SEBI asks companies to strengthen controls on handling of UPSI

by CS Vinita Nair, (corplaw@vinodkothari.com)

Preamble

SEBI framed SEBI (Prohibition of Insider Trading) Regulations, 2015 (the Regulations) to combat the wrong of trading in securities with the advantage of having asymmetrical access to unpublished information which when published would impact the price of securities in the market. Originally framed in 1993 and thereafter, replaced with revised regulations in 2015.

The Regulations mandates listed entities to frame Code of Conduct for Prohibition of Insider Trading and Code of Fair Disclosure. The Code of Conduct is for all employees and connected persons to adhere and comprises of requirement of pre-clearance of trade, disclosure of trade, prohibition to trade when the trading window is closed, restriction on contra trade and reporting of violations to SEBI and taking disciplinary action against those who violate the Code of Conduct. In order to ensure successful implementation of Code of Conduct, it is of utmost importance to sensitize the employees about the requirements of the Regulations and the Code of Conduct, what is expected out of them, what are the Do’s and Don’ts that such employees and connected persons are required to adhere to. Additionally, the Compliance officer is also expected to carry out timely reporting to Chairman of Audit Committee/ Board, maintain grey list, ensure the employees update the list of immediate relatives, ensure that action is taken against those who violate the Code.

SEBI order in case of Axis Bank

SEBI vide order dated December 27, 2017[1] issued directions to Axis Bank Ltd in respect of leakage of UPSI relating to financials through social networking thereby requiring Axis Bank Ltd to submit information regarding the processes controls that it has in place regarding handling of UPSI. This is relevant for all other listed entities as preparing of periodic financials is a regular phenomenon and is definitely an UPSI. SEBI attributed such leakage to the inadequacy of the processes / controls / systems that Axis bank as a listed company had put in place. SEBI stressed on the fact that while procurement or communication of UPSI  by  any  person  is identified as a violation of regulation 3 of PIT Regulations and section 12A(e) of the SEBI Act, it becomes incumbent upon every listed company to put in place.

SEBI ordered Axis Bank to strengthen its processes/ systems/ controls to ensure such instance is not repeated in future and to conduct an internal inquiry into the leakage of UPSI and take appropriate action against those responsible for the same, in accordance with law. The scope of enquiry prescribed included but not limited to determination of the possible role of following persons in relation to the aforesaid leakage of UPSI:

  1. Persons / members of committees involved in generation of the original data for the purpose of determination of  key figures pertaining to financial figures including GNPA, NNPA, NIM, Slippage, Write-off, CASA, etc.
  2. Persons involved  in  the  consolidation  of  the  figures  for  the  financial results.
  3. Persons involved in the preparation of board notes and presentations.
  4. Persons involved in dissemination of information  relating  to  financial  results in the public domain.
  5. Any other persons who had access to the information.

SEBI provided a timeline of 3 months from the date of order and asked to file a report to SEBI within 7 days from completion.

In the past, in case of Palred Technologies Limited[2], SEBI had charged a facebook ‘mutual friend’ whose trading pattern was found in deviation from the established trading pattern and when he could not reply to specific details sought by SEBI.

What’s in store for others

There is definitely a need for all other listed entities to revisit and ensure the sanctity of its own controls and processes in relation to handling of UPSI. The extent to which the employees have been sensitized will determine the effectiveness of the processes and controls. Needless to say, any such instance affects the credibility and reputation of the listed entity.

All the listed entities frame the two codes required under the Regulations, put up FAQs on the intranet and monitor the trading of the designated persons and other connected persons. But it is very essential to test the effectiveness, to re-visit, to sensitize the employees again and again, to make them aware of the repercussions of violating the Regulations or the Code.

Areas to sensitize

  1. Educating all insiders about the sensitivity of information and the need to restrict disclosures on “need to know” basis;
  2. Educating all such executives who deal with sensitive information to ensure strictest confidentiality;
  3. Ensuring that there is adherence to Company’s internal code/protocol while speaking to press/public forums;
  4. Ensuring that trading in securities of any other company, in respect of whom the company’s executives have UPSI, is barred;
  5. Ensuring that the investment team/investment committee/ research desk of the company has “chinese wall” protection from such team as may have UPSI in relation to clients;
  6. Ensuring that trading by all employees in company’s securities are disclosed, if such trades are in excess of the stipulated amount every quarter;
  7. Ensuring that DPs are aware of closure of trading window;
  8. Ensuring that DPs take prior approval for any trading while trading window is open;
  9. Ensuring that DPs are aware of contra trade restrictions;
  10. Ensuring that flow of information is clear from the respective HoDs to the compliance officers for maintenance of grey/ restricted list;
  11. Educating on the requirement to have differential closure of trading window depending on the nature of UPSI and manner in which information is to flow;
    • For eg. the M&A team must be aware about likelihood of any acquisition and deal dynamics even before it is put up before the Board or Committee for sanction. The trading window for such team cannot commence at same time when the window is closed for those preparing board notes, agenda etc. The closure for them will commence earlier and this will be required to be communicated by the respective HoD to the compliance officer.

What should the SOP cover?

A Standard Operating Procedure (SOP) may be separately framed to implement to Codes under the Regulations or this may be incorporated in the Code itself. Apart from the introduction and provisions of law, the SOP should cover following:

Parameter Points to be covered
Dealing in securities ·         The employees shall be informed about period when the employee including his/her Immediate Relatives shall not trade;

·         The employee shall be required to seek permission of respective HoD or Compliance Officer before sharing of an UPSI for legitimate purpose/ on a ‘need to know basis’ i.e. for performance of duty or discharge of legal obligations. While seeking permission, the need to know requirement shall be justified. Till receipt of sanction, the information shall not be shared.

·         The HoD/ Compliance Officer sanctioning such a requirement may mandate entering of NDA and any other compliance arising under the Code for such designated person.

Updating information ·         The listed entity shall provide a robust system to ensure timely updation of list of immediate relatives by designated persons, online application for pre-clearance, reporting of trade, submitting disclosure, seeking permission for sharing of UPSI for legitimate purposes in order to do away with the excuse of not being able to send information on time;

 

Period of Trading Window closure ·         It is not relevant whether the intimation of trading window closure is given to stock exchange or not. The closure is for the insiders and not outsiders. Therefore, the Code/ SOP should clearly specific tentative period when the trading window shall remain closed.

·         The Compliance Officer in consultation with executive director shall have the power to decide and close the trading window for any other period during which certain identified employees shall be prohibited from trading in securities of the Company or any other company of which such employees is expected to have access to UPSI.

·         The period of closure shall be informed to the employees by way of intranet and/or email. The email should mandate a read receipt.

Pre-clearance and Reporting of Trade undertaken ·         The employees shall be sensitized about the requirement to seek pre-clearance and also to report the trade undertaken pursuant to such trade.

·         When the trade is reported, immediately an email can be sent intimating about the contra trade restrictions.

·         Instances when a waiver will be granted should be adequately captured in the Code and also sensitized to employees.

·         The RTA should also be given the details of PAN of the designated employees to be able to pull out the beneficiary position of such DPs separately in order to track the change in holding of shares.

Responsibility of Compliance Officer ·         The Compliance Officer shall sensitize the employees on recent orders, informal guidance given by SEBI in simplified manner;

·         The Code shall provide the option to contact the Compliance Office in case of any doubt/ confirmation in relation to Regulations to ensure that employees don’t sleep walk into non-compliance.

·         Regular tracking of trades by employees, issuance of warning letters, periodic internal reporting, taking disciplinary action and informing SEBI of violation of Code by DPs.

Chinese Wall mechanism ·         The access to those departments that are expected to be in possession of UPSI should be restricted;

·         Within such departments, use of cell phones/ gadgets which could potentially aid in sharing UPSI should be avoided;

·         The documents/ records/ systems storing UPSI should be stored with password protection or other security feature that the entity adopts in general;

·         Strict instruction shall be given in relation to manner of handling of such records for legitimate purpose till the particular UPSI becomes a generally available information.

 

Conclusion

Unlike other SEBI Regulations, this Regulation is required to be complied by the listed entity as well as its employees and connected persons. Therefore, the onus is on the listed entity to sensitize, facilitate, monitor and report.

 


[1] https://www.sebi.gov.in/web/?file=../../../sebi_data/attachdocs/dec-2017/1514383873200.pdf#page=1&zoom=auto,-22,842

[2] https://www.sebi.gov.in/sebi_data/attachdocs/1454682584239.pdf

Secretarial Standards 3 – a voluntary guideline for companies!

-By Megha Saraf (corplaw@vinodkothari.com)

Introduction

The Institute of Company Secretaries of India (“ICSI”) vide its earlier notification had brought an exposure draft on Secretarial Standards-3 (“SS-3/Standards”) on Dividend which was put forward for public comments. After considering the suggestions/comments received on the draft, ICSI has finalized the Standard and has made it enforceable from 1st January, 2018. Although, SS-3 is getting enforced, however being voluntary in nature the question of adopting the same is uncertain by the companies.

This article is an attempt to jot down the major highlights of the Standards covering its scope which shall present an idea on the list of compliance for a company.

Applicability

The Standard is applicable on all companies except a company limited by guarantee and a company declaring dividend under liquidation.

Major highlights of the Standards

  1. Dividend to be declared only once the deposits accepted under the Act has been repaid with interest, debentures and preference shares issued have been redeemed with interest, term loan with any bank or financial institution have been repaid with interest.

    Hence, companies may be able to declare dividend only once they have met all their liabilities towards other security holders.

  1. The Standard specifically exempts Government companies from complying with the conditions laid down for declaring dividend where there are inadequate profits or no profits in the company provided the entire paid up share capital is held by the Central Government or State Government(s) or jointly by both. Further, such exemption has been made in line with the exemption provided under the Companies Act, 2013 (“Act, 2013”).

    Further, the Standard also exempts Government Companies from the condition of depositing the dividend amount in a separate bank account within 5 days of its declaration. However, it does not exempt such Government Companies from the condition of paying dividend to the shareholders within 30 days of the declaration.

    Therefore, such exemption has been made in line with the exemption provided under the Act, 2013 to the Government Companies.

  1. The Standard prohibits declaration of dividend by any Committee or by resolution by circulation except by the Board at a Board Meeting.

    Considering that the decision of declaring dividend is one of the major decisions for a company which is ultimately correlated to the shareholders of the company, it is utmost important for the Board of Directors of a company being at the top most hierarchy of a company after the shareholders, to think twice before taking such decision.

    Therefore, the provision may be said to empower only the board members to take such informed decision after following a lengthy discussion compared to any Committee or merely passing it through resolution by circulation.

  1. The Statement containing details of the Members whose dividend has remained unpaid or unclaimed required to be maintained by a company was earlier required to be maintained and updated by the company on a quarterly basis.

    However, considering the tediousness of the work and suggestions made by the stakeholders, ICSI has left the timeline for such updation on the convenience of the company itself without prescribing for quarterly review.

Provisions relating to Investor Education and Protection Fund (“IEPF”)

Almost after an year, Ministry of Corporate Affairs (“MCA”) and the Depositories have made effective the transfer of shares to IEPF by issuing operational guidelines and filling up the technical gaps that was present in the earlier notifications brought in by the MCA w.r.t IEPF. For the purpose of effecting transfer of shares to IEPF, the foremost criteria is that dividend on the underlying shares must have remained unpaid and unclaimed for a period of 7 consecutive financial years.

Although, the provisions of the Standards has been kept aligned with the provisions of the Act, 2013 and IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016 (including any amendment made thereto), there are still certain major loopholes in the provisions of the Standards which can be said cumbersome for a company intending to comply with the provisions of the Standard voluntarily. One such loophole is the requirement of sending individual notices to the Members before transferring any unpaid or unclaimed dividend atleast 3 months’ before the due date for such transfer.

Where on one side the provisions of IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016 mandates for giving notice to those Members whose underlying shares are liable for transfer on which dividend has remained unpaid or unclaimed for 7 consecutive years, the provisions of the Standard provides for giving notice to the Members before transferring any unclaimed or unpaid dividend to the IEPF.

Thus, the provision of the Standard seems to be cumbersome for companies to follow requiring them to give notice every year before transferring any unpaid or unclaimed dividend to the IEPF.

Additional compliance for Listed companies

The Standard where on one side is a voluntary guideline for companies, it also mandates certain additional compliance on the part of listed companies alongwith the compliance of other laws applicable on such listed company such as SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations, 2015”). Some of the additional compliance mentioned under the Standards provides that:

  1. Equity shares allotted by a company shall rank pari passu alongwith the existing equity shares in the company for the purpose of payment of dividend.
  2. Prior intimation to the Stock Exchange of the Board meeting in which dividend is supposed to be recommended or declared.
  3. Prior intimation to the Stock Exchange of the record date fixed for the purpose of payment of dividend.
  4. Recommendation/ declaration of dividend prior to the record date fixed for the purpose
  5. Intimation about the outcome of the Board meeting, in which dividend is recommended or declared, to the Stock Exchange.
  6. Formulation of Dividend Distribution Policy by top 500 companies based on market capitalization.
  7. Disclosure of the dividend payment date in the Corporate Governance Report.

It is to be noted here that the above stated compliance as said to be additional for a company are nothing but mandatory compliance for any listed company in terms of the provisions of LODR Regulations. Thus, it can be said that the above mentioned compliance are nothing but re-iteration of the provisions of LODR Regulations, 2015 which are mandatory to be followed by a listed company and therefore are not burden for a company.

Conclusion

Though ICSI has made the Standards effective from 1st January, 2018, compliance of the same is a voluntary practice for any company. Further, as the major provisions of the Standards has been kept aligned with the provisions of other laws such as the Act, 2013 or the LODR Regulations, 2015, the provisions of the Standards does not make compliance a tedious work for a company.

Therefore, compliance with the provisions of the Standards shall indirectly lead a company as a well-compliant company in terms of mandatory laws.

FAQs on Layers of Subsidiaries

By Team Vinod Kothari & Company | December 21, 2017 (corplaw@vinodkothari.com)

 

MCA vide its Notification[1] dated September 20, 2017 notified the Companies (Restriction on Number of Layers) Rules, 2017, imposing a limit of two layers of subsidiaries which is effective from September 20, 2017[2]. In this regard, the following FAQs discusses various questions relating to the provisions dealing with layers of subsidiaries:

  1. Which all sections deal with restriction on layers of subsidiaries in Companies Act, 2013 (‘CA, 2013’)?

The following are the two sections which deals with restriction on layers of companies:

  • Proviso to Section 2 (87) [definition of subsidiary company or subsidiary]: As per the proviso, such class or classes of holding companies (as may be prescribed) shall not have layers of subsidiaries beyond such numbers as may be prescribed.
  • Section 186 (1) [Loan and investment by company]: As per this Section, a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies.
  1. What is meant by ‘layer’ under Section 2 (87) of the CA, 2013?

The word “layer”, referred to in Section 2(87), means subsidiary or subsidiaries of the holding company.  The same word has also been used in Section 186 (1). Given the intent of the section, ‘layer’ refers to vertical limit.

  1. What is the reason behind limiting the number of layers?

The Joint Committee on Stock Market Scam[3] provided that on account of layers it became difficult to link the source of fund with the actual users to which these fund were put.

The multiple layers of companies are used by the companies for syphoning of funds and for money laundering. Therefore, in order to curb such practices by the companies, the government has provided restriction on floating layers of companies.

  1. Is there any restriction on horizontal propagation?

The restriction in layers of subsidiaries is for vertical propagations and not for horizontal propagations. A company may have as many investments horizontally. The same can be illustrated with the following diagram:

 

Figure 1: Horizontal propagation of Company A

  1. Are there any exceptions to proviso of section 2 (87)?

In addition to the exceptions given in section 186 (1), the Companies (Restriction on number of layers) Rules, 2017 (‘Rules, 2017’) also provides exception to the following companies:

  • a banking company;
  • a non-banking financial company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) which is registered with the Reserve Bank of India and considered as systemically important non-banking financial company by the Reserve Bank of India; (Nothing specified in relation to housing finance companies/ NBFC CICs).
  • an insurance company being a company which carries on the business of insurance in accordance with provisions of Insurance Act, 1938 and Insurance Regulatory Development Authority Act, 1999;
  • a Government company referred to in clause (45) of section 2 of the Act.
  1. Are the provisions applicable on subsidiaries incorporated outside India?

First proviso to Rule 2 of the Rules provides exemption to a Company from acquiring a company incorporated in a country outside India with subsidiaries beyond two layers as per the laws of such country.

The exemption in case of acquiring of subsidiaries incorporated outside India should have been extended equally to subsidiaries freshly incorporated outside India. There shouldn’t have been a distinction in acquisition and incorporation of subsidiary outside India. Either a company may acquire a subsidiary outside India which in turn has several layers of downstream investment or it may float a subsidiary outside India which will keep on further incorporating or acquiring subsidiaries outside India.

It will be incorrect to say that Company incorporating subsidiaries outside India will have to adhere to the restriction of layers even if the same is permitted as per law of that country.

  1. Are the wholly owned subsidiaries even counted in the limits of layer?

The second proviso to Rule 2 of the Rules provides:

“Provided further that for computing the number of layers under this rule, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.”

As per the above-mentioned provision, a layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account while computing the number of layers i.e., one layer which is represented by a wholly owned subsidiary shall not be taken into account.

‘Layer’ cannot mean ‘Layers’ based on interpretation that singular includes plural. Therefore, it should not be read as any layer represented by a wholly owned subsidiary. The whole purpose will get defeated if companies are allowed to incorporate layers of wholly owned subsidiaries without any restriction. Therefore, the exemption is only in a layer which represents a wholly owned subsidiary. However, it is pertinent to note that the layer of wholly owned subsidiary has to reflect in the first layer and not thereafter in order to avail the exemption.

The permitted layers can be illustrated with the following diagram:

Figure 2: Permitted layers of subsidiaries

  1. Whether the Rules are prospective or retrospective?

As per Rule, after the date of commencement of the Rules, the holding companies, other than the exempted companies, which has number of layers of subsidiaries in excess of the limit of layers:

  • shall not have any additional layer of subsidiaries over and above the layers existing on such date; and
  • shall not, in case one or more layers are reduced by it subsequent to the commencement of these Rules, have the number of layers beyond the number of layers it has after such reduction or maximum layers allowed in sub-rule (1), whichever is more.

Therefore, companies will have to comply with these conditions prospectively.

  1. Whether acquisition, as mentioned in the Rules, covers intra group transactions?

Yes, acquisition here refers to any acquisition which has the result of making the entity being acquired, the subsidiary of the acquiring entity. Accordingly, intra group transactions as well as external transactions shall be covered.

  1. Whether it is possible to acquire a company incorporated outside India which has no subsidiary? Or has subsidiaries within two layers even if the laws of the host country permit beyond 2 layers?
Draft Rules[4] Final[5]
After the date of commencement of this rule, every holding company, other than a holding company belonging to a class specified in sub-rule

(2), shall have not more than two layers of subsidiaries:

On and from the date of commencement of these rules, no company, other than a company belonging to a class specified in sub-rule (2), shall have more than two layers of subsidiaries:
Provided that the provisions of this sub-rule shall not affect a holding company from acquiring a subsidiary incorporated in a country outside India if such subsidiary has subsidiaries as per the laws of such country. Provided that the provisions of this sub-rule shall not affect a company from acquiring a company incorporated outside India with subsidiaries beyond two layers as per the laws of such country:

By virtue of Rule 2(1) a company cannot have more than two layers of subsidiaries unless the company is covered in exemption list provided in Rule 2 (2).

The carve-out given in the proviso under draft rules explains that the overseas subsidiary being acquired may have any number of subsidiaries permitted as per law of host country. The final rules amended the wording to clarify that even if such subsidiaries have more than two layers of subsidiaries as per laws of such country, the holding company can acquire such subsidiary. The intent is to make it abundantly clear that if the acquiring entity is likely to breach the limit of layer of subsidiary on account of acquisition of company incorporated outside India, the rule shall not apply. There is no precondition that the company being acquired abroad should have two layers of subsidiaries.

  1. Is there any filing requirement for companies which has number of layers of subsidiaries in excess of the limit?

Every company, other than the companies exempted under the section, existing on or before the commencement of these rules, which has number of layers of subsidiaries in excess of the layers specified, shall file return in Form CRL-1 with the Registrar within a period of 150 days from the date of publication of these Rules in Official Gazette i.e., September 20, 2017. The form requires specifying layer number of the subsidiary and percentage of shares held by holding company. The format as prescribed in the Rules requires certifying the form, therefore, the e-form is much awaited. However, in the absence of the e-form, CRL-1 should be filed in e-form GNL-2 before the expiry of 150 days from the date of publication of these Rules.

  1. Is there any penal provision for contravention of these Rules?

If any company contravenes any provision of these Rules then the company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

  1. What is meant by ‘layers of investment companies’ under Section 186 (1) of the CA, 2013?

Section 186 (1) of the CA, 2013 puts down restriction on companies to make investments through more than two layers of investment companies. In this case, it refers to vertical layers of investments companies.

The expression ‘investment company’ means a company whose principal business is the acquisition of shares, debentures or other securities.

There is no exemption to any company from adhering to the requirement of Section 186 (1).

  1. Are there any exceptions to the provisions of section 186(1)?

Yes. The proviso exempts the applicability of this section to:

  • Acquiring of any company incorporated outside India if that company has investment subsidiaries beyond two layers as per the laws of that country.
  • Subsidiary company from having an investment subsidiary to fulfill any regulatory requirement.
  1. Section 2(87) postulates that a relationship of subsidiary can be established if one controls the Board of the other company. Whether such category of subsidiary falls within the purview of Section 186(1)?

Section 186(1) of CA, 2013 nowhere talks about investment through subsidiary. Hence for the purpose of section 186(1) control over the board of company will not be reason enough for attracting the provision of section 186(1).

If such subsidiaries are investment companies, section 186(1) shall be attracted.

  1. What is the difference between the provisions of proviso to Section 2 (87) and 186(1)?

A tabular presentation of the difference between the proviso to section 2(87) and section 186(1) of the CA, 2013 is presented below:

Criteria Proviso to Section 2(87) Section 186(1)
Applicability On all companies [Except few exceptions mentioned in above question] On all companies [Except few exceptions mentioned in question no. 6]
Restriction on Holding company having more than 2 layers of subsidiaries Investing through more than 2 layers of investment subsidiaries
Entity at the end of the loop of the layer Can be a body corporate Has to be a company
Investment through Can be through bodies corporate Has to be necessarily through investment companies
Onus of complying with the section Holding company Holding company
Criteria of establishing relationship Subsidiary can be either by way of control of composition of board of directors or by way of investment in total share capital of company Holding company has to invest through investment subsidiaries. Investment can be in any security.

Table 1: Difference between the sections 2(87) and 186(1) of the CA, 2013

  1. Understanding layers with the help of few illustrations:

Illustration 1:

Figure 3: Illustration 1

The above illustration shows the permitted structure.

Illustration 2:

Figure 4: Illustration 2

In the above illustration, Company B being a WOS will be exempted and hence, the permitted layer will be till Company B2.

However, coming to the other vertical investment – Company A is not the ultimate holding of Company C1. Therefore, For Company A, the permitted layer will be till Company C1 (unless falling under the exemption) and for Company C, the permitted layer will be till Company C3.

Illustration 3:

Figure 5: Illustration 3

In this illustration, C2 is not permitted because C1 is not a subsidiary of an NBFC.

Illustration 4:

Figure 6: Illustration 4

a. Can Subsidiary 4 be shifted from WOS 1 to WOS 2? This will not result in any change in the structure or total number of subsidiaries/ step-down subsidiaries; but simply change the immediate holding entity.

Shifting of subsidiary 4 will be regarded as acquisition within the group. Where the subsidiary is a company incorporated outside India, the restriction of breaching the limit of layer of subsidiary shall not apply.

       b. Will the aforesaid exemption hold good even in case of acquiring a company incorporated outside India having an Indian company as its subsidiary at some level/ layer?

In that case, the company will be making an Indian company its subsidiary pursuant to said acquisition. The intent is to exempt from the requirement of acquiring overseas entity which has subsidiaries as per laws of host country. If the Indian company intended to acquire another Indian company in order to make such Indian company its subsidiary, the same would not have been permitted in view of restriction on layers of subsidiary. What cannot be done directly should not be done indirectly as well. Therefore, the aforesaid exemption shall not hold good.


[1] http://egazette.nic.in/WriteReadData/2017/179104.pdf

[2] http://egazette.nic.in/WriteReadData/2017/179105.pdf

[3] http://www.prsindia.org/administrator/uploads/general/1292845141_JPC_REPORT%20on%20stock%20market%20scam.pdf.pdf

[4] http://www.mca.gov.in/Ministry/pdf/Notice_29062017.pdf

[5] http://ebook.mca.gov.in/Default.aspx?page=rules

ICSI’s Golden Jubilee Release-Governance Code for Charitable Entities

By Dipanjali Nagpal (corplaw@vindokothari.com)

The Institute of Company Secretaries of India has released the Code for Charity Governance[1] at the 45th National Convention of Company Secretaries to bring about charitable entities within the ambit of good governance as envisioned by the Hon’ble Prime Minister Shri Narendra Modi for empowering the nation. Read more