insight vol. xi - cyril amarchand mangaldas · 2020. 11. 20. · limited, jaypee cement corporation...

INSIGHT|Vol. XI Issue II

July 01, 2019 – September 30, 2019

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Welcome to this issue of Insight.

In this issue of Insight, as lead articles, we have covered the circular issued by the Ministry of Corporate Affairs clarifying the concept of the appointed date of a scheme under Section 232(6) of the Companies Act, 2013, and also the key changes introduced by the Government of India to the Consolidated FDI Policy, 2017 by way of the press note 4 (2019 series) introducing further liberalization and clarification.

Apart from the above, we have also captured key developments relating to the notifications and orders issued by the Ministry of Corporate Affairs in relation to the Companies Act, 2013 as well as circulars and notifications issued by the RBI and SEBI for the period under review.

Any feedback and suggestions would be valuable in our pursuit to constantly improve Insight and ensure its continued success amongst readers. Please feel free to send any feedback, suggestions or comments to [email protected].

Regards,

CYRIL SHROFF Managing Partner Cyril Amarchand Mangaldas

Phone: +91-22-2496 4455/ 6660 4455 Fax: +91-22-2496 3666Email: [email protected]

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TABLE OF CONTENTS

PARTICULARS

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l MCA clarification on “Appointed Date” - End of a Controversy

l Liberalisation of the FDI Policy

COMPANY LAW UPDATE

l Amendments to the Companies (Significant Beneficial Owners) Rules, 2018

l Commencement of certain provisions of the Companies (Amendment) Act, 2019

l Amendment to the Companies (Share Capital and Debentures) Rules, 2014

l Constitution of the Company Law Committee

FOREIGN INVESTMENT AND RBI UPDATE

l RBI eases end-use norms for external commercial borrowings by corporates, NBFCs

l RBI amends Foreign Exchange Management (Deposit) Regulations, 2016

l RBI releases draft Guidelines for 'on tap' Licensing of Small Finance Banks in the Private Sector

l RBI amends Frequently Asked Questions on Overseas Direct Investments in relation to round tripping

SECURITIES LAW UPDATE

Amendments and Circulars

l SEBI amends the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

l SEBI revises the formats for the corporate governance reports to be submitted by listed entities to the stock exchanges

l SEBI standardizes reporting of violations related to Code of Conduct under the SEBI (Prohibition of Insider Trading) Regulations, 2015

l SEBI revises the formats for limited review and audit reports of listed entities

l Amendment of Guidance Note on PIT Regulations

l SEBI amends the PIT Regulations

l SEBI amends regulations in relation to issuance of equity shares with superior voting rights

l SEBI amends the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

l Investment norms for AIFs operating in IFSC

l SEBI imposes penalties for non-compliance of certain provisions of the SEBI ICDR Regulations

l Payment of outstanding dues by listed entities before filing scheme of arrangement

l SEBI amends the SEBI Buy-Back Regulations

l Notification of the SEBI (Foreign Portfolio Investors) Regulations, 2019

Informal Guidance

l Exemption for a proposed merger of promoter group entities under Regulation 10(1)(d)(iii) of the SEBI (SAST) Regulations, 2011

l Exemption from submission of consolidated unaudited financial results under Regulation 33(3)(b) of the SEBI Listing Regulations

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INSIGHT (Vol. XI Issue II) lJuly 01, 2019 – September 30, 2019

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MCA CLARIFICATION ON “APPOINTED DATE” - END OF A CONTROVERSY

Introduction

On August 21, 2019, the Ministry of Corporate Affairs (“MCA”) issued a circular (“Circular”) which provided the much needed clarity on the issue surrounding the “appointed date” under Section 232(6) of the Companies

1Act, 2013 (“Act”) . Corporate India, or corporate lawyers at the very least, breathed a collective sigh of relief at this welcome clarification which significantly eases the pains felt during corporate re-organization and related accounting.

To appreciate the impact of the Circular, some background is warranted on the varied interpretations taken by regional directors (“RDs”) and jurisdictional National Company Law Tribunals (“NCLT”) on the appointed date and issues faced by the parties to the scheme on account of such interpretations.

In this issue of Insight, we have considered the genesis of the concept of the appointed date, the divergent interpretations being taken by the NCLTs and the benefits of the recent clarificatory circular issued by the MCA.

Background

Schemes of arrangement are corporate reorganizations that involve inter alia the transfer of assets and liabilities from one company to another. A scheme of arrangement often refers to an “appointed date”, an “effective date” and a “record date”. While the scheme comes into effect on the effective date (once the conditions specified in the scheme have been fulfilled), the scheme is deemed to have taken effect from the appointed date and the assets and liabilities of the transferor company are transferred in the books of the transferee company from that date. A record date is the date on which the shareholders of a transferor company are identified for the purposes of issuing securities of the transferee company, in accordance with the scheme.

Generally, the appointed date is fixed keeping in view the

1 Ministry of Corporate Affairs, Clarification under Section 232(6) of the Companies Act, 2013, dated August 21, 2019, available at http:// www.mca.gov.in/Ministry/pdf/GeneralCircular 21082019.pdf.

2 AIR 1997 SC 1763.3 For example, in Edelweiss Stock Broking Ltd, In Re., (2012) 109 CLA 30, (Gujarat High Court).4 Miheer H. Mafatlal v. Mafatlal Industries Limited, (1996) 87 Com Cases 792 (SC); Hindustan Lever Employees Union v. Hindustan Lever Ltd. (1995) 83 Com Cases 30; In Re Larsen & Toubro

(2004) 121 Comp Cas 523 (Bom.).

commercial objectives of the parties, ease of identifying the assets and liabilities or segregation of profits/losses, tax considerations and other factors.

In schemes involving related companies (such as holding and subsidiary/group companies), the parties usually identify an appointed date, which is specified in the scheme. However, in case of unrelated entities, since the two companies run as independent organizations until the scheme is effective (following the approval from the jurisdictional NCLT), and on account of the fact that the assets and liabilities are to be recorded as at the values appearing on the books as on the appointed date, parties sometimes specify that the appointed date shall be the effective date.

The Concept of “Appointed Date”

Under the Companies Act, 1956 (“1956 Act”), Sections 391-394 did not explicitly contain the concept of an appointed date. This concept received the blessing of the Supreme Court in Marshall Sons and Co. (India) v. Income

2Tax Officer , which held that every scheme shall provide for a date on which the scheme shall take effect and this date shall be the date of amalgamation/date of transfer. Companies were given the discretion to select the appointed date for the scheme. Such commercial decisions, which also had approval from the shareholders, were respected by the high courts and any objections regarding the appointed date were not held to be tenable and this was left to the commercial discretion of the

3parties . This principle has been upheld in various

4decisions of the high courts .

The concept of appointed date found legislative backing with the overhaul of the 1956 Act and the coming into effect of the Act which in Section 232(6) explicitly provides that a scheme under Section 232 shall indicate an “appointed date” from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. However, the Act did not mandate that the appointed date of a scheme be a prospective date or a retrospective date, thus enabling the parties to fix the appointed date based on commercial rationale.

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In light of the language of Section 232(6) of the Act, certain RDs and consequently the NCLTs interpreted Section 232(6) to mean that the scheme shall provide for a specific calendar date as the appointed date in the scheme. The aforesaid interpretation became a cause for objection in schemes involving unrelated parties where the appointed date was linked to the effective date and the effectiveness of the scheme was linked to uncertain prospective events.

Following is a snapshot of the approach that had been followed by various NCLTs.

Ø “Appointed date” being linked to the “effective date”

In certain schemes, the effectiveness of the scheme was dependent on future uncertain events such as, regulatory approvals to be obtained from authorities. In these schemes, the appointed date was linked to the effective date rather than being a specific calendar date, which was approved by the jurisdictional High Courts/ NCLT.

(A) In the scheme of amalgamation involving Equitas Finance Limited (June 6, 2016), the Madras High Court held that the provisions of Section 394(1) of the 1956 Act provided enough freedom to a company to delay the date on which the scheme of arrangement shall take effect and tie the same to the occurrence of an event.

(B) In the scheme involving the amalgamation of Idea Cellular Limited, Vodafone India Limited and Vodafone Mobile Services Limited (December 2017), the NCLT Mumbai approved the appointed date of the scheme as theeffective date by observing that the scheme was subject to the approval of Department of Telecommunications (“DoT”) and it was not known when the DoT will approve the transfer of license consequent to sanction of merger by the NCLT. The NCLT observed that there is no legal impediment in accepting the tenability of provisions incorporated in the scheme relating appointed date to effective date.

(C) In the scheme involving Jaiprakash Associates Limited, Jaypee Cement Corporation Limited and UltraTech Cement Limited (February 15,

2017) and in the scheme involving SCIL Ventures Limited, Securities Analysis (India) Private Limited and Securities Research & Analysis Private Limited (August 9, 2017), the schemes defined the appointed date as the effective date, and were approved by the NCLT.

(D) In the scheme involving Tata Teleservices (Maharashtra) Limited and Bharti Airtel Limited (December, 2018), the scheme linked the appointed date to the effective date which was linked to approval from the DoT. The NCLT approved the scheme.

Ø “Appointed date” being linked to the valuation of assets and liabilities

Contrary to the above approach, the NCLT has, in certain cases insisted that the appointed date should be a specific calendar date which should be linked to the valuation of assets and liabilities of the transferor company.

(A) In the scheme involving East West Pipeline Limited and Pipeline Infrastructure Private Limited (September, 2018) (“Pipeline”), the NCLT noted that Section 232(6) of the Act stated that a scheme shall specify a clear calendar date as the appointed date in the scheme, instead of a date contingent on the NCLT approval. The order further specified that the appointed date shall be the date of the valuation of assets and liabilities of the companies (“Valuation Date”).

(B) In the scheme involving Century Textiles and Industries Limited and Ultratech Cement Limited (July, 2019), the NCLT followed the decision in Pipeline and stated the Valuation Date shall be the appointed date. It must be noted that in this scheme, the companies were willing to adopt a specific calendar date as the appointed date, however the NCLT insisted that the appointed date should be linked to the Valuation Date. The rationale behind these rulings appears to be that the assets to be transferred pursuant to the scheme should be valued on the cut-off date taken into consideration for the valuation, so as to ensure that the consideration payable is commensurate to the value of assets on such date.


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Implications

(A) Where the commercial intent of the parties is that the appointed date shall be the effective date of the scheme, but the NCLT directs the appointed date to be the Valuation Date, this would result in several implications in respect of the period between the Valuation Date and effective date (the “Interim Period”) which would be contrary to the commercial intent. For instance:

· The transferor company would be required to conduct its business between the appointed date and effective date in trust for the transferee company and the scheme may not have provided for this eventuality.

· The transferor company would face issues in dealing with its profits and declaring dividends during the Interim Period.

· The financial statements of the transferee company would need to account for the profits/ losses of the transferor company from the appointed date.

(B) As per Ind-AS 103 (Business Combinations), the “acquisition date” is the date on which the “acquirer obtains control of the acquiree”. Generally, this is the date on which the acquirer transfers the consideration and acquires the assets and liabilities of the acquiree. The acquirer may obtain control on a date that is either earlier or later than the date on which the transaction is closed or finalised at law. The date on which control passes from the transferor to the transferee is a matter of fact and cannot be artificially altered by the parties specifying a different date. Thus, even the Ind AS recognises that the appointed date can be a prospective effective date.

Key clarifications provided by the Circular

To bring the controversy surrounding the appointed date to rest and to ensure consistency in interpretation as also to encourage corporate reorganization and restructuring without the apprehension of unnecessary ambiguity, the MCA's Circular is helpful.

The Circular allows companies to choose an appointed date which could be a specific calendar date or a date that is linked to occurrence of agreed events such as receipt of required approvals which are relevant to the scheme. The Circular further clarifies the following:

Ø The 'appointed date' identified under the scheme shall also be deemed to be the 'acquisition date' and date of transfer of control for the purpose of conforming to accounting standards, Ind-AS 103.

Ø Where the 'appointed date' is chosen as a specific calendar date, it may precede the date of filing of the application for scheme of merger/amalgamation in the NCLT. However, if the 'appointed date' is significantly ante-dated beyond a year from the date of filing, the justification for the same would have to be specifically brought out in the scheme and it should not be against public interest. As a note of caution, in schemes under Section 392 of the 1956 Act, in which the 'appointed date' was significantly ante-dated, the Income Tax department frequently raised objections alleging the scheme being against public interest. It may be possible that the Income Tax department continues to object to the schemes where the 'appointed date' has been significantly ante-dated.

Ø The scheme may identify the 'appointed date' based on the occurrence of a trigger event which is key to the proposed scheme and agreed upon by the parties to the scheme. This event would have to be indicated in the scheme itself upon occurrence of which the scheme would become effective. However in case of such event based date being a date subsequent to the date of filing the order with the Registrar under section 232(5), the company shall file an intimation of the same within 30 days of such scheme coming into force.

Conclusion

The Circular is a welcome move by the MCA and puts an end to the ambiguity and controversy surrounding the appointed date and arbitrary interpretations taken by the RDs and the NCLTs in relation to the same. The Circular restores the construct that the appointed date can be linked to a date where the agreed conditions in relation to effectiveness of a scheme are completed, based on commercial considerations. This is in parity with the erstwhile position taken by the high courts, which have refrained from interfering with the commercial wisdom of the parties to schemes, their shareholders and creditors. The Circular also provides due clarity on the accounting treatment of schemes.


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LIBERALISATION OF THE FDI POLICY

With the aim to liberalize and simplify the FDI policy to provide ease of doing business in India, the Union Cabinet, through its Press Release dated August 28, 2019, approved certain amendments to the Consolidated FDI Policy 2017 (“FDI Policy”). The press release was followed by Press Note 4 (2019 Series) dated September 18, 2019.

The key changes are as follows:

Ø Coal Mining

The FDI Policy permitted 100% FDI under automatic route for coal and lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities. Further, 100% FDI under automatic route was also permitted for setting up coal processing plants, subject to certain conditions.

It has been now decided to permit 100% FDIunder automatic route for sale of coal and for coal mining activities including associated processing infrastructure, which would include coal washery, crushing, coal handling, and separation (magnetic and non-magnetic), subject to sectoral laws.

Ø Contract Manufacturing

The FDI Policy provided for 100% FDI under automatic route in the manufacturing sector, with no specific provision for contract manufacturing. It has now been decided to allow 100% FDI under automatic route in contract manufacturing as well.

Ø Single Brand Retail Trading (“SBRT”)

(a) The FDI Policy provided that SBRT entities having FDI beyond 51% must procure 30% of the value of the goods from India. Further, as regards local sourcing requirement, it was provided that the same can be met as an average during the first 5 years, and thereafter annually towards its India operations.

It has now been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local

sourcing, irrespective of whether the goods procured are sold in India or exported. Further, the current cap of considering exports for 5 years only has been removed.

(b) The FDI Policy also provided that incremental sourcing for global operations by the non-resident entities undertaking single brand retail trading, either directly or through their group companies, will also be counted towards local sourcing requirement for the first 5 years. In order to accommodate the practices of the prevalent business models, it has been decided that 'sourcing of goods from India for global operations' can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement.

(c) The FDI Policy provided that only incremental sourcing (over and above previous year's value) for global operations shall be counted towards local sourcing requirement. It has now been decided that the entire sourcing from India for global operations shall be considered towards local sourcing requirement (and not the incremental value alone).

(d) The FDI Policy required that SBRT entities operate through brick and mortar stores before starting retail trading of that brand throughe-commerce. It has now been decided that retail trading through online trade can also be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of the commencement of online retail.

Ø Digital Media

The FDI Policy provides for 49% FDI under approval route in up-linking of news & current affairs TV channels. It has been decided to permit 26% FDI under government route for uploading/ streaming of news & current affairs through digital media, on the lines of print media.


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COMPANY LAW UPDATE

1. Amendments to the Companies (Significant Beneficial Owners) Rules, 2018

The MCA has amended the Companies (Significant Beneficial Owners) Rules, 2018 to provide for a new Form No. BEN-2 for filing return of significant beneficial owners to the Registrar under Section 90 of the Act.

(MCA Notification No. G.S.R. 466(E) dated July 01, 2019)


2. Commencement of certain provisions of the Companies (Amendment) Act, 2019

The MCA has appointed August 15, 2019 as the date on which, inter alia, the following provisions of the Companies (Amendment) Act, 2019 shall come into force:

Section the Companies Amendments to the Act(Amendment) Act, 2019

Section 7 Sub-section (1A) has been inserted in Section 29 (Public Offer of Securities to be in Dematerialised Form) to state that in a case the shares are issued by a company belonging to other class or classes of unlisted companies, as may be prescribed, then the securities shall be held or transferred only in a dematerialised form in the manner laid down in the Depositories Act, 1996 and the regulations made thereunder.

The phrase “public” has also been omitted from sub-section (1), in clause (b) of Section 29.

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(MCA Notification S.O 2947 (E) dated August 14, 2019)

Section the Companies Amendments to the Act(Amendment) Act, 2019

Clause (i) of section 14 In Section 90 (Register of significant beneficial owners in a company), sub-section (4A) has been added to impose an obligation on the company to take necessary steps to identify an individual who is a significant beneficial owner in relation to the company and require such individual to comply with the provisions of the section.

Section 33 Section 241 (Application to Tribunal for relief in cases of oppression, etc.) has been amended for inter alia the following:

Ø A new sub-section (3) has been inserted to provide powers to the Central Government to initiate a case against a person in certain cases and refer the same to the NCLT with a request that the NCLT may inquire into the case and record a decision.

Ø Sub-section (5) has been inserted providing that every application under sub-section (3): (a) shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purposes of the inquiry; and (b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908.

Section 35 Ø Sub-section (1A) has been inserted in Section 243 (Consequence of termination or modification of certain agreements) to state that the person who is not a fit and proper person (as determined by the NCLT) shall not hold the office of a director or any other office connected with the conduct and management of the affairs of any company for a period of 5 years from the date of the said decision. However, the Central Government may, with the leave of the NCLT, permit such person to hold any such office before the expiry of the said period of 5 years.

Ø A new sub-section (1B) has also been inserted which provides that, notwithstanding anything contained in the Act, or any contract, memorandum or articles, on the removal of such a person from office of a director or any other office connected with management of affairs of the company, such a person shall not be entitled to or be paid, any compensation for the loss or termination of office.


3. Amendment to the Companies (Share Capital and Debentures) Rules, 2014

The MCA has amended the Companies (Share Capital and Debentures) Rules, 2014. The key amendments are as follows:

Ø Rule 4(1)(c) has been substituted to enhance the previously existing cap of 26% of the total post issue paid up equity share capital to a revised cap of 74% of total voting power in respect of shares with differential voting rights of a company.

Ø Rule 4(1)(d) has been omitted to remove the earlier requirement of distributable profits for 3 years for a company to be eligible to issue shares with differential voting rights.

Ø The proviso to Rule 12(1) has been amended to increase the time period within which employee stock options can be issued by start-ups recognized by the Department for Promotion of Industry & Internal Trade to promoters or directors holding more than 10% of equity shares, from 5 years to 10 years from the date of their incorporation.

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Ø Rule 18(7) has been substituted, which provides for the conditions for creating Debenture Redemption Reserve.

(MCA Notification G.S.R 574 (E) dated August 16, 2019)

4. Constitution of the Company Law Committee

The MCA has decided to constitute a CompanyLaw Committee for examining and making r e c o m m e n d a t i o n s t o t h e G o v e r n m e n t o nvarious provisions and issues pertaining to implementation of the Act and the Limited Liability Partnership Act, 2008 (“LLP Act”). The terms of reference of the Committee would be as follows:-

Ø Analyze the nature of the offences and submit its recommendation as to whether any of the offences could be re-categorized as 'civil wrongs'.

Ø Examine the feasibility of introducing settlement mechanism, deferred prosecution agreement, etc., within the fold of the Act.

Ø Study the existing framework under the LLP Act and suggest measures to plug the gaps, if any.

Ø Propose measures to further de-clog and improve the functioning of the NCLTs.

Ø Suggest measures for removing any bottlenecks in the overall functioning of the statutory bodies like SFIO, IEPFA, NFRA, etc. under the Act.

Ø Identify specific provisions under the Act and the LLP Act which are required to be amended to bring about greater Ease of Living for the corporate stakeholders, including but not restricted to review of forms under the two acts.

(MCA Notification F. No. 2/1/2018-CL-V dated September 18, 2019)


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FOREIGN INVESTMENT AND RBI UPDATE

1. RBI eases end-use norms for external commercial borrowings (“ECBs”) by corporates, NBFCs

Pursuant to the feedback from stakeholders and with a view to further liberalise the ECB framework, RBI has relaxed the end-use restrictions of ECBs by permitting the eligible borrowers to raise ECBs for the following purposes from recognised lenders, except foreign branches/overseas subsidiaries of Indian banks, subject to paragraph 2.2 of the ECB Directions:

Ø ECBs can be raised with a minimum average maturity period of 10 years for working capital purposes and general corporate purposes. Borrowing by NBFCs for the above mentioned maturity for on lending for the above purposes shall also be permitted.

Ø ECBs with a minimum average maturity period of 7 years could be availed by eligible borrowers for repayment of Rupee loans availed domestically for capital expenditure as also by NBFCs for on-lending for the same purpose. For repayment of Rupee loans availed domestically for purposes other than capital expenditure and for on-lending by NBFCs for the same, the minimum average maturity period of the ECB is required to be 10 years.

Ø The prescribed minimum average maturity provision for the aforesaid end-uses shall have to be strictly complied with under all circumstances.

(RBI/2019-20/20 AP. (DIR Series) Circular No. 04, dated July 30, 2019)

2. RBI amends Foreign Exchange Management (Deposit) Regulations, 2016 (“FEMA 5(R) ”)

Regulation 6(3) of FEMA 5(R) provided for acceptance of deposits by a Company through issue of Commercial Paper (“CP”). To bring about consistency in statutory provisions/regulations relating to CPs contained in Section 45 U(b) of RBI Act, 1934, Section 2(c) of Companies (Acceptance of Deposits), Rules 2014, which already allows investments in CPs issued by the Indian Companies, Regulation 6(3) of FEMA 5(R) has been deleted.

(RBI Circular No. 06, dated August 16, 2019)

3. RBI releases draft Guidelines for 'on tap' Licensing of Small Finance Banks (“SFBs”) in the Private Sector

RBI has released draft guidelines for 'on tap' L icens ing o f SFBs in the Pr iva te Sec to r (“Guidelines”). The highlights of the Guidelines are as follows:

Ø Registration, licensing and regulations: The SFB shall be registered as a public limited company under the Act and shall be licensed under Section 22 of the Banking Regulation Act, 1949.

Ø Eligibility: The following are eligible for setting up SFBs:


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· Resident individuals/professionals (Indian citizens), singly or jointly, each having at least 10 years of experience in banking and finance at a senior level.

· Companies and societies in the private sector, that are owned and controlled by residents (as defined in FEMA regulations, as amended from time to time), and having successful track record of running their businesses for at least a period of 5 years.

· Existing NBFCs, Micro Finance Institutions (“MFIs”), and Local Area Banks (“LABs”) in the private sector, that are controlled by residents (as defined in FEMA regulations), and having successful track record of running their businesses for at least a period of 5 years.

Ø Scope of activities: The SFB shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. It could also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products.

Ø Capital requirement and foreign shareholding: The minimum paid-up voting equity capital for SFBs shall be Rs. 200 crore, except for such small finance banks which are converted from primary (urban) co-operative banks for which the capital requirement shall be as prescribed. The foreign shareholding in the SFB shall be as per the extant FDI Policy for private sector banks and as prescribed in these guidelines.

Ø Other conditions:

· A promoter shall not be granted licenses for both universal bank and SFB even if the proposal is to set them up under the (“NOFHC”) structure. If a

promoter of a payments bank desires to set up an SFB, both the banks should be under the NOFHC structure.

· If an existing payments bank desires to convert into an SFB, it could submit its application, if it meets the eligibility criteria mentioned in these guidelines.

· Individuals (including relatives) and entities other than the promoters shall not be permitted to have shareholding in excess of 10% of the paid-up voting equity capital of the bank. In case of existing NBFCs / MFIs / LABs converting into SFB, where there is shareholding in excess of 10% of the paid-up voting equity capital by entities other than the promoters (including private equity funds), RBI may consider providing time up to 3 years from the date of the 'in principle' approval for the shareholding to be brought down to a maximum of 10%.

· The SFB shall not be a Business Correspondent (“BC”) for another bank. However, it can have its own BC network.

(Draft guidelines dated September 13, 2019)

4. RBI amends Frequently Asked Questions (“FAQs”) on Overseas Direct Investments (“ODI”) in relation to round tripping

Earlier, the RBI FAQs on ODI provided that an Indian P a r t y ( “ I P ” ) c a n n o t s e t u p a s t e p - d o w n subsidiary/joint venture in India through its foreign entity, directly or indirectly through step-down subsidiary of the foreign entity. The RBI has amended this FAQ and now provides that for such transactions, IPs can approach the Reserve Bank for prior approval through their Authorised Dealer Banks which will be considered on a case to case basis, depending on the merits of the case.


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SECURITIES LAW UPDATE

AMENDMENTS AND CIRCULARS

1. SEBI amends the SEBI (Listing Obligations and

Disclosure Requirements) Regulations, 2015

(“SEBI Listing Regulations”)

Securities and Exchange Board of India (“SEBI”) has

notified the SEBI (Listing Obligations and Disclosure

Requirements) (Third Amendment) Regulations,

2019 to increase the materiality threshold for a related

party transaction, involving payments made to a

related party with respect to brand usage or royalty,

from 2% of the annual consolidated turnover of the

listed entity as per its last audited financial statements,

to 5%.

(SEBI Notification No. SEBI/LAD-NRO/GN/2019/22

dated June 27, 2019)

2. SEBI revises the formats for the corporate

governance reports to be submitted by listed

entities to the stock exchanges

SEBI had previously issued a circular bearing

reference number CIR/CFD/CMD/5/2015 dated

September 24, 2015 (“September Circular”),

prescribing formats for compliance reports on

corporate governance to be submitted by listed

entities. Pursuant to the recommendations made by

the Kotak Committee on Corporate Governance,

SEBI amended the SEBI Listing Regulations through

n o t i fi c a t i o n b e a r i n g n u m b e r S E B I / L A D -

NRO/GN/2018/10 dated May 9, 2018. Accordingly,

to align the formats of the corporate governance

reports with the amendments, SEBI has issued this

circular with effect from September 30, 2019,

modifying the relevant formats prescribed under the

September Circular, to the extent applicable.

(SEBI Circular No.

SEBI/HO/CFD/CMD1/CIR/P/2019/78

dated July 16, 2019)

3. SEBI standardizes reporting of violations related

to Code of Conduct under the SEBI (Prohibition of

Insider Trading) Regulations, 2015 (“PIT

Regulations”)

Under the PIT Regulations all listed firms,

intermediaries and fiduciaries are required to

formulate a code of conduct for designated persons as


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well as for their relatives and inform the regulator

about any such violation.

With an objective to standardize the process relating

to dealing with violations of the Code of Conduct,

SEBI has directed all listed companies, intermediaries

and fiduciaries to:

Ø Report such violations by the designated persons and

immediate relatives of designated persons in the

standardized format to SEBI, in the format provided in

the Circular.

Ø Maintain a database of the violation of code of

conduct by designated persons and immediate

relatives of designated persons that would entail

initiation of appropriate action against them.

(SEBI Circular no. SEBI/HO/ISD/CIR/P/201982

dated July 19, 2019)

4. SEBI revises the formats for limited review and

audit reports of listed entities

SEBI has previously issued a circular bearing

reference number CIR/CFD/CMD1/44/2019 dated

March 29, 2019 (“March Circular”) prescribing

formats for limited review reports and audit reports of

listed entities and entities whose accounts are

consolidated with the listed entities as per Accounting

Standard 21. In order to align the formats of the audit

reports with the revised SA 700 and incorporate the

updates suggested by ICAI, SEBI has issued this

circular with effect from September 30, 2019

modifying relevant formats prescribed under the

March Circular, to the extent applicable.

(SEBI Circular No. CIR/CFD/CMD1/80/2019 dated July 19, 2019)

5. Amendment of Guidance Note on PIT Regulations

SEBI has revised the Guidance Note on PIT Regulations on July 05, 2019, which provides for the following:

Ø Maintaining structured digital database- Requirement to maintain structured digital database under

Regulation 3(5), containing the names of such persons or entities with whom Unpublished Price Sensitive Information (“UPSI”) is shared, is applicable to listed companies, and intermediaries and fiduciaries who handle UPSI of a listed company in the course of business operations.

Ø Scope of the term 'investment company' under Regulation 9(4)(iii) - Regulation 9(4)(iii) intends to include only those non-individual corporate promoters of intermediaries or fiduciaries as designated person, whose main object or principal activity, is investing in securities of other companies. For instance, if the promoter of a broking entity is a bank, then such promoter shall not be specified as designated person to be covered by the code of conduct of the intermediary. However, if the promoter of a broking entity is an investment company which holds investments in various companies, then such an entity shall be specified as designated person to be covered by the code of conduct of the intermediary.

(Press Release No. 17/2019 dated July 22, 2019)

6. SEBI amends the PIT Regulations

SEBI has amended the PIT Regulations to inter alia

provide the following:

Ø The system of internal controls shall include all

employees who have access to UPSI and such

employees shall be identified as designated person.

Ø The trading window restrictions will not apply in

respect of:

· The transaction which is an off-market inter-se

transfer between insiders (as per Regulation

4(1)(I) of the PIT Regulations).

· The transaction which was carried out through

the block deal window mechanism (as per

Regulation 4(1)(ii) of the PIT Regulations).

· The transaction carried out pursuant to a statutory

or regulatory obligation to carry out a bona fide

transaction (as per Regulation 4(1)(iii) of the PIT

Regulations).


14

· The transaction undertaken pursuant to the

exercise of stock options (as per Regulation

4(1)(iv) of the PIT Regulations).

· The trades pursuant to a trading plan set up in

accordance with Regulation 5 (as per Regulation

4(1)(vi) of the PIT Regulations).

· A pledge of shares for a bonafide purpose such as

raising of funds, subject to pre-clearance by the

compliance officer and compliance with the

respective regulations made by SEBI.

· Transactions which are undertaken in accordance

with respective regulations made by SEBI such as

acquisition by conversion of warrants or

debentures, subscribing to rights issue, further

public issue, preferential allotment or tendering

of shares in a buy-back offer, open offer, delisting

offer.

Ø Introduction of provisions relating to informant

mechanism, which shall come into force with effect th

from 100 day from September 17, 2019, which inter

alia include-

· Submission of original information by the

informant by furnishing the voluntary

information disclosure form to the office of

informant protection of SEBI in the prescribed

format.

· On receipt of the voluntary information

disclosure form, the office of informant

protection shall communicate the substance of

the information along with the evidence

submitted by the informant to the relevant

department or division of SEBI for examination

and initiation of necessary action, if any.

· Upon collection or substantial recovery of the

monetary sanctions amounting to at least twice

the reward, SEBI may at its sole discretion,

declare an informant eligible for reward and

advice the informant or his or her legal

representative to file an application for claiming

such reward. Provided that, the amount of

Reward shall be 10% of the monetary sanctions

collected or recovered and shall not exceed

Rupees one crore or such higher amount may be

specified.

· Any information including original information

may, at the discretion of SEBI, be made available

when it is required to be disclosed in connection

with any legal proceedings in furtherance of

SEBI's legal position;

(i) as permitted by the PIT Regulations; or

(ii) as may be otherwise required or permitted by

law.

· No amnesty or immunity shall be provided to an

informant for violation of securities law.

(SEBI Circular No. SEBI/LAD-NRO/GN/2019/23

dated July 25, 2019 w.e.f. July 25, 2019;

and No. SEBI/LAD-NRO/GN/2019/32.

Dated September 17,2019)

7. SEBI amends regulations in relation to issuance of

equity shares with superior voting rights

SEBI, pursuant to its decision in the board meeting on

June 27 , 2019 , app roved t he f r amework

(“Framework”) relating to issuance of equity shares

with superior voting rights (“SR Shares”). In

furtherance of the above, SEBI has:

Ø Notified the SEBI (Issue of Capital and Disclosure

Requirements) (Third Amendment) Regulations,

2019, thereby permitting companies having issued SR

Shares to its promoters/founders to undertake an

initial public offering of their ordinary equity shares.

Some of the key highlights are as follows:

· Certain additional eligibility conditions have

been prescribed for companies with SR Shares

undertaking an IPO, including (i) the issuer

company should be a tech company (as defined

therein), (ii) SR Shares shall have voting rights in

the ratio of a minimum of 2:1 up to a maximum of

10:1 compared to ordinary equity shares. The

ratio shall be in whole numbers, (iii) Holders of

SR Shares (“SR Shareholders”) shall not be part

of a promoter group whose collective net worth is

more than INR 500 crores, and SR Shares shall


15

only be issued to promoters or founders who hold

an executive position in the issuer company, (iv)

the issue of SR Shares is be authorized by a

special resolution passed at a general meeting of

the shareholders of the issuer company, and (v)

SR Shares shall have the same face value as

ordinary equity shares and shall be held by the

holders for at least 6 months prior to the filing of

the red herring prospectus.

· SR Shares held by promoters will be eligible for

the minimum promoter contribution under

Regulations 14 and Regulation 113 of the SEBI

(Issue of Capital and Disclosure Requirements)

Regulations, 2018 (“SEBI ICDR Regulations”).

Further, the SR Shares shall be locked-in for a

period of 3 years from the date of commencement

of commercial operations or date of allotment,

(whichever is later) or up to their conversion into

ordinary equity shares, whichever is later.

· SR Shares held by promoters cannot be pledged

as collateral security for any loans as prescribed

under Regulation 21 and Regulation 119 of the

SEBI ICDR Regulations. Further, SR Shares

cannot be transferred to another promoter or

member of promoter group or a new promoter, as

provided under Regulation 22 and Regulation

120 SEBI ICDR Regulations.

· In case of rights issue of SR Shares, holders of

existing SR Shares would not be permitted to

renounce their rights and SR Shares issued are be

locked-in until conversion into ordinary shares

along with existing SR Shares. In case of bonus

issue, SR Shares carry same ratio of voting rights

as compared to ordinary shares and such SR

Shares are to be converted to ordinary equity

shares along with existing SR Shares held by such

holders.

Ø Amended the SEBI (Buy-Back of Securities)

Regulations, 2018 (“SEBI Buy-Back Regulations”)

and the SEBI (Delisting of Equity Shares)

Regulations, 2009 to implement the aforesaid

Framework i.e. increasing the scope of 'Shares'

defined therein to include SR Shares.

Ø Notified the SEBI (Listing Obligations and Disclosure

Requirements) (Fourth Amendment) Regulations,

2019. The key amendments are as follows:

· Stricter corporate governance requirements have

been introduced for listed entities with SR

Shares:

(i) Composition of the board of directors: At

least half of the board of directors of

companies having outstanding SR Shares

shall comprise of independent directors.

(ii) Audit committee: The audit committee of

such an entity shall only comprise of

independent directors.

(iii) Other board committees: At least two-thirds

of the members of the Nomination and

Remuneration Committee, Stakeholder

Relationship Committee and the Risk

Management Committee shall comprise of

independent directors.

· The listed entity cannot issue shares with superior

or inferior dividend rights or inferior voting rights

vis-à-vis the equity shares listed on the stock

exchange. Further, the listed entity may issue SR

Shares to its existing SR Shareholders only by

way of a bonus, split or a rights issue in

compliance with applicable laws.

· The SR Shares at all times shall be treated at par

with the ordinary equity shares, except in case of

voting on resolutions. However, SR Shares shall

be treated at par with the ordinary equity shares

(i.e. one share shall only have one vote), in terms

of voting rights in certain cases including

appointment or removal of independent

directors/auditors, voluntary winding up,

initiation of voluntary resolution under the

Insolvency and Bankruptcy Code 2016, related

party transactions involving the SR Shareholders,

changes in the memorandum or articles of

association (except any change affecting the SR

Shares), etc.


16

· The total voting rights of SR Shareholders

(including ordinary shares) upon listing, pursuant

to an initial public offer, shall not, at any point,

exceed 74%.

· The SEBI Listing Regulations prescribe certain

provisions for the conversion of the SR Shares

into ordinary equity shares of the listed entity.

· The SEBI (Substantial Acquisition of Shares and

Takeovers) Regulations, 2011 have been

amended to provide an exemption from the

obligation to make an open offer under

Regulation 3 in case of increase in the voting

rights of any shareholder beyond the threshold

limits specified under Sub Regulation (1) and (2)

of Regulation 3, without the acquisition of

control, pursuant to the conversion of SR Shares

into ordinary equity shares.

(SEBI Notification No. SEBI./LAD-NRO/GN/2019/25 SEBI Notification No. SEBI/LAD-NRO/GN/2019/26SEBI Notification No. SEBI/LAD-NRO/GN/2019/27

and SEBI Notification No. SEBI/LAD NRO/GN/2019/29

each dated July 29, 2019 and SEBI/LADNRO/GN/2019/28 dated July 29, 2019)

8. SEBI amends the SEBI (Substantial Acquisition of

Shares and Takeovers) Regulations, 2011

(“Takeover Regulations”)

SEBI, pursuant to its decision in the board meeting on

June 27, 2019, has amended certain provisions of

Takeover Regulations. The key highlights of the

amendment are as follows:

Ø The term 'encumbrance' has been defined to include

any restriction on the free and marketable title to

shares, by whatever name called, whether executed

directly or indirectly; pledge, lien, negative lien, non-

disposal undertaking; or any covenant, transaction,

condition or arrangement in the nature of

encumbrance.

Ø The promoter of every target company has to declare

on a yearly basis that the promoter, along with Persons

Acting in Concert (“PACs”), has not made any

encumbrance, directly or indirectly, other than those

already disclosed during the financial year. Such a

declaration has to be made within 7 working days

from the end of each financial year to every stock

exchange where the shares of the target company are

listed; and the audit committee of the target company.

Ø Additional disclosure requirements have been

prescribed by SEBI, as per the circular dated August

07, 2019:

· The promoter of every listed company shall

specifically disclose in the prescribed format,

detailed reasons for encumbrance, if the

combined encumbrance by the promoter along

with PACs with him equals or exceeds:

- 50% of their shareholding in the company; or

- 20% of the total share capital of the company

· The disclosure shall be made to every stock

exchange where the shares of the company are

listed and to the listed company within 2 working

days from the creation of such encumbrance.

· If the existing combined encumbrance by the

promoter along with PACs with him is either 50%

or more of their shareholding in the company or

20% or more of the total share capital of the

company as on September 30, 2019, he shall

specifically make first disclosure on detailed

reasons for encumbrance in the prescribed

format, by October 04, 2019.

(SEBI Notification No. SE

SEBI/HO/CFD/DCR1/CIR/P/2019/90 dated August

07, 2019 w.e.f. October 01, 2019)

9. Investment norms for AIFs operating in IFSC

In order to harmonize the provisions governing

investments by Alternative Investment Funds

(“AIFs”) incorporated in International Financial

Services Centres (“IFSC”) with those provisions

regarding investments applicable for domestic AIFs,

SEBI has permitted AIFs incorporated in IFSC to

make investments as per the provisions of the SEBI

(AIF) Regulations, 2012, and the guidelines and


17

circulars issued thereunder, including the operating

guidelines for AIFs in IFSC.

(SEBI Circular No. SEBI/HO/IFSC/CIR/P/2019/91

dated August 09, 2019)

10. SEBI imposes penalties for non-compliance of

certain provisions of the SEBI ICDR Regulations

In line with the provisions of Regulation 297 and 298

of the SEBI ICDR Regulations, which prescribe the

actions which may be taken by stock exchanges

against listed entities or any other person for

contravention of the provisions of the SEBI ICDR

Regulations, SEBI has prescribed the penalties which

may be imposed by stock exchanges on such listed

entities for certain specific non-compliances. SEBI

has issued this circular in supersession to its circular

bearing reference number CIR / CFD / DIL / 57 / 2017

dated June 15, 2017.

Ø A fine of INR 20,000 per day of non-compliance till

the date of compliance has been prescribed under the

circular for certain non-compliances, including delay

in completion of bonus issue, delay in completion of

conversion of convertible securities and allotment of

equity shares, delay in approaching the stock

exchanges for listing of equity shares and delay in

making an application for trading approval within the

timelines prescribed under the relevant regulations.

Ø In case of delay in completion of bonus issues, it is

clarified that while the approval for listing and trading

of promoters' bonus shares may be granted by stock

exchanges only after payment of the requisite fine,

such approval in relation to the non-promoter shares

may be granted, in the interest of investors, subject to

compliance with other requirements.

Ø The recognised stock exchange shall issue notices to

the non-compliant listed entities to ensure compliance

and collect fines as per the circular within 15 days

from the date of notice, failing which, appropriate

action may be initiated in furtherance of Regulation

298 of the SEBI ICDR Regulations. The stock

exchanges shall disclose, on their websites, the names

of the non-compliant listed entities (including details

of the fines imposed and/or received etc.).

(SEBI Circular No.

SEBIHO/CFD/DIL2/CIR/P/2019/94


11. Payment of outstanding dues by listed entities

before filing scheme of arrangement

SEBI vide Circular dated September 12, 2019 has stipulated payment of all dues, fines or penalties imposed by SEBI, stock exchanges and the depositories on the listed entities before filing the draft scheme of arrangement with the designated stock exchange.

In case such dues remain unpaid, a 'report on the unpaid dues' shall be submitted to the stock exchanges (along with the draft scheme) by the listed entities prior to obtaining an observation letter from the stock exchanges, containing details of the unpaid dues, as per the prescribed format.

(SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2019/192 dated

September 12, 2019)

12. SEBI amends the SEBI Buy-Back Regulations

SEBI has notified the SEBI (Buy-back of Securities)

(Second Amendment) Regulations, 2019, whereby

following key changes have been made:

Ø The standalone and consolidated financial statements

will both be considered for evaluating the maximum

limit of buy-back, permitted size of buy-back from

open market, ratio of the aggregate of secured and

unsecured debts owed by the company to the paid-up

capital and free reserves after buy-back and limit of

buy-back beyond which special resolution at a general

meeting is required.

Ø For companies having subsidiaries that are NBFCs

and HFCs regulated by RBI or the National Housing

Bank, post buyback ratio of secured and unsecured

debts owed by the company to the paid-up capital and


18

free reserves to be 2:1, after excluding the

abovementioned subsidiaries. However, all such

excluded subsidiaries are required to have their ratio

of aggregate of secured and unsecured debts to the

paid-up capital and free reserves of not more than 6:1

on standalone basis.

(SEBI Notification No. SEBI/LAD-NRD/GN/2019/33

dated September 19, 2019)

13. Notification of the SEBI (Foreign Portfolio

Investors) Regulations, 2019

Based on the recommendation of the H. R. Khan

committee, SEBI has repealed the SEBI (Foreign

Portfolio Investors) Regulations, 2014 and notified

the SEBI (Foreign Portfolio Investors) Regulations,

2019 (“2019 FPI Regulations”). Set out below are the

key highlights.

Ø Foreign Portfolio Investor (“FPI”): Under the new

Regulations, FPIs would be classified into 2

categories instead of 3.

· Category – I FPIs: Include inter alia (a)

government and government-related investors

including entities controlled or at least 75%

directly or indirectly owned by such government

and government related investor; (b) pension

funds and university funds; (c) appropriately

regulated entities such as insurance or

reinsurance entities, banks etc.; (d) eligible

entities from the Financial Action Task Force

(“FATF”) member countries.

· Category II – FPIs : All the investors

n o t e l i g i b l e u n d e r C a t e g o r y I F P I s

such as (a) appropriately regulated funds not

eligible as Category-I foreign portfolio investor;

( b ) e n d o w m e n t s a n d f o u n d a t i o n s ;

(c) charitable organisations; (d) corporate bodies;

( e ) f a m i l y o f fi c e s ; ( f ) i n d i v i d u a l s ;

(g) appropriately regulated entities investing on

behalf of their client; and (h) unregulated funds in

the form of limited partnership and trusts.


Ø Investment Restrictions:

· An FPI shall invest only in shares, debentures and

warrants issued by a body corporate, listed or to

be listed on a recognized stock exchange in India;

units of schemes launched by mutual funds; units

of schemes floated by a collective investment

scheme; derivatives traded on a recognized stock

exchange; units of real estate investment trusts,

infrastructure investment trusts and units of

Category III alternative investment funds; indian

depository receipts; any debt securities or other

instruments as permitted by the RBI for FPIs.

· Where an FPI, prior to commencement of these

regulations, holds equity shares in a company

whose shares are not listed on any recognised

stock exchange, and continues to hold such shares

after the IPO and listing thereof, such shares shall

be subject to lock-in for the same period, if any, as

is applicable to shares held by a foreign direct

investor placed in similar position.

· FPIs are allowed to buy or sell illiquid or

suspended or delisted securities.

· FPIs are allowed to receive, hold and sell unlisted

securities as referred at Regulation 20(2) and

transact in unlisted securities received through

involuntary corporate actions including a scheme

of a merger or demerger or pursuant to

implementation of any resolution plan or in

accordance with the guidelines issued by the

Government of India or the RBI or any other

regulator for a scheme of debt resolution.

However, such unlisted holdings of the FPI shall

be treated as FPI.

· The purchase of equity shares of each company

by a single FPI including its investor group shall

be below 10% of the total paid-up equity capital

on a fully diluted basis of the company. Where the

total investment under these regulations by an

FPI including its investor group exceeds the

threshold of below 10% of the total paid up equity

19


capital in a listed or to be listed company on a

fully diluted basis, the FPI shall divest the excess

holding within 5 trading days from the date of

settlement of the trades resulting in the breach. In

case the FPI fails to divest the excess holding, the

entire investment in the company by such foreign

portfolio investor including its investor group

shall be considered as investment under foreign

direct investment and the FPI and its investor

group shall not make further portfolio investment

in that company under these regulations.

(SEBI Notification No. SEBI/LAD-

NRO/GN/2019/36, dated September 23, 2019)

INFORMAL GUIDANCE

1. Exemption for a proposed merger of promoter group entities under Regulation 10(1)(d)(iii) of the SEBI (SAST) Regulations, 2011

Karun Carpets Pvt . Ltd. (“KCPL”) , DBH International Pvt. Ltd. (“DBHI”) and Bharat Starch Products Pvt. Ltd. (“BSP”) hold respectively 5.82%, 40.44% and 5.64% shares of Greaves Cotton Ltd. (“Target Company”) and are classified as promoters of the Target Company. KCPL, DBHI and BSP and their shareholders are directly or indirectly promoters of the Target Company.

With a view to consolidate group entities so as to eliminate the cross-holdings, DBHI, BSP and DBH Investments Pr ivate Limited (col lect ively “Transferor Companies”) were proposed to be amalgamated into KCPL (“Transferee Company”) through a scheme of amalgamation under Section 230-232 of the Companies Act.

Pursuant to the scheme, investment of DBHI and BSP in the Target Company would get consolidated in KCPL and will result in an increase in the investment of KCPL in the Target Company from 5.82% to 51.90%.

Relying on the informal guidance in Force Motors Limited and in the matter of Saldhar Investments and Trading Company Private Limited, KCPL sought confirmation from SEBI that the proposed acquisition would fall under the exemption provided under Regulat ions 10(1)(d)( i i i ) of the Takeover Regulations.

SEBI concluded that the transfer and vesting of shares of the Target Company, by the Transferor Companies with the Transferee Company would be exempt from the open offer obligations by virtue of Regulation 10(l)(d)(iii) of Takeover Regulations, based on the following:

Ø The transaction would be discharged by way of issue of equity shares of Transferee Company and there was no involvement of cash/cash equivalents.

Ø Mr. Karan Thapar along with family members have sole control over the KCPL, DBH Investment Private Limited and BSP, which holds 51.90% of shares Target Company and there will be no change in the indirect control over the 51.90% shares of the Target Company pursuant to the proposed scheme. Also, the Transferor Company-3, viz. DBH Investment Private Limited is held indirectly by Mr. Karan Thapar through DBH Investments Private Limited and KCPL. Further, there shall be no change in control of Mr. Karan Thapar in Target Company pursuant to the Scheme of Amalgamation.

(SEBI Informal Guidance CFD/DCRI/OW/P/2019/14383/1 dated June 06,

2019)

2. Exemption from submission of consolidated unaudited financial results under Regulation 33(3)(b) of the SEBI Listing Regulations

An informal guidance was sought by Shriram Transport Finance Company Limited (“STFCL”), a public listed company, in relation to the requirement of preparation and submission of unaudited consolidated financial results for the first 3 quarters of the fiscal 2020 i.e. the quarters ending June 30, 2019, September 30, 2019 and December 31, 2019 (“Quarters”) and for each such quarters for subsequent financial years under the SEBI Listing Regulations (since a subsidiary of STFCL ceased to be its subsidiary with effect from February 7, 2018 and became an associate of STFCL). Further, STFCL sought clarification on whether the submission of unaudited standalone financial results for the Quarters and for each such quarters for subsequent financial years would ensure compliance with regulation 33(3)(b) of the SEBI Listing Regulations.

20


SEBI, clarified that for the purpose of compliance with the SEBI Listing Regulations, if a listed entity has subsidiaries or associates, the listed entity is required to submit quarterly/ year-to-date consolidated financial results, in addition to standalone financial results as mentioned in Regulation 33(3)(a) of the SEBI Listing Regulations and the limited review report as mentioned in Regulation 33(3)(c)(i) of the SEBI Listing Regulations. Further, it clarified that the non-submission of the aforesaid financial results would result in non-compliance of the SEBI Listing Regulations.

(SEBI Informal Guidance No. SEBI/HO/CFD/CMD/OW /P/2019/19757/1


LIST OF CONTRIBUTORS

21

DISCLAIMER: This newsletter has been sent to you for informational purposes only and is intended merely to highlight issues. The information and/or observations contained in this newsletter do not constitute legal advice and should not be acted upon in any specific situation without appropriate legal advice.

The views expressed in this newsletter do not necessarily constitute the final opinion of Cyril Amarchand Mangaldas on the issues reported herein and should you have any queries in relation to any of the issues reported herein or on other areas of law, please feel free to contact at the following co-ordinate:

CYRIL SHROFF Managing Partner [email protected]

This newsletter is provided free of charge to subscribers. If you or anybody you know would like to subscribe to Insight please send an e-mail to [email protected], include the name, title, organization or company, e-mail address, postal address, telephone and fax numbers of the interested person.

If you are already a recipient of this service and would like to discontinue it or have any suggestions and comments on how we can make the newsletter more useful for your business, please email us at [email protected].

cyril amarchand mangaldas

peninsula chambers, peninsula corporate park, gk marg, lower parel, mumbai - 400 013 (india)

tel: +91 22 2496 4455 fax:+91 22 2496 3666

www.cyrilshroff.com

other offices: new delhi bengaluru hyderabad chennai ahmedabad

CYRIL [email protected]

YASH [email protected]

BHARAT [email protected]

RAMGOVIND [email protected]

DEVAKI [email protected]

SHEJAL [email protected]

ARCHIT [email protected]


insight vol. xi - cyril amarchand mangaldas · 2020. 11. 20. · limited, jaypee cement corporation...

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