Saturday, April 21, 2018

SUZLON’S COMPANY SECRETARY WAS FINED BY SEBI FOR FAILURE TO MAKE SOME CORPORATE ANNOUNCEMENT AS PER LODR


SUZLON’S COMPANY SECRETARY WAS FINED BY SEBI FOR FAILURE TO MAKE SOME CORPORATE ANNOUNCEMENT AS PER LODR

SEBI FINES SUZLON FOR FAILURE TO DISCLOSE PRICE SENSITIVE INFORMATION


Markets regulator Securities and Exchange Board of India (Sebi) on Friday imposed a fine of Rs1.1 crore on wind turbine maker Suzlon Energy Ltd for violating insider trading norms.


Suzlon Energy had failed to disclose price sensitive information as required under Sebi’s listing regulations on “more than one occasion”.


“I find that the investigation did not bring out the disproportionate gain or unfair advantages to the noticee and loss caused to investors as a result of non-disclosure of truncation of order. 




They failed to make the disclosure on more than one occasion, hence it can be said, it is repetitive in nature,” Sebi’s adjudicating officer Sahil Malik said in the order.


The notices in the case were Suzlon Energy, its promoters Tulsi R. Tanti and Girish R. Tanti, and Hemal A. Kanuga. Tulsi Tanti is chairman and managing director while Girish Tanti is a director.




COMPANY SECRETARY CUM COMPLIANCE OFFICER FINED

Kanuga, who has been fined Rs5 lakh, is compliance officer, according to the order.

According to information available on BSE, Kanuga is currently company secretary.

FAILURE TO INFORM SEBI AND MARKET SOME CORPORATE ANNOUNCEMENT

The violations pertain to failure to make certain corporate announcements about orders received by the company. The regulator looking into announcements made during the period from 1 April 2006 to 31 March 2009. 

“It was alleged that around 18.8% of the order received by Noticee 1 (Suzlon) and informed by way of various corporate announcements were either not opted for by the clients or were not executed. It was also alleged that no specific corporate announcement was made by the noticees to inform stakeholders about the same,” Sebi noted.


Thursday, April 19, 2018

ALL ABOUT NBFC, WHAT IS A NBFC?


ALL ABOUT NBFC

WHAT IS A NBFC?

R V Seckar consultant in FEMA, CORPORATE LAW & NBFC REGISTRATION


Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, and it deals in the business of loans and advances, acquisition of shares,  bonds/stock/ /securities debentures issued by Government or local authority or other securities of marketable nature, hire-purchase, leasing, chit business insurance business.

WHAT IS NOT A NBFC?

But it does not include any institution whose principal business is agriculture activity, industrial activity, construction sale/purchase/ of immovable property.

DEFINITION OF A NBFC

Basically, any non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is an NBFC.


R V Seckar consultant in FEMA, CORPORATE LAW & NBFC REGISTRATION

WHAT RBI FINANCIAL STABILITIY REPORT SAYS

RBI’s recent Financial Stability Report says- NBFCs have continued to perform better than the banks.  Net profit as a percentage of total income remained at 15.3% between March 2015 and March 2016. The flow of non-bank resources to the corporate sector, which includes NBFCs’ bond market borrowing and lending, has increased by 43% from April 2017 to December 2017.

NBFC & INDIAN ECONOMY

R V Seckar consultant in FEMA, CORPORATE LAW & NBFC REGISTRATION

NBFC sector is growing at the cost of banks that are saddled by bad loans and poor profitability. NBFCs were the largest net borrowers of funds from the financial system.

There is a growing realisation of the significance of NBFCs in the industry, and in promoting India's economic growth.  There are huge growth opportunities for NBFCs because of the great advantages it offers; though there are some issues regarding the NBFCs.


Both the pros and cons of NBFCs are elucidated below:

R V Seckar consultant in FEMA, CORPORATE LAW & NBFC REGISTRATION


ADVANTAGES OF NBFC

  1. Can provide loans and credit facilities
  2. Can trade in  money market instruments
  3. Can do wealth management such as managing portfolios of stocks and shares
  4. Can underwrite stock and shares and other obligations
  5. NBFCs are the last resorts of borrowing; NBFCs are there where banks are not there
  6. NBFCs are the largest propellants of ushering finance into the country
  7. Agility is very important for NBFCs as it sets the banks apart. Banks function slower as compared to the NBFCs.
  8. The use of modern methods by NBFCs has overcome key challenges that had overwhelmed conventional lending. NBFCS have made great use of technological advancements like the use of mobile phones and the internet which has helped in making information easily accessible anytime anywhere. It has reduced the demand and reliance on bank branches.
  9. Technology is not only at the head of banking and financial services, but also an increasingly digitized India has underpinned the rise of NBFCs. Digitalization has given NBFCs the ability to present multiple choices and reach the larger audience at quicker pace. This indirectly gives rise to larger NBFCs.
  10. Combination of partnership and database helps in increasing penetration of financial inclusion. To reach large numbers of customers successfully, and minimize risks, NBFCs have forged partnerships including the government to use their database and identify customer worthiness. Thus lending has been productive.
R V Seckar consultant in FEMA, CORPORATE LAW & NBFC REGISTRATION

DISADVANTAGES OF NBFC

  1. NBFCs cannot accept demand deposits as it falls within the realm of activity of commercial banks
  2. An NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself
  3. Deposit insurance facility is not available for NBFC depositors unlike in case of banks
  4. All NBFCs cannot accept deposits; only some can. Only those NBFCs holding a valid Certificate of Registration with authorisation to accept Public Deposits can accept/hold public deposits
  5. The regulatory mechanism for NBFCs is stringent.

RBI’s Stricter Norms for NBFC

RBI has prescribed strict norms on capital adequacy and NPA in order to bridge the regulatory gaps between NBFCs and Banks, asking NBFCs to maintain minimum capital adequacy norms. It is reflected from a statement of the RBI which said that seven NBFCs were not able to meet the regulatory minimum capital adequacy norms of 15% as of March 2016.


COURTESY: -Isha Malik &  M/s Vinod Kothari & Company

Tuesday, September 5, 2017

Over 2 lakh directors to be barred from board posts



Over 2 lakh directors to be barred from board posts
 

At least two lakh directors on the board of companies, whose names have been struck off by the Registrar of Companies (RoC), will be barred from holding any board position in new ventures although they will not have to step down from the board of other companies on which they are currently directors. 





So far, names of 2.1 lakh companies have been struck off for not filing returns and not completing other formalities related to compliance after notices were served on 2.97 lakh companies that had failed to respond to show-cause notices. Sources told TOI that this number is expected to rise in coming months. The crackdown against directors will begin over the next few days. 

The move to crack down on non-compliant companies by the ministry of corporate affairs (MCA) is part of an action on so-called shell companies, many of which exist only on paper and are often used as vehicles for round-tripping of funds or for money laundering. The government has set up a task force comprising MCA and revenue department officials to plug this gap in the system as it seeks to clamp down on black money . While the law allows oneperson companies, a majority of the companies have at least two directors, if not more. There are over 10 lakh companies in the country and the total number of directors will be in excess of 20 lakh. 

The law allows the government to bar these directors from taking up any board po sition for five years, sources said. They will, however, be allowed to fulfil obligations related to the companies whose names have been struck off. In addition, their directorship on other boards is not being disturbed, a source said.“There is no intention to create problems in other companies. So we are for the moment staying away from acting against the boards of other companies,“ a source said. 


On July 2, TOI was the first to report that MCA was launching an assault against directors on these companies and also informing banks about names of companies being struck off. Sources said the Reserve Bank of India as well as the Indian Banks' Association have been informed about the decision to strike off the names so that fund flow is choked. In the past, there have been instances where companies whose names had been struck off managed to have access to funding. 

Courtesy -Economic Times 

Directors disqualified under Section 164(2)(a) of the Companies Act, 2013 and who are associated with struck off companies (S.248) are advised not to make any application for Name Availability(INC-1), Incorporation of Companies (INC-7/SPICe-INC-32/URC-1/INC-12). Forms filed by such Directors shall be rejected summarily by the Central Registration Centre(CRC). Further, attention is drawn to the provisions of Section 7(5) and 7(6) which, inter-alia, provides that furnishing of any false or incorrect particulars of any information or suppression of any material information shall attract punishment for fraud under Section 447. Attention is also drawn to the provisions of Section 448 and 449 which provide for punishment for false statement and punishment for false evidence respectively.

Wednesday, June 14, 2017

Exemptions to Private Companies under Companies Act, 2013:

Exemptions to Private Companies under Companies Act, 2013:

As we all know that some exemptions were granted by MCA to Private Companies on 05.06.2015, the MCA has added more exemptions by amending the notification issued on 5th June, 2015 and by notifying further exemptions on 13th June, 2017:

1. New Concept of Start-up/ Start-up Companies has been introduced:

Start up Private Companies are not required to prepare the Cash Flow Statements under Companies Act, 2013.

For the purposes of this Act, the term 'start-up' or "start-up company" means a private company incorporated under the Companies Act, 2013 (18 of 20'l3) or the Companies Act, 1956 ('l of 1956) and recognized as start-up in accordance with the notification issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry."

2. The Private Companies which are small companies are not required to mention the amount of remuneration drawn by Directors in Annual Return.

3. The disclosure requirement of Adequacy of Internal financial control in Auditor’s report has been removed for a private company which is One Person Company or a small company or which has turnover less than rupees fifty crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or anybody corporate at any point of time during the financial year less than rupees twenty-five crore.

4. The Startup Private Companies are also not required to hold minimum number of four board meetings in a year. 

Earlier there were only One Person Compan
y, small company and dormant company in this category of exemption.

Monday, May 22, 2017

WHETHER NCLT CAN WAIVE THE REQUIREMENT OF CREDITOR’S / SHAREHOLDER’S MEETING IN CASE OF MERGER /DEMERGER/AMALGAMATION

WHETHER NCLT CAN WAIVE THE REQUIREMENT OF CREDITOR’S / SHAREHOLDER’S MEETING IN CASE OF MERGER /DEMERGER/AMALGAMATION

Powers of NCLT


In JVA Trading Pvt. Ltd. and C&S Electric Limited.


This case involved a scheme of amalgamation of JVA Trading with C&S Electric. JVA Trading had only four shareholders, all of who had granted their consent to the amalgamation. Hence, the question was whether the shareholders’ meeting of JVA Trading could be dispensed with. Here, after analysing the provisions of the Companies Act, 2013, the NCLT held:


 Section 230(9) of the Companies Act, 2013

In relation to the dispensation of the meeting of the equity shareholders of the Transferor Company is concerned we are not inclined to grant dispensation taking into consideration the provisions of the Companies Act, 2013 and the rules framed there under both of which expressly do not clothe this Tribunal with the power of dispensation in relation to the meeting of shareholders/members. On the other hand reference to Section 230(9) of the Companies Act, 2013 … discloses that the Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement and does not provide for the dispensation of the meeting of members.


Powers of NCLT


Companies (Compromises, Arrangements and 

Amalgamations) Rules, 2016)

Further, the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 more specifically Rule 5 which provides for directions to be issued by this Tribunal discloses that determining the class or classes of creditors or of members meeting or meetings have to be held for considering the proposed compromise or arrangement; or dispensing with the meeting or meetings for any class or classes of creditors in terms of sub-section (9) of section 230.

Keeping in view the above provisions, dispensation of the meetings of members of the company cannot be entertained by NCLT.

This effectively means that the NCLT can never dispense with the holding of a meeting of a class of shareholders or creditors (except under section 230(9)) even if such a meeting turns out to be an empty formality. This will certainly add to the costs and inefficiencies in effecting a scheme of arrangement. Under the Companies Act, 1956, courts did regularly grant dispensation despite the absence of any express provision in that legislation or the accompanying rules. It is not as if the affected minority shareholders are without any recourse. It is always possible for them to raise their objections when the scheme is taken up for consideration by the NCLT after the requisite classes of shareholders and creditors have approved it.



Creditors Meeting under Section 230(9) of the Companies Act, 2013


Whether NCLT has General Powers to dispense 

the creditor's Meeting ?


From a legal perspective, the NCLT does have general powers that it is at liberty to exercise in order to give effect to a scheme, for example in rule 24(2) of the rules pertaining to compromises and arrangements. However, the NCLT seems to be constrained by the existence of sub-section (9) of section 230, which expressly provides for dispensation of creditors’ meetings so long as they have been consented to by 90% of the creditors in value. The NCLT’s position is that this is only dispensation possible, and no other.

Section 230(9) of the Companies Act, 2013 … discloses that the Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement and does not provide for the dispensation of the meeting of members.

Thus , we can come to a conclusion that NCLT will not have any 
authority to dispense with the requirement of creditors meeting except under Section 230(9) of the Companies Act, 2013.



Tuesday, May 16, 2017

RANSOME Cyber Attack - Incident Response Requirements in Indian Law by Affected Companies

RANSOME Cyber Attack - Incident Response Requirements in Indian Law by Affected Companies
Ransomeware Attack

Yesterday’s Ransome cyber-attack. There are legal & regulatory requirements on affected Indian companies to report cyber incident under Information Technology Act, RBI guidelines and telecom license conditions. The relevant reporting authority depends upon the nature of the business of the company. There are stringent penalties (including imprisonment) if such incidents are not reported in certain cases.

Cyber Attack

Incident Reporting under CERT Rules

In India, section 70-B of the Information Technology Act, 2000 (the “IT Act”) gives the Central Government the power to appoint an agency of the government to be called the Indian Computer Emergency Response Team. In pursuance of the said provision the Central Government issued the Information Technology (The Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules, 2013 (the “CERT Rules”) which provide the location and manner of functioning of the Indian Computer Emergency Response Team (CERT-In). Rule 12 of the CERT Rules gives every person, company or organisation the option to report cyber security incidents to the CERT-In. It also places an obligation on them to mandatorily report the following kinds of incidents as early as possible:
·         Targeted scanning/probing of critical networks/systems;
·         Compromise of critical systems/information;
·         Unauthorized access of IT systems/data;
·         Defacement of website or intrusion into a website and unauthorized changes such as inserting malicious code, links to external websites, etc.;
· Malicious code attacks such as spreading of virus/worm/Trojan/botnets/spyware;
·         Attacks on servers such as database, mail, and DNS and network devices such as routers;
·         Identity theft, spoofing and phishing attacks;
·         Denial of Service (DoS) and Distributed Denial of Service (DDoS) attacks;
·         Attacks on critical infrastructure, SCADA systems and wireless networks;
·         Attacks on applications such as e-governance, e-commerce, etc.
Cyber Laws in India

Incident Reporting under Intermediary Guidelines
Section 2(1)(w) of the IT Act defined the term “intermediary” in the following manner;
“Intermediary” with respect to any particular electronic record, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web hosting service providers, search engines, online payment sites, online-auction sites, online market places and cyber cafes.
Rule 3(9) of the Information Technology (Intermediaries Guidelines) Rules, 2011 (the “Intermediary Guidelines”) also imposes an obligation on any intermediary to report any cyber incident and share information related to cyber security incidents with the CERT-In. Since neither the Intermediary Guidelines not the IT Act specifically provide for any penalty for non-conformity with Rule 3(9) therefore any enforcement action against an intermediary failing to report a cyber security incident would have to be taken under section 45 of the IT Act containing a penalty of Rs. 25,000/-.
How to Prevent a Cyber Attack ?

Incident Reporting under the Unified License

·         Clause 39.10(i) of the Unified License Agreement obliges the telecom company to create facilities for the monitoring of all intrusions, attacks and frauds on its technical facilities and provide reports on the same to the Department of Telecom (DoT). Further clause 39.11(ii) provides that for any breach or inadequate compliance with the terms of the license, the telecom company shall be liable to pay a penalty amount of Rs. 50 crores (Rs. 50, 00, 00,000) per breach.
A recent example of such an attack that we have seen from India is the recent data breach involving an alleged 3.2 million debit cards in India. In the case of this hack the payment processing networks such as National Payments Corporation of India, Visa and MasterCard, informed the banks regarding the leaks, based on which the banks started the process of blocking and then reissuing the compromised cards. It has also been reported that the banks failed to report this incident to the Computer Emergency Response Team of India (CERT-In) even though they are required by law to do so.


Courtesy: The Center for Internet & Society 

Wednesday, May 10, 2017

Recognition of CS as Goods and Service Tax Practitioner

Recognition of CS as Goods and Service Tax Practitioner 

Dear Professionals,


Pursuant to the Section 48 of the approved Central Goods and Service Tax Act (CGST), read with Rule 24 of the Revised Return Rules as available on www.cbec.gov.in , Any person who has passed Final Examination of the Institute of Company Secretaries of India (ICSI) is Eligible for enrolment as Goods and Services Tax Practitioner by making an application in Form GST PCT-1 to the Authorised Officer.

http://www.cbec.gov.in/


Please see my earlier post on 6 October 2016 

http://rvseckarcompanylaw.blogspot.in/2016/10/requesting-government-of-india-to.html