may 2018 - icsi may 2018.pdf · cs ankur srivastava cs b v dholakia cs dipika kataria (ms.) cs...

May 2018

Creating Connections –Building Bridges…Together

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Editor

CS Hitesh Kothari- Chairman, WIRC

Editorial Board (in alphabetical order)

CS Ankur Srivastava CS B V Dholakia CS Dipika Kataria (Ms.) CS Narendra Singh CS Piyush Bindal CS Rajkumar Adukia (Dr.) CS Riddhi Thakkar (Ms.) CS Umesh Ved

Contents

Page no. Particulars

2-3 Chairman Message 6-18 Article on (i) Analysis Of Some Important Provisions Of

The Companies (Amendment) Act, 2017 (ii) SEBI LODR - Requirement of Policies and

Critical Inputs thereof

19-21 Updates 22 List of Incharge/Executive Officers of WIRC

Chapters 24-25 Activity Report 26-30 Photo Gallery 31-32 Upcoming event announcement 33-34 Blood donation and CSBF Appeal

Publisher Dr. Rajesh Kumar Agrawal,

Regional Director- ICSI WIRC

Disclaimer: You are receiving this e-Newsletter since you are a member of ICSI. Views expressed in this newsletter are of authors and not necessarily of ICSI or WIRC of ICSI. ICSI or WIRC of ICSI does not verify authenticity of legal provisions contained in this newsletter. Neither authors, editors, publishers nor printers and distributers would be liable in any manner to any person by reason of any mistake or omission in this newsletter or for any action taken or omitted to be taken or advice rendered or accepted on the basis of this work. All rights reserved. All claims, disputes or complaints will be subject exclusively to jurisdiction of courts/ forums/ tribunal at Mumbai only.

WIRC of ICSI Premises :

13, 56 & 57, Jolly Maker Chambers No. 2 (1st & 5th Floors), Nariman Point, Mumbai – 400021 e-mail: [email protected], Phone Nos. : 022- 61307900 / 61307901 / 61307902

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CHAIRMAN’S MESSAGE

Dear Professional Colleagues,

The Month of May at Mumbai was Mighty and Marvelous and the activities were Magnificent. Yes in deed that WIRC was as busy as ever in serving its members and students.

The 19th Edition of PCS Conference which incidentally also happened to the Golden Jubilee edition was held at Mumbai on 18th and 19th May 2018. It was a Galaxy under one roof and eminent personalities from across the country graced the occasion. Shri Satyapal Singh,Minister of State for Human Resource Development was the Chief Guest and Shri Ashok Tyagi, Chairman, SEBI was the Guest of Honour. The gathering speaks volumes about any conference and the 19th edition had an excellent presence of more than 500 delegates from across the country. The institute also released around 9 publications. I am happy to inform you that WIRC also played a crucial role in releasing of publication on Transfer Pricing. I compliment the efforts of CS A Sekar and Ms.NayanaSavala who contributed in the preparation of publication on Transfer Pricing.The sessions held during the PCS Conference is exemplary and was a real value addition for the delegates. WIRC also contributed a sum of Rs,1,11,111/- towards CSBF and the same was handed over to president,ICSI.

Mumbai is growing and so as WIRC. We witnessed the birth of two Knowledge Centres in Mumbai. The Mulund Knowledge centre had its maiden meeting on May 13,2018 and the Vasai Knowledge Centre had its meeting on May 27,2018. Both the Knowledge Centre had an overwhelming response in terms of registration. I appreciate the pains taken by all the co-ordinators of these new centres and will appeal all the members to nurture the centres for better prospects. In this occasion I appeal all the members to take maximum advantage and enroll as a member in any Knowledge centre which is near to you. It gives me great happiness to inform you all that the membership of various knowledge centres is nearing 500. I compliment all the co-ordinators for the pains-taking efforts to expand the membership.

Raipur, which is the sole Chapter of the State of Chattisgarh organized a State conference which was attended by the members from various neighboring states. I thank CS Amit Kumar Jain, Chairman of Professional Development committee for taking efforts to organize the state conference.

I am happy to inform you that WIRC in the coming months will come out with various professional and academic development activities. In the lines of ICSI HO WIRC will also celebrate the month of July as “Students Month” where we are charting a whole month plan.

When work is a pleasure, life is a joy! When work is a duty, life is slavery- Maxim Gorky

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Members and Students who have “Out of Box” plans may please share your innovative ideas with us so that the initiative will see the light during Students month.

Friends, Donating Blood is Donating life and I will request all the members to enroll in the blood bank directory. I request all the members to refer the link- https://www.icsi.edu/Portals/72/Blood%20donar-Revised.pdf and complete the registration formalities.

I had the opportunity of meeting Dr.(Ms.) M.Thenmozhi who has recently taken over as Director of National Institute of Securities Markets and discussed about various aspects pf professional development. Dr.Thenmozhi was receptive to our thoughts and assured to have many joint initiatives which will be useful for our members.

The coming month is the month of examinations and I am sure that all the students are putting efforts to come out with flying colours. When I am writing this to you, my thoughts are going towards a famous Srilankan Cricketer –MarvanAttapattu who has proved and shown to the world that hard work and constant practice can move mountains and change the fate of any person. I will appeal all the readers to read his story by referring to the link http://tyronesystems.com/cwc/?p=1509

The moment exams are over the next though process comes to the mind of a student is placements and here we are. The Mega Campus Placement Drive -2018 will be held at ICSI-WIRC on June 12,2018. I appeal all my young friends to visit the ICSI website an enroll for the same.

WIRC is in the process of re-vamping its page in the ICSI website and I am sure that many of the members and students would have visited the website. I will request all of you to visit the website - https://www.icsi.edu/wiro/Home.aspx and give your valuable feedback. Your suggestions in this process is very important for us to come out with a page which will be beneficial for our members.

I am reserving my views for the next edition with a food for thought on what I have stated in the beginning. It is time for all of us to introspect whether our work is pleasure or duty. Based on our perspective we will get the results. We at WIRC are considering work as pleasure which is enabling us to perform with joy. The joy will multiply when you all join us and work together for the development of institute. Please feel free to write to us and share your views and suggestions so that the same will be well utilized by your WIRC.

The last month was at Mumbai was Mighty and Marvelous and the activities were Magnificent. The coming month will be a Month of Monsoon. Let me meet you again with another nectar shower in the next month.

“Knowledge is Nectar”

Professionally Yours

CS Hitesh Kothari Chairman ICSI-WIRC

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ARTICLES

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Authored by:

CS Kalidas Vanjpe Practicing Company Secretary

[email protected]

ANALYSIS OF SOME IMPORTANT PROVISIONS OF THE COMPANIES (AMENDMENT) ACT, 2017

The Companies (Amendment) Bill, 2016 was introduced in parliament and was referred to the standing committee. Thereafter, quite a few organizations and individuals made various representations to the government and the committee. The author also made quite a few recommendations and pointed out possible absurdities in some of the provisions contained therein and for this purpose also met the ministers in Delhi. However, barring a few changes, the ministry did not change majority of the provisions. The Companies (Amendment) Act, 2017 (the said Act) has finally been enacted and some of the sections have already been notified and some provisions will be notified later. In due course, rules will be notified. Since in many seminars, the members have already come to know about the background and the circumstances under which these changes/amendments were necessary, I am not going into the same again. In this article, I am trying to analyse a few important provisions of the said Act, whether notified or not for now, which will have an impact on the functioning of the companies and they may lead to absurd situations or litigations. Hence, company secretaries should be careful while complying with those provisions. Associate Company The first important change brought about by the said Act is the definition of “Associate company” (sec. 2(6) of the Companies Act, 2013 (CA 2013)). This change has been brought about by changing the explanation to the definition. Prior to this change the explanation read as under: “Explanation: For the purposes of this clause, “Significant influence” means control of at least 20% of total share capital or of business decisions under an agreement.” Further, although the definition contained the words ‘joint venture’, they were not defined. Now, the new explanation reads as under: Explanation: a)"significant influence" means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement; (emphasis added) (b) the expression "joint venture" means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement; Before analyzing the above, let’s see the definition of the word ‘control’ which is relevant here.

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Control: Control shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. (sec. 2(27) of the CA 2013) Now we will analyse the amendments. The first change is replacement of the term ’total share capital’ by the term ‘total voting power’. Earlier, equity share capital and convertible preference capital were considered for this purpose whereas now shares carrying voting rights will be relevant. Hence, companies which have done their structuring based on the earlier concept may have to modify their structuring, if necessary, depending upon their exact facts. However, the second change will lead to absurd situations. It talks about ‘participation in business decisions’. The dictionary meaning of the word ‘participate’ is ‘to take part or to get involved’. Since all companies are established for doing business, all the decisions taken by them are business decisions. These decisions are taken at various levels as well. Thus, the words ‘participation in business decisions’ are very wide. Now, if a company (say company B) is involved or has taken part at any stage of any such decision of say company A, company B is said to have participated in business decisions of company A and hence, company A becomes “an associate company” of company B. Let’s understand this with the help of an example. The names are used only for the purpose of illustration to drive home the point. The names may be the respective trade-marks of those companies. ABC P. Ltd (ABC) is an HR consultancy company. Reliance Industries Ltd (Reliance) takes ABC’s help in recruiting a senior level employee. Appointment of such an employee is a business decision of Reliance. ABC selects such person for Reliance. This means that ABC has participated in the business decisions of Reliance. This also means that Reliance has become an associate company of ABC. This proposition will lead to following absurd situations. a) The Act makes it compulsory to consolidate the accounts of associate companies.

Hence, ABC has to consolidate the accounts of Reliance with it. Assuming that ABC also helps other big companies like ITC, HUL etc in recruitment, it will have to consolidate their accounts as well. So, ABC will become the biggest company in India!

b) The transactions with associate companies come within the purview of related party transactions. Hence, from second transaction onwards, these provisions have to be complied with.

c) Last but not the least, the auditors of ABC will have access to the accounts of Reliance, ITC etc!

There is a reason why I am tempted to come to this interpretation. The word ‘control’ was already there prior to the amendment. Since, this is an amendment to existing provision, it is but natural to interpret it to mean something over and above what is covered by the term ‘control’. The word ‘control’ takes care of almost all decisions at the Board level as can be seen from the above definition. Hence, participation in small business decisions will lead to absurd situations as explained above. Holding Company The present definition of the term ‘Holding company’ reads as under: Holding company, in relation to one or more companies, means a company of which such companies are subsidiary companies

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The said Act has inserted an explanation to this definition which reads as follows: Explanation: For the purposes of this clause, the expression "company“ includes any body corporate It appears that the legislature wanted to cover foreign companies by making this amendment. But, as pointed out by the author to the ministry earlier, this will cover Limited Liability partnerships (LLP) as well. LLPs, we all know, are bodies corporate. Hence, there could be a situation where an LLP will be a holding company. However, by virtue of the definition of the subsidiary company, where only criterion is share capital or composition of the Board, it cannot be a subsidiary company. Now, let’s see the effects of this situation with the help of an illustration. The following would be a structure in one set up.

Company A (holding company)

I

Company B (A’s subsidiary)

I

An LLP- C (major investment and profit share by B)

I

Company D(subsidiary of C, an LLP)

In the above structure, since C will not be a subsidiary of A, D will not become a subsidiary of A, although for all practical purposes, A will be controlling it. Since C will be governed by a separate Act, it will be interesting to see whether it will be compelled to consolidate the accounts of D with it. Deposits While there are some amendments to existing provisions in relation to deposits, the most important amendment is in relation to Officer in default. In section 76A, there is a small but very important change. The officer in default shall be punishable with imprisonment which may extend upto seven year AND (instead of existing word ‘or’) with fine. Thus, the offence will be non-compoundable. Since the term ‘Officer in default’ include company secretaries, they should be careful about these provisions.

Thereafter, it is mandatory for the person to give the information within 30 days from the date of the notice. If he fails to give the information or gives information which is not satisfactory,

Beneficial ownership The said Act has made certain provisions in relation to beneficial ownership and significant beneficial owner apart from defining these terms by substituting section 90 of CA 2013. One of the most important and equally absurd provision is that a Company shall give notice to any person whom the Company knows or has reasonable cause to believe- a) to be a significant beneficial owner (SBO) b) to be having knowledge of the identity of a SBO or another person likely to have such knowledge or c) to have been SBO of the company during the three years immediately preceding the date on which the notice is issued.

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the company has to approach National Company Law Tribunal within fifteen days of the expiry of the period specified in the notice, for an order directing that the shares in question be subject to restrictions with regard to transfer of interest, suspension of all rights attached to the shares and such other matters as amy may be prescribed. With my limited knowledge, I fail to understand how an artificial person like company can ‘know’ or ‘believe’ certain information. Is it the knowledge or belief of the Board of Directors or Managing director or any Key Managerial Personnel or even an employee? Secondly, is it expected that the company should undertake these kinds of investigation activities rather doing their own business? Most importantly, in a litigation, especially like the one involving oppression and mismanagement, a variety of allegations are made by the disputants. If someone alleges that a particular minister or some influential person is holding benami shares in a company in the matter before NCLT, it becomes the knowledge of the company, irrespective of the fact that it may not be true. But under the law, if the company has knowledge, it is supposed to send a notice to such minister or influential person and that person has to reply within thirty days. This example is given just to show how these provisions will lead to absurd situations. The author had suggested to make this provision specific like knowledge of the Board of Directors through Board processes or something on similar lines. The new section is not happily worded. Sub-section 8 talks about passing of an order by the Tribunal after giving an opportunity of being heard to the parties concerned. Immediately after that sub section 9 provides that the company or any person aggrieved by the order may make an application to the Tribunal for relaxing or lifting the restrictions imposed by the Tribunal. It appears that the legislature wants to give a right of review under Order 47, rule 1 of the Civil Procedure Code. But since the same is not clearly spelt out, on plain reading of both the sub-sections, a question arises that if Tribunal is giving an opportunity of being heard, why should the company or the person aggrieved approach the Tribunal again? And when the Tribunal is passing a reasoned order, why should it entertain such application? This confusion could have been avoided by properly drafting both the sub-sections.

a) A special resolution is passed by the company in general meeting with full disclosures in the explanatory statement and

Loans to Directors Some relaxation is given in the said Act for this type of transaction by substituting section 185 of CA 2013. A company may advance any loan including any loan represented by a book debt or give any guarantee or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested subject to two conditions:

b) The loans are utilized by the borrowing company for its principal business activities.

“Any person in whom any of the director of the company is interested” means: a) any private company of which any such director is a director or member b) any body corporate at a general meeting of which not less than twenty five per cent of

the total voting power may be exercised or controlled by any such director or by two or more such directors together or

c) any body corporate, the Board of directors, Managing Director or manager whereof is accustomed to act in accordance with the directions or instructions of the Board or of any director or directors, of the lending company.

Now, the second condition as stated above is extremely tricky. The term ‘principal business activities’ is not defined in CA 2013. In any law, there should be no scope for assumption, if you expect people to comply. If the regulator assumes principal business activity based on the

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volume of business/revenue generated, then in different year it may be different in case of multi-business segment company. So at the time of taking loan, the company may have a particular segment as principal business activity as per this assumption, but in subsequent year, some other activity may become principal activity. If part utilization of such loan takes place in such year, there is a violation of the provisions of the Act as in that year, the earlier year’s business activity will not be principal business activity. The penal provision makes ‘the company’ liable for punishment ‘if any loan is advanced or a guarantee or security is given or provided or utilized in contravention of the provisions of the section’. It appears that the regulators will hold both the lending and the borrowing company liable for wrong utilization of loan by the borrowing company. Although the director will be interested in the borrowing company, it will be far-fetched to assume that he alone or the lending company is controlling everything in the borrowing company. In view of so many ambiguities, it is going to be a nightmarish experience for the companies and the professionals. Given the hawkish attitude and the enthusiasm and activism of all the regulators coupled with the loose drafting which is prone to litigation, it will be a challenging task for the companies and professionals in the days to come.

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Authored by:

CS Prativa Jena Company Secretary

Palanpur Holdings – Wockhardt Group Company [email protected]

SEBI LODR - Requirement of Policies and Critical Inputs thereof

INTRODUCTION

On 2nd September, 2015, SEBI notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’ or ‘SEBI LODR’ or ’LODR’) which became effective from 1st December, 2015.

SEBI consolidated the provisions of the erstwhile Listing Agreements for different segments of the capital market viz. Equity (including convertibles), Non-Convertible Debt Securities,Non-Convertible Redeemable Preference Shares, Indian Depository Receipts etc. into one single document called ‘Listing Regulations’ or ‘LODR’ for various types of securities listed on the Stock Exchange(s).

Apart from aligning the Listing compliances with the provisions of the Companies Act, 2013 (‘the Act’), the Listing Regulations covers Guiding Principles for periodic disclosures by listed entities; Common obligations applicable to all listed entities; Obligations which are applicable to specific types of securities; Obligations of stock exchanges; and provisions in case of default etc. Further, entities who intend to list its securities on the Stock Exchanges are now required to sign the shortened and uniform version of the Listing Agreement.

NEED OF LISTING REGULATIONS

The erstwhile Listing Agreement was an agreement between the Listed Entity and the Stock Exchange (i.e. ‘private law’) which was treated as public law as it was binding on all the listed entities. Listed entities were duty bound to ensure the compliances of the signed Agreement. However, the challenges could have arose when the Stock Exchanges modified the same and the Listed entities were to comply with the new requirement(s)as one was not even required to sign or agree for newly amended/ introduced requirements.

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Nonetheless, with the amendment in Section 21 of Securities Contract (Regulation) Act, 1956 (‘SCRA’) [as amended by Securities Laws (Amendment) Act, 1995], the Listing Agreement, although a contract, was made a statutory requirement, thereby making it mandatory for every listed entity in India to comply the same. Section 21 of SCRA states that ‘Where the securities are listed on the application of any person in any recognized stock exchange, such person shall comply with the conditions of the listing agreement with that stock exchange’. Further, Section 11A(2) (as amended in the year 2002) of the SEBI Act, 1992 empowers SEBI to specify the requirement for listing and transfer of securities and matters incidental thereto.

In view of the above, it is understood that erstwhile Listing Agreement, although a contract between two Parties, was statutory requirement with the insertion of appropriate clauses in the SCRA and SEBI Act. Nonetheless, SEBI has aptly introduced one piece of Law in the form of LODR for all type of securities listed on the Indian Stock Exchanges.

In this Article, the Author intends to brief about the Policies that are required under SEBI LODR, in case of listed specified securities, and critically analyses the same.

Policy

REQUIREMENT OF POLICIES UNDER SEBI LODR

Pursuant to SEBI LODR, listed entities which have listed its specified securities (i.e. ‘equity shares’ and ‘convertible securities’) are required to frame various Policies, summarized below, with brief analysis:

Brief requirement Critical analysis/

Remarks Require-ment of hosting in

website

Policy for Preservation of Documents [Reg. 9]

It is mandated to frame a policy for preservation of documents broadly classifying in at least two categories as follows: • documents which need to

preserved permanently; • documents with

preservation period of not less than eight years after completion of the relevant transactions.

It was laudable mandate which certainly help SEBI in investigations of cases against the companies as the company will not be able to give excuses for not furnishing

It is not clear whether the requirement of preservation of documents is restricted to documents/ registers/ records required only under SEBI Regulations; or it extend to the Companies Act, 2013 and other applicable laws also. .

No. It would be apt to make it mandatory to upload the same in the company’s website.

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the information sought if the same need to be preserved for certain period as per the Policy.

Policy for determining ‘material’ subsidiary [Reg.16(1)(c) read with Reg. 24]

A company shall be a material subsidiary whose income or net worth exceeds [20%] 1

• not dispose shares in its material subsidiary which would reduce its shareholding (either on its own or together with subsidiaries) to less than 50% or cease the exercise of control over the subsidiary without passing a special resolution in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court/ Tribunal;

of the consolidated income or net worth respectively in the immediately preceding accounting year. If any subsidiary is found to be ‘material’, then the company to ensure that it will:

• not sell, dispose off and

lease any assets amounting to more than 20% of the assets of the material subsidiary on an aggregate basis during a financial year without prior approval of shareholders by way of special resolution. However, the said approval is not required if the sale/ disposal/ lease is made under a scheme of arrangement duly approval by a Court/ Tribunal; and

• ensure at least one Independent Director (‘ID’) of the Company shall be a director on the Board of Directors of an unlisted material subsidiary,

It would be apt if the Kotak Committee’s recommendation in this regard is notified by SEBI by amending LODR at the earliest.

Yes

1SEBI’s Kotak Committee recommended limit of 10% in place of 20% to determine material subsidiary. Nonetheless, for the purpose of requirement of having ID of holding company on the Board of an unlisted material subsidiary, the limit continues to be 20%.SEBI is yet to notify the amendments in LODR relating to outcome of its Board Meeting announced on 28th March, 2018 wherein many recommendations of Kotak Committee have been accepted.

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whether incorporated in India[or not]2

.

Code of conduct for board of directors and senior management personnel [Reg. 17(5)]

The duties of IDs have been laid down exhaustively in the Companies Act, 2013. Affirmation of compliance of the Code given by members of the board of directors and senior management personnel forms part of Annual Report.

The Code, inter-alia, may include the duties as laid down in the Act; matters pertaining to dealings with the Company; and ‘do’s & don’ts’ expected from the directors while dealing in the securities of the Company etc.

Yes

Framing of Risk Management Plan [Reg. 17(9)& 21]

The Board of directors to frame, implement and monitor the risk management plan for the Company. Further, [top 100 listed entities] 3

Keeping in view importance of Risk Management, it would be if requirement of Risk Management Committee is made applicable for all listed entities. Further, requirement of evaluation of Risk management system by the Audit Committee should be done away with as one of the key functions of the Board is to ensure systems for risk management. This will eliminate duplicity of review.

, determined on the basis of market capitalisation, as at the end of the immediate previous financial year are required to constitute a Risk Management Committee, majority of members which shall consist of the board of directors. Additionally, Audit Committee to review the risk management systems of the Company.

No

Policy on diversity of Board of directors [Reg. 19(4) i.e. Role of NRC.]

In the absence of detailing of diversity in the LODR, it is suggested that the Board members may be consciously drawn in a manner that at least one director is inducted from each of the following field: • Industry in which the

Company operates • Banking and finance • Legal and General

Administration • Media • Any other field as may be

decided by the Nomination and Remuneration Committee of the Company.

Due care be given to gender; and person of a different nationality, in case of multinational company.

No

Policy on Though it is not specifically In line with the No.

2In the SEBI’s Kotak Committee, the requirement of ID has been recommended for material overseas subsidiary(ies) also. 3Kotak Committee recommended the requirement of constitution of Risk Management Committee for top 500 listed entities in place of top 100.

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Nomination & Remuneration [Reg. 19(4) ]

mentioned that there should be a Policy on Nomination & Remuneration. Further, the role of Nomination & Remuneration Committee as elaborated under Regulations 19(4) read with Schedule II of the LODR can be dealt aptly in the form of Policy. Nonetheless, Section 178 of the Companies Act, 2013 states about formulation of Nomination & Remuneration Policy.

requirement spelt in Section 178 of the Act and Part D of Schedule II of LODR, a Policy on Nomination & Remuneration or by whatever name it may called should be there to deal with the following: • criteria for

determining qualifications, positive attributes and independence of a director and recommend to the board of directors a policy relating to, the remuneration of the directors, key managerial personnel and other employees;

• criteria for evaluation of performance of IDs and the board of directors;

• persons who can be

qualified to become directors and who may be appointed in senior management;

• whether to extend or continue the term of appointment of the ID, on the basis of the report of performance evaluation of IDs;

• terms and conditions of appointment of IDs;

• criteria of making payments to non-executive directors; and

• familiarization programmes imparted to IDs etc.

The Companies Act, 2013 requires that such Policy need to be disclosed in the Board’s Report. Further, pursuant to requirement stated in the Companies Amendment Act, 2017,only salient features of the Policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board's report.

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Whistle blower policy/ Vigil mechanism [Reg. 22]

The listed entities are required to recognise the rights of its stakeholders and encourage co-operation between the listed entity and stakeholders. Hence, it is imperative to devise an effective whistle blower mechanism enabling stakeholders, including employees and their representative bodies, to freely communicate their concerns about illegal or unethical practices. Whereas, regulation 22 states that listed entity shall formulate a vigil mechanism for directors and employees to report genuine concerns.

In view of criticality, formulation of Whistle blower policy should not only be restricted for directors and employees but also for other stakeholders to report genuine concern. Further, it should be mandated that such Policy be popularised amongst stakeholders periodically and all stakeholders should be encouraged to report their genuine concern promptly.

Yes

Policy on materiality of related party transactions (‘RPT’) and on dealing with RPT [Reg. 23]

The definition of related party transaction is much wider in LODR as it even covers transfer of resources, services or obligations between a listed entity and a related party, regardless of whether a price is charged. A transaction with a related party is considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds 10% of the annual consolidated turnover as per its last audited financial statements. All related party transactions require prior approval of the audit committee irrespective of materiality. However, the Committee may grant omnibus approval for related party transactions proposed to be entered into by the Company subject to certain conditions which are required to be reviewed by the Committee on quarterly basis.

As material related party transaction requires approval of the Shareholders, it would be apt if SEBI clarifies that if the approval of the Shareholders is sought once then for how many years such approval of the Shareholders would be valid for transactions with such related party. In the absence of such clarity, if approval is sought once, it is assumed to be valid for all the years to come.

Yes

Policy for determining Materiality of

Listed entities are required to frame Policy guidelines to disclose events specified in

It would apt if SEBI prescribes the criteria/ threshold parameter(s)

Yes. Policy need

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Events [Reg. 30(4)]

Para B of Part A of Schedule III of LODR. The broad criteria to frame the said Policy is that the omission of an event or information which is likely to result in significant market reaction if the said omission came to light at a later date. Nonetheless, all the events specified in Para A of Part A of Schedule III are considered material and the same need to be disclosed to the Exchange(s).

for disclosures of events of Para B also e.g. 10% of total revenue or net worth or assets. Further, in case of fraud by directors, it should be non-negotiable and ‘any amount’ of fraud should be mandated to be disclosed to the Exchanges. If the words ‘any amount’ appears harsh then it would be apt if SEBI aligns the requirement of reporting of fraud in line with the Companies Act, 2013.

to be uploaded on the website.

Archival Policy [Reg. 30(8)]

Effective 1st December, 2015, all information which are disclosed to the Stock Exchanges need to be hosted on the website of the Company for a period of 5 years. Thereafter, the same need can be retained on the website as per Archival Policy of the Company. This means the company will have to frame a Policy and state that how many more year(s) they would like to retain the information available on its website.

It is apt to retain such information available on the website for atleast 3 more years after the mandatory 5 years which would be in line with the requirement of the Companies Act, 2013 pertaining to maintenance of books of accounts.

Yes. The Policy need to be uploaded on the website.

Dividend Distribution Policy [Reg. 43A]

SEBI has mandated top 500 listed entities based on market capitalization (calculated as on March 31 of every financial year) to formulate a dividend distribution policy. The Policy, inter-alia, to include the parameters such as the circumstances under which the shareholders may or may not expect dividend; the financial parameters that shall be considered while declaring dividend; internal and external factors that shall be considered for declaration of dividend; how the retained

The requirement of this Policy be made mandatory for all listed entities.

Yes. The Policy need to be disclosed in the Annual Report of the Company as well.

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earnings shall be utilized etc.

Policy to maintain strict control on stationery [Effective 20th April, 2018]

SEBI vide circular dated 20th April, 2018 regarding “Strengthening the Guidelines and Raising Industry standards for RTA, Issuer Companies and Banker to an Issue” have mandated RTAs and Issuer Companies to frame a written policy and to maintain strict control on stationery including blank certificates, dividend/interest/redemption warrants.

The circular provides clarity relating to responsibility of RTA, Banker and the Issuer with regard to payment of dividend, interest etc. and maintenance of records thereof. It also provides clarity relating to correction of errors, maintenance of Members’ data, usage of stationery etc. However, it is not clear whether the written Policy is needed only with respect to maintaining strict control only on stationery including blank certificates, dividend/interest/redemption warrants; or on any other matter stated in the Circular.

No

CONCLUSION

Introducing Listing Regulations in place of the erstwhile Listing Agreement is certainly a step which was needed as it has not only consolidated the provisions of Listing Agreement for different segments of the capital market in one piece of document but also aligned it with the provisions of the Companies Act, 2013.

Nonetheless, in addition to formats for reporting of various disclosures, SEBI has made various amendments in the Listing Regulations since it’s notification in September 2015. Further, SEBI has also issued various clarifications in the form of FAQs from, time to time, on the LODR.In view of this, it would be apt if SEBI issue consolidated SEBI Listing Regulations every year, as on particular date, for ease of reference of all the Stakeholders.

SEBI, earlier in November 2015,shortened the format for publishing financial results in Newspapers which has not only reduced the substantial cost of publication of the companies but also conserve the environment to great extent in the time to come. In line with the same thought process, SEBI should do away with the requirement of publications of notices relating to board meetings, book closure, completion of despatch of postal ballot etc. in Newspapers as such information are available on the websites of the Stock Exchanges and the Company.

May 2018


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UPDATES Monitoring of foreign investment limits in listed Indian companies

Complied by:

CS Swati Bhatt,

Practicing Company Secretary

1. Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to Foreign Exchange Management (Transfer or Issue of Security by a person Resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017 and as amended from time to time, in terms of which the onus of compliance with the sectoral/ statutory caps on foreign investment lies with the Indian investee company.

[email protected]

2. Currently, Reserve Bank of India receives data on investment made by Foreign Portfolio Investors (FPI) and Non-resident Indians (NRI) on stock exchanges from the custodian banks and Authorised Dealer Banks for their respective clients, based on which restrictions beyond a threshold limit is imposed on FPI/ NRI investment in listed Indian companies.

3. In order to enable listed Indian companies to ensure compliance with the various foreign investment limits, Reserve Bank in consultation with Securities and Exchange Board of India (SEBI), has decided to put in place a new system for monitoring foreign investment limits, for which the necessary infrastructure and systems for operationalizing the monitoring mechanism, shall be made available by the depositories. The same has been notified by SEBI vide Circular- IMD/FPIC/CIR/P/2018/61 dated April 05, 2018 read with Circular- IMD/FPIC/CIR/P/2018/74 dated April 27, 2018.

4. In terms of para 6 of Annexure A of the circular dated April 05, 2018, all listed Indian companies are required to provide the specified data/ information on foreign investment to the depositories. The requisite information may be provided before May 15, 2018. The listed Indian companies, in non-compliance with the above instructions will not be able to receive foreign investment and will be non-compliant with Foreign Exchange Management Act, 1999 (FEMA) and regulations made thereunder.

5. All Authorised Dealer Banks are advised to instruct their clients and respective Indian companies, about the system requirement at para 4 of this circular.

6. Further, upon implementation of the new monitoring system, all Authorised Dealer banks would be required to provide the details of investment made by their respective NRI clients to the depositories in the format as provided by the depositories/ SEBI. In addition, the reporting to Reserve Bank in the existing system, viz., LEC (NRI) and LEC (FII), would continue.

7. AD Category-I banks may bring the contents of this circular to the notice of their customers / constituents concerned.

8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

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Complied by:

CS Ajay Kumar, Practicing Company Secretary

[email protected]

1.

PART- A UNDER COMPANIES ACT, 2013

Where there was no arbitration agreement existing between petitioners and respondents for resolving disputes in respect of shares in question, and petitioners were not party to arbitration proceedings pending between respondents inter se before arbitral tribunal, NCLT could not have passed impugned order holding that decision on reliefs claimed by petitioners in Company Petition shall depend upon findings of arbitral tribunal- AUM CAPITAL MARKET (P.) LTD V. JYOTI LTD. [2018] 146 SCL92(HIGH COURT-GUJRAT)

OPPRESSION AND MISMANAGEMENT

2. In view of Section 62(3) when question of issue of further share capital is taken up, conversion of loan into share capital would be permissible provided there was special resolution passed by company in General Meeting which granted option as a term attached to loan raised by company permitting conversion of such loan into shares of company- RAJ SINGH CHOPRA V. JAGAT SINGH CHOPRA [2018] 146 SCL 127 (NCLAT)

SHARE CAPITAL

3.

Nothing in section 248 shall affect power of Court to wind up a company name of which has been struck off from register of companies-REAL TIME INTERACTIVE MEDIA (P.) LTD. V. METRO MUMBAI INFRADEVELOPER (P.) LTD. [2018] 146 SCL 138 (HIGH COURT- BOMBAY)

WINDING UP

4.

Where the petitioner did not object to the appointment of a director, it is not open to the Tribunal to set aside the appointment- SURGI AID LIFECARE (P.) LTD V. RAHULDEV VYAS [2018] 143 CLA 152 (NCLAT)

OPPRESSION AND MISMANAGEMENT

May 2018


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1.

PART - B UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016

Filing of copy of certificate from ‘Financial Institution’ maintaining accounts of Operational Creditor confirming that there is no payment of unpaid operational debt by ‘Corporate Debtor’ as prescribed under clause(c) of sub-section (3) of section 9, is mandatory for initiation of insolvency resolution process. HMTC ENGINEERING CO. (KOLKATA) (P.) LTD. V. ENERGO ENGINEERING PROJECTS LTD.[2017] 143 SCL 735 (NCLT-NEW DELHI)

APPLICATION BY OPERATIONAL CREDITOR

2.

Where corporate debtor claimed that there was already a dispute regarding quality of paddy supplied to it by operational creditor before issue of demand notice against it, but there was no document to prove that corporate debtor had ever intimated about said dispute to operational creditor and it was continuously making payments towards interest over outstanding amount to operational creditor, application under section 9 against corporate debtor was to be admitted- HAJURA SINGH BHIM SINGH V. BEST FOODS LTD. [2018]146 SCL 313 (NCLT- CHANDIGARH)

APPLICATION BY OPERATIONAL CREDITOR

3.

Where before admission of application under section 7, Adjudicating Authority had not issued any notice to Corporate Debtor, impugned order admitting application under section 7 was passed in violation of rules of natural justice and same was to be set aside- CHAND KHAN V. RCI INDUSTRIES & TECHNOLOGIES LTD. [2018] 145 SCL 553 (NCLAT)

INITIATION BY FINANCIAL CREDITOR

4.

Section 14(2) of Bankruptcy Code prevails over section 56 of Electricity Act, 2003 during moratorium period; since ‘electricity’ is an essential goods with reference to corporate debtor, in view of section 14(2), electricity company could not disconnect power supply to corporate debtor during moratorium period- NITIN HASMUKHLAL PARIKH V. MADHYA GUJRAT VIJ COMPANY LTD. [2018] 146 SCL 412 (NCLT-AHMEDABAD)

MORATORIUM

May 2018


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List of Incharge/Executive Officers of WIRC Chapters

Sr. No. Chapter name Chapter In-Charge Contact No.

e-mail id of Chapter In Charge

1 Ahmadabad CS Ketan Bhalgamiya 079-30025334/35 [email protected]

2 Aurangabad Mr. Subhash Bappi Sinha 0240-2451124 [email protected]

3 Bhayander Ms. Krutika Kargutkar 022-28183888 [email protected]

4 Bhopal Ms. Amita Malviya 0755-2577139 [email protected]

5 Dombivali Mr. Kamal Kumar Soni - [email protected]

6 Goa Mr. Vasant Kerkar 0832-2435033 [email protected]

7 Indore CS Pravin Gupta 0731-4248181 [email protected]

8 Kolhapur Ms. Archana Sawant 0231-2659498 [email protected]

9 Nagpur Mr. Sudhakar 0712-2453276 [email protected]

10 Nashik Mr. Amit Kumar 0253-2509989 [email protected]

11 Navi Mumbai Ms. Lacchmi Bhatt 022-27577816 [email protected]

12 Pune Mr. Anil Tale 020-24263228/0341 [email protected]

13 Raipur Mr. Prafulla Kumar Dash 0771-3267784 [email protected]

14 Rajkot Mr. Aritra Karmakar 0281-3059646 [email protected]

15 Surat Mr. Goutam Karmakar 0261-2463404 [email protected]

16 Thane Ms. Kavita Chavan 022-25891333-3793 [email protected]

17 Vadodara Mr. Amit Kumar Nagar 0265-2331498 [email protected]

mailto:[email protected]�
















May 2018


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May 2018


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ACTIVITY REPORT Ahmedabad Chapter

Study Circle Meeting Date May 12, 2018

Venue Ahmedabad Chapter Premises

Topics Ethos In Ancient Management & Disciplinary Mechanism Of ICSI

Chief Guest / Speakers Faculty : CS A.K. DIXIT

Delegates 76 Participants

Education Expo By TV9 Date May 12, 2018 & May 13, 2018

Venue Gujarat University Convention Hall

Topics Education Expo

Chief Guest / Speakers Chief Guest: Mr. Bhupendra Chudasma (Education Minister Of Gujarat)


Series On Drafting Of Legal Documents Date May 19, 2018


Topics Drafting Of Affidavits & Its Ingredients

Chief Guest / Speakers Speaker : Advocate Pankaj Agarwal


GST Master Class Series Date May 25, 2018 To May 30, 2018


Topics GST Master Class Series

Chief Guest / Speakers Speaker : Cs Payal Kataria


Pune Chapter Training Mela Date 25.05.2018

May 2018


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Venue Pune Chapter of ICSI

Topics Training Mela for CS Trainee

Chief Guest / Speakers Interviewer (CS Associates and Firms) 16 Firms

Guidance Programme for CS Students Date 25.05.2018

Venue Pune Chapter of ICSI

Topics Exam Preparation

Chief Guest / Speakers CA Swanand Purohit

Delegates 05

Seminar on “Critical Analysis of Companies Amendment Act 2017” Date 26.05.2018

Venue Hotel President, Pune

Topics Critical Analysis of Companies Amendment Act 2017

Chief Guest / Speakers CS (Dr) K R Chandratre – Past President ICSI

Delegates 78

Surat Chapter Full day seminar Date 17-May-2018

Venue South Gujarat Chapter of The Institute of Cost Accountants of India

Topics Corporate Governance & Company Law and Bhagavad Gita & Sundara Kanda

Chief Guest / Speakers Dr. P V S Jagan Mohan Rao (Past President, The IC)

Delegates Target: 50 Actual: 22 (Members); 2 (Students)

Half day seminar Date 26-May-2018.

Venue Hotel Royal Shelter, Vapi, Gujarat.

Topics Companies (Amendment) Act, 2017; SEBI (LODR) Amendment Regulations 2018; Reading and Analysis of Financial Statement

Chief Guest / Speakers CA Surendra Kanstia; CS Praveen Soni; CA Ashish Bakliwal

Delegates Target: 50 Actual: 39 (Members); 3 (Students)

May 2018


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PHOTO GALLERY ICSI WIRC

WIRC members handing over a cheque of Rs.1,11,111/- to CS Makarand Lele, President, ICSI towards CSBF Contribution

CS Hitesh Kothari, Chairman, ICSI-WIRC meeting Dr.(Ms.) M.Thenmozhi ,Director, National Institute of Securities Markets

Inauguration of Mulund Knowledge Centre Audience of First Mulund Knowledge centre

May 2018


Page | 27

CS S N Ananthasubramanian, Past President,ICSI delivering inaugural address and present in the dias CS Praveen Soni, Tresurer,ICSI-WIRC,CS Narayan Shankar,Speaker and CS Hitesh Kothari, Chairman, ICSI-WIRC

Release of publication during the 19th National PCS Conference by Chief Guest Dr.Satya Pal Singh, Minister of State for Human Resource Development and Mr.AjayTyagi, Chairman,SEBI

Inaguration of 19th National PCS Conference at Mumbai on May 18,2018

Ghatkopar Knowledge Centre meeting on May 25,2018. CS Satyan Israni addressing the participants

CS Narayan Shankar, Speaker during First Vasai Knowledge Centre meeting held on May 27, 2018

First Vasai Knowledge Centre Meeting held on May 27, 2018

May 2018


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May 2018


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WIRC Chapters

Ahemdabad Chapter

May 2018


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Pune Chapter

Surat Chapter

May 2018


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May 2018


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May 2018


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May 2018


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“CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress Let us lend

support and join for noble cause.”