RANJ Corporate Updates June 2011

711 views
669 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
711
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

RANJ Corporate Updates June 2011

  1. 1. TABLE OF CONTENTS PAGE NO.CORPORATE AFFAIRS Green Initiatives in the Corporate Governance Clarification on marking a company as having management dispute by RoCs MCA not to take any form on record unless BS, P & L Account & Annual Returns are filed Ministry makes it mandatory for CSs, CAs, CWAs to digitally sign DIN applications Form 32 filed with ROC can be challenged in Court of Law Clarification of applicability of XBRL Certification of Financial Statements in the XBRL Mode by Practising Professionals Modification in the instruction regarding payment of MCA fees in electronic mode Provisions of section 108A to 108I of Companies Act, 1956 not in force now Clarification in respect of General Circular No: 2/2011 dated 08th February, 2011 Depreciation for the purpose of declaration of Dividend under Section 205 in case of companies referred to in Section 616 (C ) of the Companies Act, 1956 Clarification Loan to Public Limited Company under section 295 of Companies Act. Clarification regarding effective date of Companies (Particulars of Employees) Amendment Rules, 2011 Limited Liability partnership of chartered accountants will not be treated as ‘Body Corporate’ for the purpose of Section 226(3)(a) of the Companies Act, 1956 The Companies (Passing of the resolution by Postal Ballot) Rules, 2011 provides for voting by electronic mode.TAXATION Clarification issued by Tax Research Unit, CBEC regarding Short Term Accommodation Service and Restaurant Service Instructions on issuance of TDS Certificates in Form No.16A and option to authenticate same by way of Digital Signature IASB issues four new IFRSRBI / FEMA Pledge of shares for Business Purposes Opening of Bank Account for FDI transactions FDI in services come down by 22.5 pc to USD 3.4 bn in 2010-11SEBI Adjustment of Differential Pricing Amount Option to hold units of MF schemes in Demat FormOTHERS SAT Judgement against AMC- Mutual funds [Subramanian R. Venkat vs. SEBI] Page 2 of 18
  2. 2. Green Initiatives in the Corporate Governance i. Issue of Certificate by Digital Signature The Ministry of Corporate Affairs has taken a “Green Initiative in the Corporate Governance” by allowing paperless compliances by the Companies after considering sections 2, 4, 5, and 81 of the Information Technology Act, 2000 for legal validity of compliances under Companies Act, 1956 through electronic mode. The Registrar of Companies has to issue a number of certificates to the companies and other stakeholders as required under the provisions of Companies Act, 1956 read with Companies Regulation, 1956. At present these certificates are issued physically under the manual signature of Registrar of Companies and issued by post. In order to cut timelines and an another step towards “Green Initiative” it has been decided that all certificates and standard letters issued by the Registrar of Companies will now be issued electronically under the Digital Signature of the Registrar of Companies. The Digital Certificates are being developed and will be available for issue by 30th June, 2011 in phased manner.ii. Ministry allows holding shareholders meetings through video conferencing The Ministry of Corporate Affairs on 20th May 2011 issued a circular allowing the Companies to hold AGM’s online. It also stated that if a Company wants to hold such an AGM, it will have to have send a notice informing shareholders about “the availability of participation through video conference, and provide necessary information to enable shareholders to access the available facility of videoconferencing. The Ministry added that the Chairman and Secretary would have to safeguard the integrity of the meeting via videoconferencing, ensure proper videoconference facilities, prepare the minutes of the meeting, and ensure that no one other than the concerned shareholder or proxy to the shareholder is attending the meeting through electronic mode. Page 3 of 18
  3. 3. This announcement comes in as a response to representations being received by the Ministry from various industry bodies to recognize participation by shareholders in meetings under the Companies Act, 1956 through electronic mode. This is a part of the MCA’s Green Initiative Campaign for Corporate Governance. Earlier last month, the MCA had also allowed Companies to send Annual Reports by Email.iii. Participation by Directors in Board / Committee Meetings through video conferencing The Ministry of Corporate Affairs has vide Circular No. 28/2011 dated May 20, 2011 clarified that that a Director of a company may participate in a Board/Committee meeting under the provisions of Companies Act, 1956 through electronic mode. Highlights: Audio-visual electronic communication facility shall be employed which enables all persons participating in that meeting to communicate concurrently. Every director of the company must attend the meeting of Board/Committee of directors personally at least one meeting a financial year of the company. The notice of the meeting must inform directors regarding availability of participation through video conference, and provide necessary information to enable directors to access the available facility of videoconferencing. The notice of the meeting shall also seek confirmation from the director as to whether he will attend the meeting physically or through electronic mode and shall also contain the contact number(s) / e-mail addresses of the Secretary / designated officer to whom the director shall confirm in this regard. In the absence of any confirmation from the Director, it will be presumed that he will physically attend the Board meeting.iv. Approval of appointment of agency for providing electronic platform for e-voting under Companies Act, 1956 The MCA vide Circular No.21 /2011, Dated: 02.05.2011 has taken a “Green Initiative in the Corporate Governance” by approving appointment of agency for providing electronic platform for electronic voting under the Companies Act, 1956. Page 4 of 18
  4. 4. In order to have secured electronic platform for capturing accurate electronic voting processes, National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd (CDSL) are being are being approved by the Ministry of Corporate Affairs subject to the condition that they obtain a certificate from Standardization Testing and Quality Certification (STQC) Directorate, Department of Information Technology, Ministry of Communications & IT, Govt. of India.Clarification on marking a company as having management dispute by RoCs.In order to bring uniformity of practices by all Registrar of Companies it is clarified that the Registrarof Companies shall mark a company as having management dispute under MCA-21 system only incases where:a. the court or Company Law Board has directed to maintain the status quo with reference to any e- forms including status of Directors in the company, orb. the Court or Company Law Board has granted any injunction or stay in taking the document on record and Registrar of Companies is a party in such court cases and/or the directions have been issued to the Registrar of Companies.c. the Registrar of Companies in not a party and such orders have been passed and has not been served to the Registrar of Companies, it is for the parties to comply to such orders and in case of non-compliances, the law shall take its own course.MCA not to take any form on record unless BS, P & L Account & Annual Returns are filedIt has been observed that some companies are filing only their event based information with theRegistrar of Companies without filing their upto date Balance Sheet and Profit & Loss Account andAnnual Return. In order to ensure corporate governance and proper compliances of the provisions ofCompanies Act, 1956, it has been decided that no request, whether oral, in writing or through e-forms, for recording any event based information/ changes shall be accepted by the Registrar ofCompanies from such defaulting companies, unless they file their updated Balance Sheet and Profit& Loss Accounts and Annual Return with the Registrar of Companies. Page 5 of 18
  5. 5. However, in the interest of other stakeholders Form 32, Form 20B, Form 21A, Form DIN-3, Form 21,Form23AC & 23ACA, Form 1 INV, Form 23B, Form 66, Forms related to Cost Audit Branch, InvestorComplaint Form will continue to be accepted by the Registrar of Companies from such defaultingcompanies.It may be further noted that: No e-filing shall be accepted by the Registrar of Companies from Directors of these defaulting companies for any other company also. Company Secretaries and Auditors of these companies will also not be allowed to sign and certify the filing with MCA-21 system, in respect of these defaulting Companies, till the defect is rectified. Members of ICAI, ICSI and ICWAI must not issue any certificates to such defaulting companies other than above mentioned e-forms. Action will be taken against the defaulting companies and their Directors/ officers in default in co-ordination with RBI and SEBI.Ministry makes it mandatory for CSs, CAs, CWAs to digitally sign DIN applicationsThe Ministry of Corporate Affairs has vide General Circular No. 32/2011, dated 31st May, 2011decided that with effect from 12th June, 2011, all DIN-1 & DIN-4 applications have to be digitallysigned by the practising Company Secretaries, Chartered Accountants or Cost Accountants who shallalso verify the particulars of the applicant given in the applications. All these applications will beapproved online.Form 32 filed with ROC can be challenged in Court of LawIn order to cut timelines and bring more transparency in the working of office of Registrar ofCompanies, the Form 32 will also be taken on records under Straight Through Process (STP) mode.The information given in the e-form 32 is being taken on file maintained by the Registrar ofCompanies through electronic mode on the basis of statement of correctness given by the filingcompany and further verification by the practising professional i.e., Chartered Accountants, CostAccountants and Company Secretaries, without prejudice to the rights of the parties to settle thedispute, if any, in a court of competent jurisdiction. Page 6 of 18
  6. 6. Clarification of applicability of XBRLThe MCA had issued a Circular bearing No 09/2010 dated 31.03.2011 which directed certain class ofcompanies to file balance sheets and profit and loss account for the year 2010-11 onwards by usingXBRL taxonomy. MCA has issued a Corrigendum vide circular No. 25/2011 dated 12th May, 2011excluding banking companies, insurance companies, power companies, Non Banking FinancialCompanies and overseas subsidiaries of these companies from the mandated class of Companies.Therefore in the circular No. 09/2010 for clause (i) and (ii) of Paragraph 2 under Heading Coverage inPhase I the following shall be substituted and read as:(i) All companies listed in India and their subsidiaries, having paid up capital of Rs. 5 Crores and above or a turnover of Rs. 100 Crore or above, excluding banking companies, insurance companies, power companies, Non Banking Financial Companies and overseas subsidiaries of these companies.Certification of Financial Statements in the XBRL mode by Practising ProfessionalsThe MCA had as per its circular bearing No. 14/2011 dated 8th April, 2011 entrusted practisingprofessionals i.e. members of ICAI, ICSI & ICWAI with the responsibility of ensuring integrity ofdocuments filed by them with MCA in electronic mode and the system would accept these documentsonline without the approval of the ROC. The Ministry of Corporate Affairs has vide its General circularno. 26/2011 has now included certification of Financial Statements in the Extensible BusinessReporting Language (XBRL) Mode by Practising Professionals in addition to the other documentsfrom the year 2011-12.Modification in the instruction regarding payment of MCA fees in electronic modeIn partial modification of circular even number dated March 09, 2011 regarding acceptance ofpayment of value above Rs. 50,000/- for MCA services, only in electronic mode, the Ministry ofCorporate Affairs vide circular dated 27.05.2011 has instructed that w.e.f. May 29th, 2011 thepayment of less than Rs. 50,000/- can be made in challan mode in following cases: a) Payment to Investor Education and Protection Fund” through “Pay Misc. Fee” functionality b) Any payment made by user having category as “Official Liquidator (OL) office c) Any payment made by user having category as “MCA employee”. Page 7 of 18
  7. 7. Provisions of section 108A to 108I of Companies Act, 1956 not in force nowThe sections 108A to 108I of Companies Act, 1956 were inserted through Monopolies RestrictiveTrade Practices (Amendment) Act, 1991. As MRTP Act, 1969 stands repealed, the legal validity ofthese provisions i.e. sections 108A to 108H of Companies Act 1956 has been examined by Ministry inconsultation with Ministry of Law and Justice and clarified vide circular No. 30/2011 dated 23.05.2011that the provision of section 108A to 108I of the Companies Act 1956 have become redundant andwill have no legal force.Clarification in respect of General Circular No: 2/2011 dated 08th February, 2011Companies are seeking clarification in respect of circular No. 2/11 dated 8.2.2011 issued by theMinistry in respect of exemption u/s 212(8) of the Companies Act, 1956. The point raised is in respectof applicability of condition No. (ii) of the circular, requesting the Ministry to delete the condition inrespect of unlisted companies as this condition is applicable to listed companies as per SEBIguidelines.As such, Ministry Vide Circular No.22/2011 dated 02nd May, 2011 clarified that companies whichdesire to take the benefit of exemption allowed under this circular would have to fulfill the conditionsstipulated therein even if they are unlisted.Depreciation for the purpose of declaration of Dividend under Section 205 in case ofcompanies referred to in Section 616 (C ) of the Companies Act, 1956It has been noticed that despite having clear provisions in section 616(C) of the Companies Act,1956, the companies engaged in the generation or supply of electricity are approaching MCA forfixing rate of depreciation in individual cases. The Ministry has, considered the whole matter and it ishereby clarified that Section 616 (C) the Companies Act, 1956 provides that the same shall apply tocompanies engaged in the generation or supply of electricity, except in so far as the said provision isinconsistent with the provisions of the Indian Electricity Act, 1910 or the Electricity Supply Act, 1948as repealed by enactment of the Electricity Act, 2003.Since the rates of depreciation and methodology notified under Electricity Act, 2003 are inconsistentwith the rates given in Schedule XIV of the Act and the former being special Act, the former shall Page 8 of 18
  8. 8. prevail over rates notified under Schedule XIV of the Companies Act by virtue of section 616(c) of theCompanies Act. Accordingly, ministry vide circular No. 31/2011 dated 31st May, 2011 clarified thatcompanies referred to in Section 616(c) of the Companies Act can distribute dividend out of profitarrived at after providing for depreciation following the rates as well as methodology notified by CERCand the same shall be sufficient compliance of section 205 of the Companies Act, 1956.Clarification Loan to Public Limited Company under section 295 of Companies Act.Ministry of Corporate Affairs has noticed that some companies are making applications for gettingprior approval of Central Government when they propose to make any loan to, or give any guaranteeor provide any security in connection with a loan made by any other person to a Public LimitedCompany of which any such Director is a Director or a member even when the proposal does not fallunder section 295 (d) and section 295 (e) of the Companies Act, 1956.As such, Ministry vide Circular No. 24/2011 dated 11th May, 2011 requested to note that when thebeneficiary of the loan/guarantee/security is a public limited company, approval of central governmentshould only be sought if the provisions of sub-section (d) or (e) of section 295 of the Companies Act,1956 are attracted, further the application should also clearly bring out the facts.Clarification regarding effective date of Companies (Particulars of Employees) AmendmentRules, 2011The Ministry of Corporate Affairs has clarified that its notification of 31st March, 2011 regardingCompanies (Particulars of Employees) Amendment Rules, 2011 raising the limit of employee’s salaryto be disclosed in the Directors Reports shall be applicable to all Director’s Reports under Section217 of the Companies Act, 1956 approved by the Board of Directors on or after April 1st, 2011. It willbe irrespective of the accounting year of the annual account, being approved by the Board.Limited Liability partnership of chartered accountants will not be treated as ‘Body Corporate’for the purpose of Section 226(3)(a) of the Companies Act, 1956Ministry vide circular No. 30A/2011 dated 26.05.2011 issued a circular and clarified that LimitedLiability partnership of chartered accountants will not be treated as body corporate for the limitedpurpose of section 226 (3) (a) of the Companies Act, 1956. Page 9 of 18
  9. 9. This clarification follows a number of representations received in the Ministry from Institute ofChartered accountants of India wherein they have stated that under Section 226(3)(a) of theCompanies Act, 1956 a Body Corporate is disqualified from the appointment as auditor by acompany.The Companies (Passing of the resolution by Postal Ballot) Rules, 2011 provides for voting byelectronic mode.The Ministry of Corporate Affairs, in supercession of Companies (Passing of the resolution by postalballot) Rules, 2001 introduced The Companies (Passing of the resolution by postal ballot) Rules,2011. As per the new rules voting by shareholders may be carried on in electronic mode.Highlights: An agency approved by the Ministry shall be appointed for providing and supervising electronic platform for voting by electronic platform. Recently, National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd (CDSL) are being approved by the Ministry as agencies. The procedure for voting by electronic mode to be followed by companies shall be as recommended by agency. In this new methodology the entire voting gets registered and counted in a electronic registry in a centralized server; The company may issue notices through electronic mail provided the company has obtained e-mail address of its member for sending the notices through e-mail, after giving an advance opportunity to the member to register his e-mail address. The notice shall clearly mention that whether the company is providing voting through postal ballot or by electronic mode. The scrutinizer shall maintain a register to record the consent or otherwise received, including electronic media. Page 10 of 18
  10. 10. Clarification issued by Tax Research Unit, CBEC regarding Short Term AccommodationService and Restaurant ServiceSince the levy of service tax on the two new services relating to services provided by specifiedrestaurants and by way of short-term hotel accommodation came into force with effect from 1st May2011, a number of queries have been raised by the potential tax payers.These are addressed as follows:Short Term Accommodation Service: S. No Queries Clarification 1. What is the relevance of declared “Declared tariff” includes charges for all amenities provided tariff? Is the tax required to be paid in the unit of accommodation like furniture, air-conditioner, on declared tariff or actual amount refrigerators etc., but does not include any discount offered charged? on the published charges for such unit. The relevance of ‘declared tariff’ is in determining the liability to pay service tax as far as short term accommodation is concerned. However, the actual tax will be liable to be paid on the amount charged i.e. declared tariff minus any discount offered. Thus if the declared tariff is Rs 1100/-, but actual room rent charged is Rs 800/-, tax will be required to be paid @ 5% on Rs 800/-. 2. Is it possible to levy separate tariff It is possible to levy separate tariff for the same for the same accommodation in accommodation in respect of a class of customers which respect of corporate/privileged can be recognized as a distinct class on an intelligible customers and other normal criterion. However, it is not applicable for a single or few customers? corporate entities. 3. Is the declared tariff supposed to Where the declared tariff includes the cost of food or include cost of meals or beverages, Service Tax will be charged on the total value of beverages? declared tariff. But where the bill is separately raised for food or beverages, and the amount is charged in the bill, such amount is not considered as part of declared tariff. 4. What is the position relating to off- When the declared tariff is revised as per the tourist season prices? Will they be season, the liability to pay Service Tax shall be only on the considered as declared tariff? declared tariff for the accommodation where the published/printed tariff is above Rupees 1000/-. However, the revision in tariff should be made uniformly applicable to all customers and declared when such change takes place. 5. Is the luxury tax imposed by States For the purpose of service tax luxury tax has to be required to be included for the excluded from the taxable value. purpose of determining either the declared tariff or the actual room rent? Page 11 of 18
  11. 11. Services Provided by Restaurants: 1. If there are more than one restaurants Service Tax is leviable on the service provide by belonging to the same entity in a complex, a restaurant which satisfies two conditions: (i) it out of which only one or more satisfy both should have the facility of air conditioning in any the criteria relating to air-conditioning and part of the establishment and (ii) it licence to serve liquor, will the other should have license to serve alcoholic beverages. restaurant(s) be also liable to pay Service Within the same entity, if there are more than one Tax? restaurant, which are clearly demarcated and separately named, the ones which satisfy both the criteria is only liable to service tax. 2. Will the services provided by taxable The taxable services provided by a restaurant in restaurant in other parts of the hotel e.g. other parts of the hotel e.g. swimming pool, or an swimming pool, or an open area attached to open area attached to the restaurant are also a restaurant be also liable to Service Tax? liable to Service Tax as these areas become extensions of the restaurant. 3. Is the serving of food and/or beverages by When the food is served in the room, service tax way of room service liable to service tax? cannot be charged under the restaurant service as the service is not provided in the premises of the air-conditioned restaurant with a licence to serve liquor. Also, the same cannot be charged under the Short Term Accommodation head if the bill for the food will be raised separately and it does not form part of the declared tariff. 4. Is the value added tax imposed by States For the purpose of service tax, State Value required to be included for the purpose of Added Tax (VAT) has to be excluded from the service tax? taxable value.Instructions on issuance of TDS Certificates in Form No.16A and option to authenticate sameby way of Digital SignatureThe Income Tax Department vide Circular No. 3/2011 dated 03.05.2011 issued a circular in regard toinstructions on issuance of TDS Certificates in Form No.16A and option to authenticate same by wayof Digital Signature.Issue of TDS Certificates in Form No.16A(i) For deduction of tax at source made on or after 01.04.2011: (a) The deductor, being a company including a banking company to which the Banking Regulation Act, 1949 applies and any bank or banking institutions, referred to in section 51 of that Act or a cooperative society engaged in carrying the business of banking, shall issue TDS Page 12 of 18
  12. 12. certificates in Form No.16A generated through TIN central system and which is downloaded from the TIN website with a unique TDS certificate number in respect of all sums deducted on or after the 01st day of April, 2011 under any of the provisions of chapter-XVII-B other than section 192. (b) The deductor, being a person other than the person referred to in item (a) above, may, at his option, issue TDS certificate in Form No.16A generated through TIN central system and which is downloaded from the TIN website with a unique TDS certificate number in respect of all sums deducted on or after the 01st day of April, 2011 under any of the provisions of chapter- XVII-B other than section 192.(ii) For deduction of tax at source made during financial year 2010-11 (a) The deductor, may, at his option, issue TDS certificate in Form No.16A generated through TIN central system and which is downloaded from the TIN website with a unique TDS certificate number in respect of all sums deducted during the financial year 2010-11 under any of the provisions of chapter-XVII-B other than section 192.Authentication of TDS Certificates in Form No.16A(i) The deductor, issuing the TDS certificates in Form No.16A by downloading from the TIN website shall authenticate such TDS certificate by either using digital signature or manual signature(ii) The deductor, being a person other than the person referred above and who do not issue the TDS certificate in Form No.16A by downloading from the TIN website shall continue to authenticate TDS certificate in Form No.16A by manual signature only.IASB issues four new IFRSOn 12th May 2011, the International Accounting Standards Board (IASB) issued following four newstandards: Page 13 of 18
  13. 13. IFRS 10 Consolidated Financial Statements includes a new definition of control, which is used to determine which entities are consolidated, and describes consolidation procedures. IFRS 11 Joint Arrangements describes the accounting for joint arrangements with joint control; proportionate consolidation is not permitted for joint ventures (as newly defined). IFRS 12 Disclosures of Interests in Other Entities includes all of the disclosure requirements for subsidiaries, joint ventures, associates, and “structured entities”. IFRS 13 Fair Value Measurement provides guidance on how to measure fair value, but does not change when fair value is required or permitted under IFRS.These new standards are effective for annual periods beginning on or after 1 January 2013.Pledge of shares for Business PurposesThe Reserve Bank of India vide circular No. 57 dated May 02, 2011 has been decided to delegatepowers to the AD Category - I banks to allow pledge of shares of an Indian company held by non-resident investor/s in accordance with the FDI policy in the following cases subject to compliance withthe conditions indicated below: (a) Shares of an Indian company held by the non-resident investor can be pledged in favour of an Indian bank in India to secure the credit facilities being extended to the resident investee company for bona fide business purposes subject to the following conditions : in case of invocation of pledge, transfer of shares should be in accordance with the FDI policy in vogue at the time of creation of pledge; submission of a declaration/ annual certificate from the statutory auditor of the investee company that the loan proceeds will be / have been utilized for the declared purpose; the Indian company has to follow the relevant SEBI disclosure norms; and pledge of shares in favour of the lender (bank) would be subject to compliance with the Section 19 of the Banking Regulation Act, 1949. Page 14 of 18
  14. 14. (b) Shares of the Indian company held by the non-resident investor can be pledged in favour of an overseas bank to secure the credit facilities being extended to the non-resident investor / non-resident promoter of the Indian company or its overseas group company, subject to the following conditions : loan is availed of only from an overseas bank; loan is utilized for genuine business purposes overseas and not for any investments either directly or indirectly in India; overseas investment should not result in any capital inflow into India; in case of invocation of pledge, transfer should be in accordance with the FDI policy in vogue at the time of creation of pledge; and submission of a declaration/ annual certificate from a Chartered Accountant/ Certified Public Accountant of the non-resident borrower that the loan proceeds will be / have been utilized for the declared purpose.Opening of Bank Account for FDI transactionsTo provide operational flexibility and ease the procedure for FDI related transactions, RBI videcircular No. 58 dated May 02, 2011 has decided to permit AD to open and maintain, without priorapproval of RBI, non-interest bearing Escrow accounts in Indian Rupees in India on behalf ofresidents and / or non-residents, towards payment of share purchase consideration and / or provideEscrow facilities for keeping securities to facilitate FDI transactions subject to the terms andconditions. RBI has also decided to permit SEBI authorized Depository Participants, to open andmaintain, without prior approval of RBI, Escrow accounts for securities subject to the terms andconditions.In both cases, the Escrow agent shall necessarily be an AD or SEBI authorized DepositoryParticipant (in case of securities’ accounts). These facilities will be applicable for both, issue of freshshares to the nonresidents as well as transfer of shares from / to the non- residents.FDI in services come down by 22.5 pc to USD 3.4 bn in 2010-11Foreign direct investment (FDI) in India’s services sector, which contribute over 50 per cent in thecountry’s economic growth, declined by 22.5 per cent to USD 3.4 billion in 2010-11, according to theindustry ministry’s latest data. The services sector (financial and non-financial services) had attractedFDI worth USD 4.39 billion during 2009-10. Page 15 of 18
  15. 15. Overall FDI inflows into the country dropped by 25 per cent to USD 19.4 billion during 2010-11against USD 25.8 billion in the year ago period. The services sector, despite the 22.5 per cent dip inFDI, topped the chart in attracting maximum investment.The government is taking steps like allowing FDI in Limited Liability Partnership (LLP) firms to attractmore and more foreign inflows into the country. The government is also considering to liberalize FDIpolicy in multibrand retail sector.Adjustment of Differential Pricing AmountThe Regulation 29 of SEBI ICDR Regulations allows an Issuer Company to issue specified securitiesat different prices to eligible investors subject to the conditions mentioned therein.However, it was being observed by SEBI that the effect of such differential pricing, in a public issue,was being given to the eligible investors only at the stage of allotment of specified securities and notat the time of filing an application for such allotment. This was taking away certain benefits from theinvestors such as lower cash outflow at a price net of discount, the ability to apply for more shareswith the same cash outlay, etc.Thus to address this issue, SEBI has vide its Circular No.CIR/CFD/DIL/2/2011 dated 16th May 2011has clarified so as to allow investors eligible for differential pricing to make the payment of discountedprice at the time of bidding itself, subject to compliance of appropriate disclosure and other norms.Option to hold units of MF schemes in Demat FormSecurities and Exchange Board of India vide circular CIR/IMD/DF/9/2011 dated May 19, 2011advised AMCs to clarify by way of an addendum that units of all Mutual Fund schemes held in dematform shall be fully transferable. It has been observed that in their close ended schemes, manymutual funds provide an option to hold units either in physical or in demat form, but offer no suchoption in case of open ended schemes. In order to facilitate investors, Mutual Funds should providean option to the investors to receive allotment of Mutual Fund units in their demat account whilesubscribing to any scheme (open ended/close ended/Interval). Therefore Mutual Funds/AMCs are Page 16 of 18
  16. 16. advised to invariably provide an option to the investors to mention demat account details in thesubscription form, in case they desire to hold units in demat form.SAT Judgement against AMC- Mutual funds [Subramanian R. Venkat vs. SEBI]It was held by the Securities Appelate Tribunal (SAT) that Asset Management Companies (AMCs)cannot change the terms of the issued units / securities arbitrarily without taking consent from theUnit-holders.Brief Facts of case ‘Subramanian R. Venkat vs. SEBI’:The Appellant are husband and wife who are regularly investing in shares and mutual fund schemethrough various market intermediaries. HSBC Mutual Fund i.e. Respondent No. 2 had issued ascheme with two plans, viz. a long term plan and a short term plan. The Short term Plan is known asHSBC Gilt Fund. In the offer document it was mentioned that the short term plan was suitable forinvestors seeking to obtain returns from a plan investing in gilt across the yield curve with the averagematurity of portfolio normally not exceeding 7 years and modified normally not exceeding 5years. Thelong term plan was intended to suit investors with surpluses for medium to long period and the planwas to invest in gilts across the yield curve with the average maturity of the portfolio normally notexceeding 20years and modified duration normally not exceeding 12 years. The appellants chose theshort term as against the long term plan and wanted to invest their personal saving in the short termplan of the scheme. However, HSBC wound up the long-term plan, and changed the term of theshort-term plan by increasing the tenure from 5 to 7 years to not exceeding 15 years. This resulted ina fall in the Net Asset Value (NAV) of the scheme and the grievance is that the respondent haschanged the scheme without informing the unit holders and without giving opportunity to theunitholders to exit the scheme. The appellant filed the complaint with the board and assetmanagement company to direct the matter and to make good the losses suffered by the appellant.The order of the board was against the appellant and the present appeal has been filed. Page 17 of 18
  17. 17. Held:The appeal is allowed in the favour of investors.Reason:1. Such a change in the term of the plan was found to be one that affects the fundamental attributes of the scheme and modifies the interests of the unit holders. It was given effect to without notifying the unit holders and providing an exit option as set out in Reg. 18(15A) of the SEBI (Mutual Funds) Regulations, 1996; andJ`lomlo^qb=rma^qbp=qb^j==Disclaimer: The above information is only indicative and solely for informational purpose and private circulation. RANJ &Associates, Company Secretaries intend to, but do not guarantee or promise that it is correct, complete / up-to-date. Weexpressly disclaim any liability to any person in respect of anything, and of consequences of anything done, or omitted to bedone by any such person in reliance upon the contents of this document.The information in this document is as of May 31, 2011. Page 18 of 18

×