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Open in new tab National financial information repository: One more or one for all?
– Lovish Jain, Executive | lovish@vinodkothari.com
Some days ago, Mr. Vinod Kothari had commented on a LinkedIn post :
“Do we realise how many places does a lender (NBFC, Bank) register information about a loan? There are 4 credit information companies (such as CIBIL) where the credit data, including performance history, is uploaded. If the exposure is Rs 5 crores or above, in the aggregate over the banking system, information goes on CRILC too.
RBI has recently written to NBFCs reminding them of the obligation to register details with NeSL, an information utility under IBC, irrespective of whether the provisions of Code apply (for example in case of individuals), or whether the lender in question is at all contemplating resorting to IBC as a remedy (for example, consumer loans).
If the loan is a secured loan, the details need to be filed with CERSAI. If the secured loan borrower is a company, details need to be filed with RoC too. If the security interest is on immovable property, one needs to file particulars with land registry. If the security interest is on motor vehicles, the hypothecation is registered with Vahan portal too.
Read more →MCA rationalizes 52 ROC e-Forms for V3 portal
NCLT’s powers to rectify register of members restricted in case of breach of securities laws
– Sharon Pinto, Manager | sharon@vinodkothari.com
Introduction
A recent judgment by the Supreme Court in Ifb Agro Industries Limited vs Sicgil India Limited, has put to rest the concerns regarding rectificatory jurisdiction of NCLT u/s 59 of Companies Act, 2013 (section 111A of the erstwhile Companies Act, 1956). The ruling has shed light on the scope of NCLT jurisdiction in case of rectification of the register of members, in cases where there are violations of specific laws and the facts of the case are such that the same requires proper enquiry, adjudication under the specific statute. The two major questions addressed by Hon’ble Supreme Court are as follows:
- What is the scope and ambit of Section 111A of the Companies Act, 1956 (‘Act, 1956’) / Section 59 of the Companies Act, 2013 (‘Act, 2013’), to rectify the register of members?
- Which is the appropriate forum for adjudication and determination of violations and consequent actions under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997 (‘SEBI SAST Regulations’) and the SEBI (Prohibition of Insider Trading) Regulations 1992 (‘SEBI PIT Regulations’)?
Directors to declare on personal disqualifications too in DIR-8
– Prapti Kanakia, Manager | prapti@vinodkothari.com
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Debenture Issuance -Recent developments & applicable compliances
– Vinita Nair, Senior Partner | vinta@vinodkothari.com
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2022 Wrapped Up: Regulatory review of corporate law developments
– Payal Agarwal, Assistant Manager (payal@vinodkothari.com)
2022 has been a relatively stable year when it comes to Companies Act, save changes in the forms and filing procedures with increasing online processes, there has been significant traction on the part of SEBI. While Structured Digital Database (SDD) remained the buzzword for the listed entities with the stock exchanges requiring them to submit quarterly compliance certificates, the stress for proper controls on insider trading remained the focal point. For social enterprises, a landmark development was the introduction of the concept of Social Stock Exchanges, which seems to be shortly getting into operational mode.
We have tried to briefly cover the major developments in corporate laws during the year 2022. You may also refer to our brief discussion of the same in this youtube video. For updates relevant to the financial sector including the overseas investment norms, refer 2022 in retrospect: Regulatory activity in the financial sector. You may also refer to our quick round-up of regulatory developments in IBC in the year 2022.
Read more →Financial entities in IFSC: A primer
– Parth Ved, Executive | parth@vinodkothari.com
Table of contents
Background
Flow of funds, just like a river, not only enriches its destination but also benefits all the stops it passes through. Having a financial hub, a stopover which enables routing billions and billions of global funds on a daily basis can definitely prove resourceful. London, New York, Singapore are some of the globally recognised financial centres, and needless to say these locations are at the forefront of financial development. India too has tried to tap into this with the setting up of GIFT-IFSC in Gujarat, and has tried to position itself as the next big global hub for financial transactions.
Through this write-up, the author tries to explain the concept of International Financial Services Centre and the applicability of domestic regulatory framework on entities set up therein.
Read more →SEBI rationalizes ID appointment and removal process for first term Re-appointment process to be rationalized post amendment in CA, 2013
Utilisation of accumulated surplus by section 8 companies
-Can surrogate means be used to relegate funds or benefits to shareholders
Pammy Jaiswal | Partner | Vinod Kothari and Company
Shraddha Shivani | Executive | Vinod Kothari and Company
Background
Section 8 of the Companies Act, 2013 (‘CA’) provides for the formation of companies with specific objects. Since the section revolves around incorporation of companies with charitable or some other specified welfare objectives, it gives an impression that these companies do not work to earn financial gains for their shareholders. This impression becomes evident since Section 8 companies are commonly referred to as ‘not-for-profit’ companies which further substantiates this understanding and adds to the confusion. They may make profits, as indeed, they very often do; however, the profit necessarily gets redeployed to carry the very same objects for which the company was formed, and cannot be relegated to the shareholders.
In fact, earning profits is not just permitted but is also essential for their continued existence and organic growth of its affairs. Most such companies do not borrow; hence, they carry their activities either through corpus contributions or through retained profits. Thus, the restrictions under CA are not on earning profits but on the distribution of the same to its shareholders.
The most common way for a company to distribute profits to its shareholders is by way of payment of dividend. This is explicitly barred in case of a Section 8 company. Having said that, these companies may also come across a situation where they do not foresee any immediate application of their accumulated profits and therefore, may look out for ways to utilise it for some other purpose. The management running these companies, potentially representing shareholders, may not be necessarily driven by avarice when they intend to use the funds other than for the purpose for which the company was formed.
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