Export Factoring in India

– Paving the way to provide easy finance to exporters

By Simran Jalan (simran@vinodkothari.com)

Introduction

Export factoring bundles together credit protection, export working capital financing, foreign accounts receivables bookkeeping and collection services- all in one product. It is the sale of foreign accounts receivable by a seller (exporter) to a factoring company at a discount, where the financier (factor) assumes the risk of default of the foreign buyer and handles collection on the receivables. The factor will purchase the accounts receivables or invoices, which are raised once the exporter ships the goods to the buyer (importer). Export financing is usually without recourse wherein the financier takes the payment risk of the importer.

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Resurrection of masses: Gujarat HC quashes MCA notification on disqualification of directors

By CS Megha Saraf (megha@vinodkothari.com)

In what might be a major embarrassment to the Ministry of Corporate Affairs (“MCA”), the Gujarat High Court has held that the MCA came up with various notifications in the month of September, 2017, disqualifying 3,09,614[1] directors, was wrong, since it amounted to giving a retrospective effect to the provisions of Section 164 (2) of the Companies Act, 2013 (“Act, 2013”). Notably, in a so-called Operation Clean Money, the MCA struck off some 2,24,733[2] companies, generally branding them as “shell companies”, and simultaneously disqualified their directors, relying on a provision introduced in the Act, 2013 in form of Section 164 (2) which extends to private companies as well.

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Accounting for Direct Assignment under Indian Accounting Standards (Ind AS)

By Team IFRS & Valuation Services (ifrs@vinodkothari.com) (finserv@vinodkothari.com)

Introduction

Direct assignment (DA) is a very popular way of achieving liquidity needs of an entity. With the motives of achieving off- balance sheet treatment accompanied by low cost of raising funds, financial sector entities enter into securitisation and direct assignment transactions involving sale of their loan portfolios. DA in the context of Indian securitisation practices involves sale of loan portfolios without the involvement of a special purpose vehicle, unlike securitisation, where setting up of an SPV is an imperative.

The term DA is unique to India, that is, only in Indian context we use the term DA for assignment of loan or lease portfolios to another entity like bank. Whereas, on a global level, a similar arrangements are known by various other names like loan sale, whole-loan sales or loan portfolio sale.

In India, the regulatory framework governing Das and securitisation transactions are laid down by the Reserve Bank of India (RBI). The guidelines for governing securitisation structures, often referred to as pass-through certificates route (PTCs) were issued for the first time in 2006, where the focus of the Guidelines was restricted to securitisation transactions only and direct assignments were nowhere in the picture. The RBI Guidelines were revised in 2012 to include provisions relating to direct assignment transactions.

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MCA aligns the provisions of Incorporation Rules with Ordinance

FAQs on SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018

SEBI extends disclosure related exemption to eligible NBFCs & HFCs

-Amends Reg. 29 (4) of SAST Regulations, 2011 dealing with disclosures relating to pledge

By Simran Jalan (simran@vinodkothari.com)

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations) provides requirement in relation to manner of acquisition, takeover, disclosure requirements, acquisitions triggering open offer etc. It is a common phenomenon to pledge the shares of a listed entity as a security for availing of loan from Banks, financial institutions.

In line with the approval granted by SEBI in its Board meeting held on December 12, 2018[1] SEBI issued SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2018[2] on December 28, 2018 (‘Amendment Regulations’) exempting certain class of NBFCs and HFCs from the requirement of disclosing acquisition (resulting from encumbrance) and disposal (resulting from release of encumbrance). This article discusses the impact of the said amendment.

The Amendment Regulations are effective from December 31, 2018.

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