GREEN WASHING AND HEFTY FINE PAID BY MNCs AROUND. THE WORLD WHAT IS GREEN WASHING ?

 

GREEN WASHING AND HEFTY FINE PAID

 BY MNCs AROUND THE WORLD

WHAT IS GREEN WASHING ?

Greenwashing is the practice of making false or misleading claims about a product, service, or company’s environmental impact.

Greenwashing can take many forms, including:

Misleading labels: Using labels like “green” or “eco-friendly” without clear definitions

Vague claims: Making vague or non-specific statements about a company’s operations

Minor improvements: Claiming that a small improvement has a big impact

Deceptive packaging: Using deceptive packaging, such as labelling a plastic package as recyclable when it’s not

Efficiency claims: Claiming to be more energy efficient without providing evidence

GREEN WASHING LEGISLATIONS AROUND THE WORLD

Authorities around the world are introducing legislation and penalties to combat the threat of greenwashing incidents. Most recently, the European Union kicked off 2024 by adopting a new law — the Greenwashing Directive — to stop greenwashing practices.

This means businesses that greenwash, or breach sustainability laws, risk being slapped with fines worth millions of dollars.

GREENWASHING LEGISLATION IN INDIA

The Central Consumer Protection Authority (CCPA) under the has issued The Guidelines for Prevention and Regulation of Greenwashing and Misleading Environmental Claims, 2024 (the Guidelines). They aim to enhance consumer trust and encourage sustainable business practices by curbing false claims or exaggerations of environmental benefits of products or services. The guidelines are in furtherance to The Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022.

APPLICABILITY OF GREENWASHING DIRECTIVES IN INDIA

Applicability of the Guidelines

• The Guidelines apply to all environmental claims made by manufacturers, service providers, or advertisers, and extend to advertising agencies and endorsers involved in promoting such products or services.
• The Guidelines strictly prohibit engaging in greenwashing and misleading environmental claims.
• 

Prevention and Regulation of Greenwashing and Misleading Environmental Claims, 2024 

COCA-COLA, DANONE AND NESTLE MAY BE IN TROUBLE DUE TO GREENWASHING ALLEGATIONS

Coca-Cola, Danone and Nestle have been accused of making misleading claims about their plastic water bottles being "100% recycled". A consumer body and two environmental groups have issued a legal complaint to the European Commission over the alleged greenwashing.

MY VIEW

Indian manufacturers, service providers, or advertisers, and advertising agencies should adopt The Guidelines for Prevention and Regulation of Greenwashing and Misleading Environmental Claims, 2024 (the Guidelines)issued by The Central Consumer Protection Authority (CCPA) to prevent hefty fines that may be levied by the above CCPA in India as a part of compliance programme in their company.

Compliance officer or Company Secretary should take care that Prevention and Regulation of Greenwashing and Misleading Environmental Claims, 2024 directives is being complied in their company to avoid hefty fines later.

FCS R V Seckar

79047 19295  rvsekar2007@gmail.com

COLLATERAL FREE LOANS OF UP TO RS 100 CR TO MSMES-GUARANTEE WILL BE GIVEN BY UNION GOVERNMENT

 COLLATERAL FREE LOANS OF UP TO RS 100 CR TO MSMES-GUARANTEE WILL BE GIVEN BY UNION GOVERNMENT

MSMEs will get collateral free loans of up to Rs 100 crores through a new credit assessment model by PSU banks very soon as per Finance Minister of India.

·       Issues and the grievances faced by MSMEs will be solved after the introduction of a new credit guarantee scheme very soon by Union government.’’

·       Presently ,MSMEs get working capital from banks, they don't get term loans, loans for plant and machinery. Now, with this guarantee, which was announced in the budget, for up to 100 crores, the guarantee will be provided, even if you are going to borrow more from the banks, for the first 100 crores, the guarantee will be given. And therefore you are going there collateral-free to that extent,"

·       No collateral, no third-party guarantee. The Central government gives you the guarantee for up to 100 crores for the MSMEs term loan up to Rs 100 crores from public sector banks

·       Banks will do the credit assessment within themselves. Each bank will have their own credit assessment model

·       No doubt , this move will accelerate the MSMEs development and growth in large scale in India.

R V Seckar , FCS
79047 19295
rvsekar2007@gmail.com

WHY COMPANIES MOBILIZE FUNDS THROUGH ISSUE OF BONDS ?

 WHY COMPANIES MOBILIZE FUNDS THROUGH ISSUE OF BONDS ?

Issuing bonds is one way for companies to raise money for their working capital or  for their capital needs . A bond functions as a loan between an investor and a company. The investor agrees to give the company a certain amount of money for a specific period of time. In exchange, the investor receives periodic interest payments.

WHY ARE COMPANIES ISSUING CORPORATE BONDS TO RAISE FUNDS?PIRAMAL CAPITAL RAISES $150 MILLION FROM BOND SALE

As of November 2022, hundreds of bonds are listed on both the BSE and NSE. Bonds can provide an efficient and cost-effective source of funding. By issuing bonds on the open market, a company may have relatively more freedom to operate in its own way while also raising money to finance day-to-day operations, fund a new project, expand into a new market, etc. In addition, bonds can lower companies’ long-term or short-term funding costs.

PIRAMAL CAPITAL RAISES $150 MILLION FROM BOND SALE

Piramal Capital and Housing Finance Limited (earlier Dewan Housing Finance Corporation Ltd. (DHFL)) is a non-deposit taking housing finance company (NBFC), headquartered in Mumbai with branches in major cities across India. DHFL was established to enable access to economical housing finance to the lower and middle income groups in semi-urban and rural parts of India.

Piramal Capital and Housing Finance recently has raised $150 million through a global bond sale. The bonds will be issued at a yield of 7.078 per cent and will have to be repaid in 3.32 years, according to a company statement. The company, a wholly-owned subsidiary of Piramal Enterprises, had raised USD 300 million from a sustainability bond issuance in July this year.

The issue saw subscriptions of USD 520 million or an oversubscription of 3.5 times.

From a geographical spread perspective, 92 per cent of the funds were raised from Asia, while the rest was from Europe, Middle East and Africa.

Piramal said that 95 per cent of the money raised was from asset managers and 5 per cent was from banks.

                         EARLIER BOND ISSUES
·       Axis Bank is planning  to roll out AT-1 bond sale for a Rs 3,000-cr fundraise.
·       SBI raises Rs 10,000 crores through infrastructure bonds at 7.36% coupon in June 2024.
·       Mahindra Finance, Shriram Transport Finance, India Bulls Housing have already issued bonds and raised funds.
·       Bajaj Finance, Hero Fincorp, L&T Finance, Tata Financial Services ,& IIFL Financial are planning to issue bonds shortly.
R V Seckar  Practicing Company Secretary ,
 7904719295,
rvsekar2007@gmail.com

SEBI STUDY UNCOVERS ALARMING TRENDS IN ROYALTY PAYMENTS BY LISTED COMPANIES- EVEN LOSS MAKING COMPANIES ARE ALLOWED TO PAY ROYALTIES

 

SEBI STUDY UNCOVERS ALARMING TRENDS IN ROYALTY PAYMENTS  BY LISTED COMPANIES- EVEN LOSS MAKING COMPANIES ARE ALLOWED TO PAY ROYALTIES

ROYALTY AND FOREIGN TECHNICAL COLLABORATION PAYMENT

Royalty and Foreign Technical collaboration payment are governed by the RBI circular AP ( DIR Series) Circular No 5 dated 21 July 2003.

LIBERALIZED  THE FOREIGN TECHNOLOGY COLLABORATION AGREEMENT POLICY

Under  liberalized  the foreign technology collaboration agreement policy through Press Note No 2 (2003 Series) dated 24 -06-2003 , irrespective of who have entered into foreign technology collaboration agreements were  permitted on the automatic approval route to make royalty payments at 8% on exports and 5% on domestic sales without any restriction on the duration of royalty payments.

AUTOMATIC ROUTE:

The Government of India has reviewed the extant policy vide the press note no 8 (2009  series ) dated 16th December 2009 and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route without any limit as stated in the following table  i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

With effect from16-12.2009,  after issue of Press Note 8 (2009 series)

 

Lump sum payments	No limit now
Royalty payable	No limits - subject to FEMA  (Current Account Transactions) Rules, 2000
Duration of royalty payments	No Limits
Royalty limits are	Net of taxes and are calculated according to standard conditions

 

For more details , please visit the following link:

https://rvseckarfema.blogspot.com/2011/02/foreign-technology-colloborations.html

ROYALTY PAYMENTS EVEN BY LOSS MAKING COMPANIES

In one out of four times, listed entities paid royalties exceeding 20% of their net profits to related parties.

And 185 instances of royalty payments were by companies that made losses.

SEBI Study found that some listed companies dolled out more than 20 per cent of their net profits as royalty to related parties.

SEBI study analysed 233 listed companies over a period of ten years, starting from financial year 2014 (FY14).

LESS THAN 5% AND MORE THAN 5%

SEBI study found 1,538 instances of royalty payments (RPs) below the approval requirement threshold, which is set at 5 per cent of the turnover.

Royalty payments of more than 5 per cent of the turnover must be ratified by majority of minority shareholders.

The cumulative 185 royalty payments by 63 loss-making companies amounted to Rs 1,355 crore.

SKIPPING OF DIVIDEND PAYMENT

Further, one out of two times, listed companies that paid royalty, did not pay dividend or paid more royalty to RPs than dividend paid to non-RP shareholders, the study revealed.

POOR DISCLOSURE LEVELS, UNFAIR PAYOUTS

SEBI’s study throws a light on poor disclosure levels, unfair payouts and unjustified payments for brand usage and technology know-how by these companies.

“In case of MNCs, shareholders of the Indian subsidiary have little information on the rates of royalty being charged from fellow subsidiaries in other geographies,” SEBI study said.

NO ADEQUATE DISCLOSURES IN ANNUAL REPORT

The SEBI study stated, "It has been observed that many of the companies are disclosing the royalty payment just as an item under the statement of transactions with RPs in the Annual Report, with no details being provided with respect to the rationale and rate of such royalty paid."

NON-DISCLOSURE OF PERIOD OF ROYALTY PAYMENTS

The SEBI study stated that the companies seeking approval of shareholders with respect to royalty payments, are not disclosing period or tenure of approval of such transactions. This is suggestive of the company seeking a perpetual approval for transactions."

ROYALTY PAYMENTS IN EXCESS OF 20% OF NET PROFITS

When analysing consistent royalty payers, of which there were 79 companies, the study found that eleven out of them consistently paid royalty exceeding 20% of net profits during all the 10 years.

MY VIEWS:

·      Government should ban the loss making companies to pay royalties as it will diminish the forex reserves of the nation. Only profit making companies should be allowed to pay royalties.

·      In Directors Report , there should be a report on royalty paid , rate of royalty paid , turnover on which royalty paid so that shareholders will come to know the details about the royalties paid.

·      Audit committee should thoroughly scrutinise the amount of royalty paid, the justification for the payment .

Courtesy : Business Standard and Money Control

R V SECKAR, FCS 4075,

rvsekar2007@gmail.com

79047 19295

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HOW AMBUJA CEMENT SAVED RS 287.87 CRORES IN STAMP DUTY

 DELHI HIGH COURT CONFIRMS THAT NON APPLICABILITY OF STAMP DUTY ON MERGERS AND AMALGAMATION BETWEEN HOLDING AND SUBSIDIARY COMPANY - 

HOW AMBUJA CEMENT SAVED RS 287.87 CRORES IN STAMP DUTY

BRIEF BACKGROUND & FACTS OF THE CASE

A Writ Petition was filed by Ambuja Cements Limited, the Petitioner, challenging the imposition of stamp duty on a merger order under Article 23 of Schedule IA of the Indian Stamp Act, 1899 for the merger between holding and subsidiary company.

A Scheme of Arrangement between Holcim (India) Private Limited (Transferee Company) and Ambuja Cement India Private Limited (ACIPL/ Transferor Company) having common parent company i.e., Holderind Investments Ltd Mauritus, was approved by the Delhi High Court on November 14, 2011.

To implement the merger, the Transferee Company issued Equity Shares to the shareholders of ACIPL (i.e., Holderind Investments Ltd.). In March 2014, the Collector of Stamps, Delhi, issued a show-cause notice alleging that the Transferee Company had failed to pay stamp duty on the merger order under Article 23 of Schedule IA of the Indian Stamp Act, 1899.

The notice demanded payment of stamp duty calculated at 3% of the total value of the merger transaction (₹7,295.94 crores), amounting to ₹218.87 crores, along with a penalty of ₹69 crores.
The notice relied on the precedent set in Delhi Towers Ltd. v. GNCT of Delhi (2009 SCC OnLine Del 3959) to classify the merger as a “conveyance” requiring stamp duty. However, the Transferee Company argued that vide Notification no. 13 dated 25.12.1937 issued by the Central Government (1937 Notification), the transaction was not eligible to stamp duty.

Whether the exemption from stamp duty on the order of merger between two or more subsidiaries of a common parent company provided under the 1937 Notification is applicable and binding?

The Court in Delhi Towers Ltd viewed that that the transfer of property between two companies, as sanctioned by the court, is an inter vivos transaction and, thus, falls under the definition of “conveyance.”

The Supreme Court judgment in Hindustan Lever Ltd. v. State of Maharashtra (2004) 9 SCC 438, which clarified that court orders sanctioning schemes of amalgamation are also subject to stamp duty.

The Court cited the case of Li Taka Pharmaceuticals Ltd. v. State of Maharashtra (1996), which held that the transfer of shares constitutes a “conveyance” and is subject to stamp duty based on the market value of the property.

 This further solidified the position that a scheme of amalgamation, whether involving immovable or movable property, is covered under the definition of “conveyance” and is subject to stamp duty.
The Transferee Company also relied heavily on the 1937 Notification, which provides an exemption from stamp duty for transfers between parent and subsidiary companies.
rvsekar2007@gmail.com

DEMAND OF ₹218.87 CRORES AS STAMP DUTY

EXEMPT FROM STIAMP DUTY AS TRANSACTION IS NOT A CONVEYANCE

MAIN LEGAL ISSUE

DELHI TOWERS LTD

HINDUSTAN LEVER LTD. V. STATE OF MAHARASHTRA

LI TAKA PHARMACEUTICALS LTD. V. STATE OF MAHARASHTRA

EXEMPTION FROM STAMP DUTY BETWEEN HOLDING COMPANY AND SUBSIDIARY COMPANY

DELHI HIGH COURT AFFIRMS

The Delhi High Court reaffirmed the applicability of the 1937 Notification which provides an exemption from stamp duty on instrument evidencing transfer of property between companies, in case where:

·      at least 90 per cent of the issued share capital of the transferee company is in the beneficial ownership of the transferor company, or

·      where the transfer takes place between a parent company and a subsidiary company one of which is the beneficial owner of not less than 90 per cent of the issued share capital of the other, or

·      Where the transfer takes place between two subsidiary companies of each of which not less than 90 per cent of the share capital is in the beneficial ownership of a common parent company.

    R V Seckar FCS

79047 19295