Mandatory linking of Aadhaar and PAN under PMLA

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By Anita Baid, (finserv@vinodkothari.com)

PML Second Amendment Rules

The Ministry of Finance on 1st June, 2017 vide notification No. G.S.R. 538(E) issued the [1]Prevention of Money-Laundering (Maintenance of Records) Second Amendment Rules, 2017 (hereinafter referred to as “Second Amendment Rules”) mandating all account holders of the reporting entities i.e., banks and financial institutions to link Aadhaar number issued by the Unique Identification Authority of India and Permanent Account Number (PAN) or Form No. 60 as defined in Income-tax Rules, 1962. The timelines for the same were as below- Read more →

Section 14 (1) v. Section 60(2) of the Code: Creditors cannot take action against personal guarantors while on-going CIRP of a Corporate Debtor

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By Shreya Routh & Vallari Dubey, (resolution@vinodkothari.com)

Brief facts of the case

Petitioners had filed a writ petition with the Allahabad High Court, challenging the order[1] passed by the Debt Recovery Tribunal (“DRT”). Petitioners are the guarantors of M/s LML Limited, Kanpur (hereinafter referred as the “Company”). The State Bank of India filed an application before the Debt Recovery Tribunal, Allahabad against the Company as the principal borrower and Sanjeev Shriya and others (hereinafter referred to as the “Petitioners”) as the guarantors. On 6.7.2017 DRT heard both the parties and passed the impugned order, staying the proceeding against the Company on the basis of the order passed by NCLT Allahabad dated 30.05.2017 imposing Moratorium on legal proceedings under Section 14 of the Insolvency and Bankruptcy Code, 2016. Subsequent to this, Corporate Insolvency Resolution Process began for the corporate debtor being the Company. As far as the resolution process for the personal guarantors was concerned, the interpretation of Section 60 of the Code provided for admitting such application to NCLT. However, since such provisions are not yet notified, being an individual, initiation of insolvency proceedings were placed before DRT. Read more →

Regulations on Prepaid Payment Instruments -Comparing the Master Circular and Master Directions

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By Anita Baid, (finserv@vinodkothari.com)

With an enlarged view of the Government to make India go cashless and straddle towards the concept of digitalisation, many companies, specifically NBFCs are seeking approval from the Reserve Bank of India (RBI) to set up business in Prepaid Payment Instruments (PPI). Before getting into the present regulatory framework of such PPIs, one needs to understand the concept of such instruments. PPIs are a form of digital electronic instruments. PPI issuers open an account for its account holders known as PPI holders and with the help of such account, withdrawal/ deposit is made for some pre-ascertained payments or receipt. A certain amount is deposited into such PPI Account from the holder’s Bank A/c and using the balance deposited in the PPI Account, payments are made and/or even cash is received. The introduction of such mechanism enables a person to go cashless. Such PPI instruments can be of three types: Read more →

Major rejig in the GST law with respect to car leasing/ renting business

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GST Division, (gst@vinodkothari.com)

 

Introduction

Vehicle leasing business in India has been gaining popularity ever since its inception in the year 2005. In the past few years, the industry has picked up pace and become the preferred mode of procuring a vehicle given its temporary and simplistic structure. The vehicle leasing market in India is estimated to be worth around Rs. 1500 crores, with a Compounded Annual Growth Rate (CAGR) of about 15-20%.[1] Although the market is scattered in nature, with around 30 companies in India carrying out the business of vehicle leasing, companies such as LeasePlan, Tranzlease, Orix India are some of the established players in this market. With a high percentage of working age population of around 925 million by 2020, and 70% of compact car owners belonging to an age group of below 35 years, the Indian vehicle leasing market has the potential to double its value in the coming 3 to 5 years.[2] While the core business of leasing companies in India involves leasing to corporations who provide the vehicles to their employees, the booming cab sector is also another area forms a chunk of their portfolio. Read more →

Transfer of shares to IEPF- Is the Wait Over ?

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By Pammy Jaiswal & Megha Saraf, (corplaw@vinodkothari.com)

Introduction

It seems that the prolonged postponement for transferring shares to IEPF is over. Ministry of Corporate Affairs (“MCA”) vide its Notification dated 13th October, 2017[1] has added yet another notification on Investor Education Protection Fund (“IEPF”), to its list. The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017 (“Second Amendment Rules”) has been made effective from 13th October, 2017. Even though the Second Amendment Rules have yet again come out with an extended time line for effecting transfer of shares, some of the operational issues are not yet clarified for effecting such transfer to IEPF.

Further, MCA has also issued a Circular dated 16th October, 2017[2] which provides for certain details on the Second Amendment Rules.

The write-up is therefore, an attempt to put before a clear snapshot of the current picture on transfer of shares to IEPF.

Main Highlights of the Second Amendment Rules

The major highlights of the Second Amendment Rules are:

  • Due Date for Transfer of shares

The Second Amendment Rules have extended the due date to transfer the shares to IEPF till 31st October, 2017 for the cases where the period of seven years has been completed or being completed during the period from 7th September, 2016 to 31st October, 2017.

Accordingly, the last date for completing all the formalities in connection with transfer shall be 30th November, 2017.

  • Transfer of shares is in the nature of transmission of shares

The Second Amendment Rules have clarified that the transfer of shares to IEPF shall take place by following the procedure for transmission of shares. Even though the documentation for such transmission has not been stated in the said rules or the circular, resolution passed by a company for transferring shares seems to a supporting document in this regard.

Further, MCA Circular dated 5th June, 2017[3], had already clarified that transfer of shares to IEPF is not in the nature of transfer but a transmission and hence, the requirement of issuing duplicate share certificate may be done away with.

  • Issuance of “New” share certificates instead of “Duplicate” share certificates

In case of physical shares, the Company shall issue “New” share certificates in Form SH-1 instead of “Duplicate” share certificates. Even though duplicate certificates need not be issued, however, the new certificates issued under the said rules will have the words “Issued in lieu of share certificate no….. for the purpose of transfer to IEPF”.

Further, the requirement entering the details of the certificate issued under the said rule in the register of renewed and duplicate share certificates maintained in Form No. SH-2 has been done away with.

  • Opening of Demat Account of IEPF Authority with Punjab National Bank

IEPF Authority has opened its Demat Account with Punjab National Bank (‘PNB’) and SBICAP Securities Limited (‘SBICAP’) for the purpose of making any transfer of shares.

  • Reporting of non-compliances to Central Government

Any non-compliance of the IEPF rules shall be reported by the IEPF Authority to the Central Government.

  • Appointment of a Nodal Officer

MCA has given a time period of 15 days to all the companies for nominating a Nodal Officer for coordinating with IEPF Authority and the details of such officer shall be displayed on the website of the company.

  • Rejection of claim in e-Form IEPF-5 in certain cases
  1. The current IEPF Rules provide that the company shall be required to provide a verification report to the Authority within a period of 15 days of receiving the claim. The Second Amendment Rules provides that in case the Authority does not receive requisite documents with a period of 90 days from the date of filing e-Form IEPF-5, the claim is liable to get rejected in the hands of the Authority.

However, before rejecting such claim, the Authority shall allow a further time of 30 days to furnish the requisite documents.

  1. In cases where the claim is incomplete or not approved and communication in this regard has been sent to such claimant and company, IEPF may reject such application if rectified documents are not filed within a period of 90 days. However, prior to such rejection, a time of further 30 days in this regard.

Highlights of the General Circular dated 16th October, 2017

  • PNB and SBICAP are the DPs with whom the IEPF Authority has opened demat account. These accounts will be fully digital and paperless;
  • Format of corporate action will be prescribed by NSDL and CDSL shortly;
  • Account maintenance charges will be minimal as per the MoU entered between the IEPF Authority and the NSDL and CDSL. Such MoU will be put up on the website of the of the IEPF Authority;
  • Cash benefit arising out of and in the form of the following, shall mandatorily be transferred to the bank account opened with PNB, Sansad Marg, New Delhi.
    • dividend from shares already transferred to IEPF;
    • proceeds realized on account of delisting of equity shares;
    • amount entitled on behalf of a shareholder in case of winding up of a company.
  • Amounts mentioned under section 125 (2) shall not be transferred to the aforesaid bank account. Only the amounts mentioned in the above point shall be transferred and nothing else.

Conclusion

Based on the above discussions, one can conclude that IEPF has tried all its might to join the dots and made the transfer of shares become a reality, although it has taken more than a year to fix the operational issues in this regard. Now, the only clarification to be looked out for is the format of corporate action, after which companies can actually complete all the formalities and finally the wait for transferring the shares to IEPF comes to an end.

[1] http://iepf.gov.in/IEPF/pdf/IEPFNotification_13102017.pdf

[2] http://www.mca.gov.in/Ministry/pdf/GC12TranferofShares_16102017.pdf

[3] http://iepf.gov.in/IEPF/pdf/IEPFGcircular07_05062017.pdf

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