MCA launches Company Law Settlement Scheme, 2014
The Ministry of Corporate Affairs (MCA) has announced the Company Law Settlement Scheme, 2014 (CLSS, 2014) vide its General Circular No. 34/2014 dated 12.08.2014 which provides a one time opportunity to all defaulting companies to clear all their pending statutory filings under the Companies Act. The Scheme came into effect on August 15, 2014 and shall be in force till October 15, 2014.
- A defaulting company” Is permitted to file belated documents which were due for filing till June 30, 2014 with reduced fees i.e. 75% waiver in the actual additional filing fees
- Entities utilizing this scheme would be provided "immunity" from prosecution under the Companies Act
- Inactive companies can avail this scheme to get themselves declared as "Dormant" or apply for “Striking off the name of the company” by filing a simple application at reduced fee
- Vanishing companies, entities which have already applied for striking off their names from the Register of Companies and those which have sought dormant status, would not be eligible for the scheme
- This scheme comes as a big relief to all corporates as it enables them to file their pending annual documents and avoid attraction of higher fees/fine & other penal action, especially disqualification of their directors prescribed under the provisions of the Act
- The Registrar of Companies to take action under the Companies Act, 1956/ 2013 against the defaulting companies who failed to avail this Scheme.
'Slum Area Development' now an eligible CSR activity
The Central Government vide Notification No. GSR 568(E)[F.NO.1/18/2013-CL-V], dated August 06, 2014 amended the Schedule VII of the Companies Act, 2013 to allow 'Slum Area Development' as an eligible Corporate Social Responsibility activity. The term 'slum area' shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.
Clarification issued regarding AS 10 - Capitalization of Costs
The MCA received a number of representations seeking clarifications on capitalization of costs in cases of Competitive Bid power projects. Accordingly, after examining the matter in consultation with the Accounting Standards Board and ICAI, the MCA vide its General Circular No. 35/2014 dated August 27, 2014 issued the following clarification:
- Borrowing costs incurred during extended delay in commencement of commercial production after the plant is otherwise ready, does not increase the worth of fixed assets and as such cannot be capitalized under Accounting Standards (AS) 10 & 16 issued by ICAI.
- Other costs should be capitalized unit-wise, instead of project wise, therefore, in case one of the units of the project is ready for commercial production, costs should be capitalized, irrespective of the fact that construction of other units still continues.
- AS 10 and AS 16 are applicable irrespective of whether the power projects are ‘Cost Plus projects’ or ‘Competitive Bid projects’.
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Appointment of Non-Deposit Accepting NBFCs with asset size of Rs 100 crore and above as sub- agents under MTSS
In order to broaden the network of sub-agents under the Money Transfer Service Schemes (MTSS), it has been decided by the Reserve Bank of India (RBI) to permit Non-Deposit Accepting Non-Banking Financial Companies (NBFCs) with asset size of Rs 100 crore and above to act as sub-agents under MTSS subject to the following conditions:
- There is no co-mingling of the Indian agent’s funds with that of the NBFC’s funds.
- The Indian agent should maintain with a designated bank, a security deposit in favour of the NBFC sub-agent.
- No NBFC, acting as sub-agent, should appoint any other entity as its sub-agent.
NBFCs desirous to act as sub-agents under the MTSS shall take prior approval of the Reserve Bank, as per the Circular No. RBI/2014-15/174 DNBS.CC.PD.No.405/03.10.01/2014-15 dated August 12, 2014.
RBI tightens norms for NBFCs to lend against shares
At present, lending against shares of Companies carried out by NBFCs is not subject to specific instructions apart from the general prudential regulation applicable to all NBFCs. The RBI issued a Circular on August 21, 2014 regulating lending by NBFCs against shares of companies.
Accordingly, NBFCs lending against collateral of shares, shall, with effect from the date of this circular:
- Maintain a Loan-To-Value (LTV) ratio of 50 per cent.
- Accept only Group-I securities as collateral for loans valued at more than Rs 5 lacs. Group-I shares are a category of limited stock defined by the SEBI and includes 694 stocks traded on the NSE and 817 stocks traded on the BSE.
- Report the pledge against shares to stock exchanges (in case of NBFCs with asset size of Rs 100 crore)
The move is aimed at tackling volatility in the capital market due to offloading of shares by NBFCs.
However, the Circular is silent on the following aspects:
- The mode of computing the value of the securities for the purpose of LTV
- Whether the above stipulations need to be complied even if shares are not the primary security for a loan?
- Requirement for disclosure/s when the pledged shares are released or when pledge is invoked.
- If Group-I Securities become Group-II Securities during the loan tenure, whether the shares must be substituted with Group-I Securities?
RBI relaxes foreign transaction norms for buying govt securities
As per the extant RBI Guidelines, Eligible investors, viz., SEBI registered Foreign Institutional Investors (FIIs), Qualified Foreign Investors (QFIs), Registered Foreign Portfolio Investors (RFPIs) and long term investors registered with SEBI had to purchase eligible government securities in the secondary market by going through exchange-registered brokers only.
However, the RBI vide its Circular No. A.P. (DIR Series) Circular No.22, dated August 28, 2014 had removed the above stipulation and decided that the above eligible investors can now acquire such securities in any manner as per the prevalent/approved market practice.
RBI eases procedure of ECB refinancing
The Reserve Bank of India has vide A.P. (DIR Series) Circular No.21 dated August 27, 2014 eased the refinancing procedure of External Commercial Borrowings (ECB) where borrowers can repay any existing debt by raising fresh ECB at lower all-in-cost but subject to the condition that the outstanding maturity of the original loan is maintained.
Further, it has been decided to simplify the procedure by delegating powers to the AD Category – I Banks to approve even those cases where the AMP of the fresh ECB is exceeding the residual maturity of the existing ECB under the automatic route subject to the following conditions:
- Both the existing and fresh ECBs should be in compliance with the applicable guidelines
- All-in-cost of fresh ECB should be less than that of the all-in-cost of existing ECB
- Consent of the existing lender is available
- Refinancing is to be undertaken before the maturity of the existing ECB
- Borrower should not be in the default / Caution List of RBI and should not be under the investigation of the Directorate of Enforcement (DoE)
- Overseas branches / subsidiaries of Indian banks will not be permitted to extend ECB for refinancing an existing ECB, and
- All requirements in respect of reporting arrangements like filing of revised Form 83, etc. are followed.
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Service Tax certificate for transportation of Goods by Rail
The Central Govt amended the CENVAT Credit Rules, with effect from August 27, 2014, pursuant to which CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be only on the basis of Service Tax Certificate for Transportation of goods by Rail (hereinafter referred to as STTG Certificate) issued by the Indian Railways, along with the photocopies of the railway receipts mentioned in the STTG certificate.
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SEBI mandates Companies to intimate names of acquirers
India's stock market regulator Securities and Exchange Board of India (SEBI) has vide Circular No. CIR/CFD/POLICYCELL/5/2014 dated August 25, 2014 revised the formats for continual disclosure under Regulation 30(1) and 30(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, which shall come into force with immediate effect.
Highlights / Impact:
- Companies have to intimate the stock exchanges details of acquirers and the persons acting in concert (PAC) in the case of acquisitions and takeover
- Details like names of the PAC, whether they are part of the promoter group and their PAN have to be filed with the stock exchange
- However, the above information will not be publicly available.
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EPFO raises monthly wage ceiling to Rs 15,000; minimum pension to be Rs 1,000
The government has notified with effect from September 01, 2014 enhancement of wage ceiling from Rs 6,500/- to Rs 15,000, per month, fixed minimum monthly pension at Rs 1,000 under EPS-95 and enhanced the maximum sum assured under the Employees' Deposit Linked Insurance (EDLI) Scheme to Rs 3 lakh.
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