Para A of Part

A of Schedule III of the Listing Regulation. Para B of Part A of Schedule III indicates the

events that should be disclosed by the listed entity, if considered material. SEBI has issued a

new Circular dated 9th September 2015 on the matter.

Annexure-I of this circular indicates the details that need to be provided while disclosing

events given in Para A and Para B of Schedule III. The guidance on when an

event/information can be said to have occurred is placed at Annexure II.

The said details as mentioned above are given to provide guidance to listed entity and the

entity has the responsibility to make disclosures that are appropriate and will be consistent

with the facts of each event.

In case the listed entity does not disclose any such specified details, it will state appropriate

reasoning for the same as part of the disclosure.

In case of securities or the derivatives, which are listed outside India by the listed entity,

parity in disclosures should be followed and whatever is disclosed on overseas stock

exchange(s) by the listed entity will be simultaneously disclosed on the stock exchange(s)

where the entity is listed in India.

This circular will come into force from 1st December 2015 which is 90 days from 2nd




September 2015, i.e., date of notification of SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015


Format for compliance report on Corporate Governance to be submitted

to Stock Exchange (s) by Listed Entities

The Listing Regulations specifies that the listed entity should submit quarterly compliance

report on corporate governance in the format specified by the Board from time to time to

recognised Stock Exchange(s) within 15 days from close of the quarter. 2. Accordingly,

formats for Compliance Report on Corporate Governance as per the Annexures I, II and III

to the above circular are being prescribed.

Annexure I- on quarterly basis

Annexure II- at the end of the financial year (for the whole of the financial year)

Annexure III-within 6 months from the end of the financial year; may be submitted along

with 2nd quarter report.

Additionally, the following reports shall also be placed before the Board of Directors(BoDs)

of the listed entity in terms of requirement under Regulation 17(3) of Listing Regulations:-

Compliance Reports mentioned above; 3.2.

Secretarial Audit Report prepared in accordance with Rule 9 of Companies (Appointment

and Remuneration of Managerial Personnel) Rules, 2014 under Section 204 of the

Companies Act, 2013 in so far as it pertains to Securities Laws.

This circular shall come into force with effect from 1st December 2015 which is 90 days of

notifications of Listing Regulations i.e. 2nd September 2015.

For details refer: http://203.199.247.102/cms/sebi_data/attachdocs/1443091241915.pdf

Disclosures to be made by NBFCs in the Offer Documents for public

issue of Debt Securities under the SEBI (Issue and Listing of Debt

Securities) Regulations, 2008.

The SEBI has modified the additional disclosures to be provided for public issue of debt

securities by NBFCs according to circular dated 17th June 2014. The modification is done to

align the disclosures made in the offer documents to be in line with the stipulations as

required by the Reserve Bank of India.

For details refer: http://203.199.247.102/cms/sebi_data/attachdocs/1442310923565.pdf


http://203.199.247.102/cms/sebi_data/attachdocs/1443091241915.pdf

http://203.199.247.102/cms/sebi_data/attachdocs/1442310923565.pdf



SEBI (Share Based Employee Benefits) (Amendment) Regulations, 2015

In exercise of the powers conferred by SEBI Act, 1992 read with Section 62 of Companies

Act, 2013 and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014, the SEBI

has issued the above regulations to further amend the SEBI (Share Based Employee

Benefits) Regulations, 2014. Among other matters, regulation 2(1) (f) has been substituted as

follows-

“employee" means—

i. a permanent employee of the company who has been working in India or outside India;

or

ii. a director of the company, whether a whole time director or not but excluding an

independent director; or

iii. an employee as defined in clause (i) or (ii) of a subsidiary, in India or outside India, or of a

holding company of the company but does not include-

a) an employ who is a promoter or a person belonging to the promoter group; or

b) 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.


Circulars from Insurance Regulatory and

Development Authority (IRDA)

Insurance Regulatory and Development Authority of India (Places of

Business) Regulations, 2015

The above Regulations will supersede IRDA (Places of Business) Regulations, 20l3. The

guideline, among other matters, prescribes the following:

The insurer should review and revise all controls and returns including the system of

periodical reviews submitted by foreign branch offices to their Head Office or Corporate

Office, as the case may be, to ensure effective supervision and to monitor their continued

viability. The findings of the inspection or audit or scrutiny and compliance reports

submitted by the foreign branch offices should be placed before the Audit Committee of the

Board of the insurer at half-yearly intervals.




The insurer will file, among others, the following financial report of foreign branches to the

IRDA:

Audited Annual Report giving full details of activities undertaken including premium

underwritten, claims incurred, expenses of management, commission, investment

income, profits, technical reserves, outstanding recoveries, etc., in the form specified in

Authority's concerned accounting regulations as modified from time to time within the

time specified therein.

Investment of funds, returns on investment, NPAs, etc., in the formats specified by the

Authority's concerned investment regulations as modified from time to time within the

time lines specified therein.

Report of the Appointed Actuary on the valuation of assets, liabilities and solvency

margin of the foreign branch office.

For details refer:

http://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2594&fl

ag=1

Exposure Draft on Insurance Regulatory and Development Authority of

India (Other Forms of Capital) Regulations, 2015

IRDA published the above exposure draft on 28th August 2015.The draft regulations provide

for 2 types of permissible ‘other forms of capital’-

Preference share capital means preference shares capital as defined in Section 43(b) of the

Companies Act, 2013 and satisfying the criteria laid down in these regulations.

Subordinated debts mean

Debentures issued in accordance with provisions of the Companies Act, 2013 and

satisfying the criteria laid down in these regulations;

Any other instruments as may be permitted by the Authority from time to time

For details refer:

http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo2595

http://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2594&flag=1


http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo2595



Draft Guidelines on remuneration of Chief Executive Officer / Whole-

time Director/Managing Director of Insurers

IRDAI proposes to issue guidelines governing compensation of Whole-time Directors

(WTD)/Chief Executive Officers (CEO)/Managing Directors (MD) of insurers. Among

other matters the guidelines provide for –

Insurers to formulate and adopt a comprehensive compensation policy and conduct annual

review thereof,

Insurer to ensure that the compensation of the MD/ WTDs / CEOs is adjusted for all types

of risk. The risk adjusted methods should preferably have both quantitative and judgmental

elements.

Accounting and renewal of remuneration.

The draft is available for public comments till 21st September 2015

For details refer:


ag=1

Exposure draft on IRDA (Issuance of Capital by Indian Insurance

Companies transacting Life Insurance business)Regulations, 2015

The IRDAI has issued exposure draft on the above Regulations proposing to substitute the

IRDA (Issuance of Capital By Life Insurance Companies) Regulations, 2011 with the issued

draft Regulations. Among other matters the draft regulations,

Allows the insurance company to go for IPO subject to compliance of lock-in period

specified at the time of grant of certificate of registration.

The draft also provides for additional disclosures to be made like –

Agent Productivity;

Value of New Business;

Investment in Equity and Bonds – yield, exposure to each industry and total investment;

Reinsurance Strategy; and

Significant Accounting Policies

For details refer:


ag=1







Submission of returns for F&A Life through the Business Analytics

Project (BAP) Module

The IRDAI had opened the process of online filing and submission of returns by insurers

and other regulated entities, for different function, in a phased manner.

A certificate from an Independent Chartered Accountant to the effect that the data

furnished through the BAP system is as per the books and records maintained by insurers

may be furnished within a period of 30 days of the timeline prescribed for each quarter

For details refer:


ag=1

Exposure Draft on IRDA (Expenses of Management of Insurers

transacting Non-life and Health Insurance business) Regulations, 2015

The IRDAI has issued draft regulations on Expenses of Management for insurers

transacting Non-life and Standalone Health Insurance Business. The draft contains, among

others, the following:

Expense of Management includes remuneration / commission to the agents/ insurance

intermediaries and other expenses debited to Revenue Account. However it does not include

charge to Profit such as Income Tax, Wealth Tax etc.

Board approved policy for allocation and apportion of the Expense of Management within

various segments.

Certification from one of statutory auditors on compliance of the Regulations and the

allocation. Auditor also needs to certify that allocation and apportion of expense is in

accordance with the board approved policy.

Provides for prohibited expenses.

Returns to be signed by Chief Finance Officer and CEO and to be adopted by the Board on

the recommendation of Audit Committee.

For details refer:


ag=1







Accounting and Auditing

Guidance Notes

Guidance Note (GN) on Audit of Internal Financial Controls Over

Financial Reporting

The Companies Act, 2013 has introduced many new reporting requirements for the statutory

auditors of companies. One of these requirements is given under the Section 143(3)(i) of the

Act requiring the statutory auditor to state in his audit report whether the company has

adequate internal financial controls (IFCs) system in place and the operating effectiveness

of such controls.

The section has cast onerous responsibilities on the statutory auditors because reporting on

IFCs is not covered under the Standards on Auditing issued by the ICAI and also because of

the fact that no framework has been prescribed under the Act and the Rules thereunder for

the evaluation of IFCs.

To help the members properly understand and perform the various aspects of this reporting

responsibility, the ICAI has brought out the above GN.

The GN covers aspects such as Scope of reporting on IFCs under the Act, essential

components of internal controls, Technical guidance on audit of IFCs, Implementation

guidance on audit of IFCs.

Management’s Responsibility

The Companies Act, 2013 has significantly expanded the scope of internal controls to be

considered by the management of companies to cover all aspects of the operations of the

company.

Section 134 (5)(e) to the Act requires the Directors’ Responsibility Statement (DRS)to state

that the directors, in the case of a listed company, had laid down IFC to be followed by the

company and that such IFCs are adequate and were operating effectively.

Section 134(5)(e) of the Act explains the meaning of the term, IFC as “the policies and

procedures adopted by the Company for ensuring the orderly and efficient conduct of its

business, including adherence to the Company’s policies, the safeguarding of its assets, the

prevention and detection of frauds and errors, the accuracy and completeness of the

accounting records, and the timely preparation of reliable financial information”.



Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014 requires the Bods’ Report of all

companies to state the details in respect of adequacy of IFCs with reference to the FSs.

Auditor’s Responsibility

Auditor needs to obtain reasonable assurance to state whether an adequate internal financial

controls system was maintained and whether such internal financial control system operated

effectively in the company in all material respects with respect to financial reporting only.

“IFCs over financial reporting” shall mean “A process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of FSs for

external purposes in accordance with generally accepted accounting principles. A company's

internal financial control over financial reporting includes those policies and procedures that

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of the assets of the company;

provide reasonable assurance that transactions are recorded as necessary to permit

preparation of FSs in accordance with generally accepted accounting principles, and that

receipts and expenditures of the company are being made only in accordance with

authorisations of management and directors of the company; and

provide reasonable assurance regarding prevention or timely detection of unauthorised

acquisition, use, or disposition of the company's assets that could have a material effect on

the FSs.”

For details refer: http://resource.cdn.icai.org/39249aasb28733.pdf

Exposure Drafts

Upgradation of Accounting Standards

The Indian Accounting Standards (Ind AS), as notified by the MCA in February, 2015, have

been applicable to the specified class of companies.

For other class of companies, i.e., primarily the unlisted entities having net worth less than

Rs. 250 crores, Accounting Standards, as notified under Companies (Accounting Standards)

Rules, 2006, has been applicable. MCA has requested the Accounting Standards Board

(ASB) of the ICAI to upgrade Accounting Standards, as notified under the above Rules, to

bring them nearer to Ind AS.

http://resource.cdn.icai.org/39249aasb28733.pdf



Accordingly, the Accounting Standards Board, initiated to upgrade these standards which

will be applicable to all companies having net worth less than Rs. 250 crores including non-

corporate entities. In this direction, below mentioned Exposure Drafts (EDs) have been

issued for comments.

ED on AS 2 Inventories

The objective of this Standard is to prescribe the accounting treatment for inventories. A

primary issue in accounting for inventories is the amount of cost to be recognised as an asset

and carried forward until the related revenues are recognised. This Standard deals with the

determination of cost and its subsequent recognition as an expense, including any write-

down to net realisable value. It also provides guidance on the cost formulas that are used to

assign costs to inventories.

For details refer: http://resource.cdn.icai.org/39335asb28811-as2.pdf

ED on AS 10 Events after the Reporting Period

The objective of this Standard is to prescribe:

When an entity should adjust its FSs for events after the reporting period; and

the disclosures that an entity should give about the date when the FSs were approved for

issue and about events after the reporting period.

The Standard also requires that an entity should not prepare its FSs on a going concern basis

if events after the reporting period indicate that the going concern assumption is not

appropriate.


ED on AS 20 Accounting for Government Grants

This Standard shall be applied in accounting for, and in the disclosure of, government grants.

This Standard does not deal with:

the special problems arising in accounting for government grants in FSs reflecting the effects

of changing prices or in supplementary information of a similar nature;

Government assistance other than in the form of government grants;

Government participation in the ownership of the entity.

Government grants covered by AS 41, Agriculture.


http://resource.cdn.icai.org/39335asb28811-as2.pdf





Reserve Bank of India (RBI)/Foreign

Exchange Management Act, 1999

(FEMA)

RBI Notifications/ Orders & Circulars

Deposits placed with NABARD/SIDBI/NHB for meeting shortfall in

Priority Sector Lending by Banks-Reporting in Balance Sheet

It has been decided by RBI that for accounting periods commencing on or after 1st April

2015, deposits placed with NABARD/SIDBI/NHB on account of shortfall in priority

sector targets should be included under Schedule 11- ‘Other Assets’ under the subhead

‘Others’ of the Balance Sheet. Banks may also disclose the details of such deposits, both for

the current year and previous year, as a footnote in Schedule 11 of the Balance Sheet.

Further, while presenting the Balance Sheet for the year ending 31st March 2016, the

previous year amounts may be appropriately regrouped.

It may be noted that the extant instructions on the treatment of such amounts for the

purposes of computation of Capital to Risk Weighted Assets Ratio (CRAR), Adjusted Net

Bank Credit (ANBC), etc. remain unchanged.

For details refer:

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/127DR74FEAD0A2CEE4089A9B8D

C7966572010.PDF

Issue of shares under Employees Stock Options Scheme and/or sweat

equity shares to persons resident outside India

RBI has been decided that an Indian company may issue “employees’ stock option” and/or

“sweat equity shares” to its employees/directors or employees/directors of its holding

company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident

outside India, provided that :

The scheme has been drawn either in terms of regulations issued under the SEBI Act, 1992

or the Companies (Share Capital and Debentures) Rules, 2014 notified by the CG under the

Companies Act 2013, as the case may be.

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/127DR74FEAD0A2CEE4089A9B8DC7966572010.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/127DR74FEAD0A2CEE4089A9B8DC7966572010.PDF



The “employee’s stock option”/ “sweat equity shares” issued to non-resident

employees/directors under the applicable rules/regulations are in compliance with the

sectoral cap applicable to the said company.

Issue of “employee’s stock option”/ “sweat equity shares” in a company where foreign

investment is under the approval route shall require prior approval of the Foreign

Investment Promotion Board (FIPB) of Government of India.

Issue of “employee’s stock option”/ “sweat equity shares” under the applicable

rules/regulations to an employee/director who is a citizen of Bangladesh/Pakistan shall

require prior approval of the FIPB.

For details refer:

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/128A45D448713C867460CB107457D

F32259C9.PDF

Concurrent Audit System in Commercial Banks - Revision of RBI

Guidelines

The RBI has issued the above revised guidelines in view of the changes in banks’

organizational structure, business models, use of technology (implementation of Core

Banking Solution), etc. Based on the revised guidelines, a review of the current system of

concurrent audit should be carried out immediately and necessary changes should be

incorporated therein by the banks. The modified concurrent audit system of banks should be

placed before their Audit Committee of BoDs. The bank should, once in a year, review the

effectiveness of the system and take necessary measures to correct the lacunae in the

implementation of the program

For details refer:

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/C07DFE1D4FB008D49FABD06689

EE646880E.PDF

Provision of Factoring Services by Banks - Review

The RBI has advised that banks may carry out the business of factoring departmentally,

without obtaining the prior approval of RBI, subject to certain stipulations.

The RBI has clarified that setting up of factor subsidiaries or investments by banks in

factoring companies will be subject to extant guidelines on investments by banks in

subsidiaries and other companies. Further, investment of a bank in the shares of factoring

companies inclusive of its subsidiary carrying on factoring business shall not, in the

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/128A45D448713C867460CB107457DF32259C9.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/128A45D448713C867460CB107457DF32259C9.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/C07DFE1D4FB008D49FABD06689EE646880E.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/C07DFE1D4FB008D49FABD06689EE646880E.PDF



aggregate, exceed 10% of the paid up capital and reserves of the bank. Subsidiaries and JVs

of banks, including the existing ones would be regulated as NBFC-Factors

These stipulations, among other matters, include that receivables acquired under factoring

should be treated as part of loans and advances. Accordingly, the same may be reported

under the head ‘Bills Purchased and Discounted’ in Schedule 9 of the Balance Sheet of the

banks. A separate disclosure may be made in the ‘Notes’ forming part of the Accounts

(Schedule 19 of the Balance Sheet) with regard to factoring exposures.

For details refer:

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/140F6BCB0D8FDB224D8CAAC2D7

8518AC8004.PDF

Exposure Norms limit for the Standalone Primary Dealers (SPDs)

To facilitate greater level of participation in corporate bonds by SPDs, it has been decided to

increase exposure ceiling limits in respect of single borrower/ counterparty from 25% to

50% of latest audited Net Owned Funds (NOF) and in respect of group borrower from 40%

to 65 % of latest audited NOF only for investments in AAA rated corporate bonds.

The existing norm of exposure ceilings for single borrower/ counterparty and group

borrower of 25 and 40% respectively and other instructions will continue to apply in

respect of other investments in the corporate bonds.

For details refer:

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/149CBI060815D583C8F36A4244EA

A3572C093A2DFD8C.PDF

Interest Subvention Scheme

The Government of India has approved the implementation of the Interest Subvention

Scheme for the year 2015–16 for short-term crop loans up to Rs. 3 lakhs with certain

stipulations. These stipulations, among other matters, include the following-

In respect of 2% interest subvention, banks are required to submit their claims on a half-

yearly basis as on 30th September 2015 and 31st March 2016, of which, the latter needs to

be accompanied by the statutory auditor's certificate certifying claims for subvention for the

entire year ended 31st March 2016 as true and correct. Any remaining claim pertaining to

disbursements made during the year 2015–16 and not included in the claim for 31st March

2016, may be consolidated separately and marked as an “Additional Claim” duly audited by

statutory auditors certifying the correctness.

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/140F6BCB0D8FDB224D8CAAC2D78518AC8004.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/140F6BCB0D8FDB224D8CAAC2D78518AC8004.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/149CBI060815D583C8F36A4244EAA3572C093A2DFD8C.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/149CBI060815D583C8F36A4244EAA3572C093A2DFD8C.PDF



In respect of 3% additional subvention, banks may submit their one-time consolidated

claims pertaining to the disbursements made during the entire year 2015–16 latest by 30th

April 2017, duly audited by the statutory auditors certifying the correctness.

For details refer:https://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=9984

Reporting requirement under Foreign Account Tax Compliance Act

(FATCA) and Common Reporting Standards (CRS)

India has signed the Inter-Governmental Agreement (IGA) with the USA on 9th July 2015,

for Improving International Tax Compliance and implementing the FATCA. The same has

come into force w.e.f. 31st August 2015. India has also signed a multilateral agreement on 3rd

June 2015, to automatically exchange information based on Article 6 of the Convention on

Mutual Administrative Assistance in Tax Matters under the CRS, formally referred to as the

Standard for Automatic Exchange of Financial Account Information.

In this regard, Government of India has notified the amendments to Income Tax Rules

(Rules) and has added the following Rules:

Rule 114F (definitions)

Rule 114G (Information to be maintained and reported) and

Rule 114H (due diligence requirement) for operationalisation of IGA and CRS.

This information regarding US reportable persons and other reportable persons have to be

furnished in a Form 61B.

All the concerned financial institutions should refer to the amended rules and take steps for

complying with the reporting requirements.

For details refer:

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/FATCAD70E2624023F45168D939E6

D7AF0E875.PDF

Guidelines on Compensation of Chief Executive Officer/ Whole Time

Directors – Restrictions under Section 20 of the Banking Regulation Act,

1949 – Loans to Directors

In order to streamline the existing processes and to obviate the need to approach RBI on

case-to-case basis, it has been decided that in exercise of the powers vested with RBI under

Section 35B of the Banking Regulation Act, 1949 (the BR Act, 1949), commercial banks can

https://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=9984

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/FATCAD70E2624023F45168D939E6D7AF0E875.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/FATCAD70E2624023F45168D939E6D7AF0E875.PDF



grant loans and advances to the Chief Executive Officer/ Whole Time Directors, without

seeking prior approval of RBI, subject to the following conditions:

The loans and advances shall form part of the compensation /remuneration policy approved

by the BoDs or any committee of the Board to which powers have been delegated or the

Appointments Committee, as the case may be.

The guidelines on Base Rate will not be applicable on the interest charged on such loans.

However, the interest rate charged on such loans cannot be lower than the rate charged on

loans to the bank’s own employees.

The terms and conditions of the loans granted to the Chief Executive Officer / Whole Time

Directors which are currently outstanding may, at the banks’ discretion, be reviewed in the

light of the above guidelines in order to address transition issues.

For details refer:

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/FCDF04364CD28B4E9793DEF6111

FF21588.PDF

Constitution of the Audit Committee of the Board

The RBI has advised public sector banks that if it has more than one Executive Director

(ED) the ED in-charge of internal inspection and audit should be the member of the Audit

Committee of the Board whereas other EDs can be invitees to the meeting if the agenda

includes any item for discussion from their domain.

Half yearly/Quarterly Review of Accounts of Public Sector Banks

The format for “Specimen of the Review Report” to be submitted by Statutory Central

Auditors to the bank for half yearly/quarterly review has been revised.

For details refer:

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/C186242EACA8BA914188A9EA9640

C135403E.PDF

Requirement for obtaining prior approval of RBI in cases of acquisition/

transfer of control of Non-Banking Financial Companies (NBFCs)

The RBI based on the representations received from the Industry has reviewed the

Notification No. DNBS(PD) 275/GM(AM)-2014 dated 26th May 2014 on ‘NBFC (Approval

of Acquisition or Transfer of Control) Directions, 2014’. As per the revised directions prior

written permission of RBI will be required for,

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/FCDF04364CD28B4E9793DEF6111FF21588.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/FCDF04364CD28B4E9793DEF6111FF21588.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/C186242EACA8BA914188A9EA9640C135403E.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/C186242EACA8BA914188A9EA9640C135403E.PDF



Any takeover or acquisition of control of an NBFC which may or may not result in change

of management.

Any change in the shareholding by acquisition/ transfer of 26% or more of the paid up

equity share capital. However, prior approval shall not be required in case of change in

shareholding beyond 26 per cent due to buyback of shares or reduction in capital where the

said change has the approval of a Competent Court. However, the said change should be

reported to the RBI within 1 month from its incurrence.

Any change in the management of the NBFC which would result in a change in more than

30 per cent of the directors, excluding independent directors. Further prior approval would

not be required for directors who get re-elected on retirement by rotation.

NBFCs notwithstanding the above shall continue to inform RBI regarding any change in its

director / management as required under other NBFC regulations.

For obtaining prior approval NBFCs shall submit an application along with specified

documents to the Regional Office of the Department of Non-Banking Supervision in whose

jurisdiction the Registered Office of the NBFC is located.

A public notice of at least 30 days shall be given before effecting the sale of, or transfer of

the ownership by sale of shares, or transfer of control, whether with or without sale of

shares. Such public notice shall be given by the NBFCs and also by the other party or jointly

by the parties concerned, after obtaining the prior permission of the Reserve Bank.

For details refer:

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/CN11294B9AB06785045C3A3C6CED

CDEBCDA37.PDF

Returns to be submitted by NBFCs (Asset Size below Rs. 500 crore)

As per the revised regulations, all non-deposit taking NBFCs (NBFCs-ND), with assets less

than Rs. 500 crore are required to submit an Annual Return. Two new Return Formats have

been created to capture important financial parameters of the respective category of NBFCs,

i.e.

NBS 8 for NBFCs-ND with assets size between Rs.100-500 crore, and

NBS 9 for NBFCs-ND with assets size below Rs. 100 crore.

The Annual Return needs to be submitted within 30 days of closing of the financial year.

However, since most of these NBFCs will be filing such return for the first time, the Annual

Return for the year ending March 31, 2015 are to be filed by 30th September 2015.

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/CN11294B9AB06785045C3A3C6CEDCDEBCDA37.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/CN11294B9AB06785045C3A3C6CEDCDEBCDA37.PDF



Non-deposit taking NBFCs with assets of Rs. 50- 500 crore that have already submitted the

prescribed returns for the quarter ending 31st March 2015 are not required to submit the

annual return for the year ending March 2015.

For details refer:

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/119NTDNBS2163025105B74844A32

C422681B9C0E0.PDF

Regularisation of assets held abroad by a person resident in India under

FEMA, 1999

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,

2015 (“Black Money Act”), passed by the Parliament of India, received assent of President

of India on 26th May 2015 and has come into force with effect from 1st July 2015. The

primary objective of the Black Money Act is to address the issue of undisclosed assets held

abroad by persons Resident in India. The Black Money Act provides for taxation of income

and assets acquired abroad from income not disclosed but chargeable to tax in India.

In this regard, the RBI vide its Circular No.18 dated 30th September 2015, has eased the

compliance requirements under FEMA by providing the following clarifications:

No proceedings under FEMA shall be initiated against any person who declares any asset

held abroad and pays the necessary taxes and penalties under the provisions of Black Money

Act with respect to that asset held abroad.

No permission under FEMA will be required to dispose of the asset so declared and

repatriate the proceeds to India through banking channels within 180 days from the date of

declaration.

In case a person intends to continue holding the declared assets, such person will be required

to apply to the RBI within 180 days from the date of declaration. In case such application is

not approved, the asset will have to be disposed of within 180 days from the date of refusal

or within such extended period as may be permitted by the RBI and proceeds of the disposal

of such asset shall have to be brought back to India immediately through the banking

channel.

For details refer:

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/AD18D46D371CA7874C8788FF3367

62E41F4B.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/119NTDNBS2163025105B74844A32C422681B9C0E0.PDF

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/119NTDNBS2163025105B74844A32C422681B9C0E0.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/AD18D46D371CA7874C8788FF336762E41F4B.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/AD18D46D371CA7874C8788FF336762E41F4B.PDF



External Commercial Borrowings (ECB) Policy - Issuance of Rupee

denominated bonds overseas

In order to facilitate Rupee denominated borrowing from overseas, it has been decided to

put in place a framework for issuance of Rupee denominated bonds overseas within the

ECB policy.

The broad contents of the framework are as follows:

Any corporate or body corporate as well as Real Estate Investment Trusts (REITs) and

Infrastructure Investment Trusts are eligible for this.

Any investor from a Financial Action Task Force (FATF) compliant jurisdiction will be

considered a recognized investor.

Minimum maturity period is of 5 years.

All in cost should be commensurate with prevailing market conditions.

The amount of the bond should be as per ECB Policy.

End use restrictions are only to the extent of the Negative list.

The detailed guidelines have also been stated in the Annexure forming part of the circular.

Further, all other provisions of extant ECB guidelines regarding reporting requirements

(including obtaining Loan Registration Number), parking of bond proceeds, security /

guarantee for the borrowings, conversion into equity, corporate under investigation, etc., will

be applicable for borrowing by issuance of Rupee denominated bonds overseas.

For details refer:

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/APDIR17F3216FECE3F0441C8E1107F5E2B

A1927.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/APDIR17F3216FECE3F0441C8E1107F5E2BA1927.PDF

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/APDIR17F3216FECE3F0441C8E1107F5E2BA1927.PDF



DISCLAIMER AND STATUTORY

NOTICE This e-publication is published by CNK & Associates, LLP Chartered

Accountants, India, solely for the purposes of providing necessary information

to employees, clients and other business associates. This publication summarises

the important statutory and regulatory developments. Whilst every care has been

taken in the preparation of this publication, it may contain inadvertent errors for

which we shall not be held responsible. The information given in this

publication provides a bird’s eye view on the recent important select

developments and should not be relied solely for the purpose of economic or

financial decision. Each such decision would call for specific reference of the

relevant statutes and consultation of an expert.

This document is a proprietary material created and compiled by CNK &

Associates LLP. All rights reserved. This newsletter or any portion thereof may

not be reproduced or sold in any manner whatsoever without the consent of the

publisher.

This publication is not intended for advertisement and/or for solicitation of

work.



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