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Open in new tab Financing transition from “brown” to “green”
SEBI prescribes additional requirements for transition bonds
– Mahak Agarwal, Executive | corplaw@vinodkothari.com
Need for transition finance
As climate change and its impacts continue to remain one of the major concerns of any economy, transition finance is a step towards effectively transforming carbon emissions and combating climate change.
‘Transition Bonds’, as the word speaks for itself, are debt instruments that facilitate transition of a carbon-intensive business into decarbonizing business and eventually achieving the Net Zero emissions targets.
While it is true that change is the only constant, it cannot be denied that the same can often be challenging. Similar is the case with enterprises looking to metamorphosize their activities into a sustainable form. A huge amount of finance is required for carbon-intensive sectors to decarbonize and it is here that transition bonds find their application.
Read more →Legal Entity Identifier Code now mandatory for bond issuers
Ajay Ramanathan, Executive | ajay@vinodkothari.com
Background
Legal Entity Identifier (LEI) Code is a unique 20-digit code used to identify legal entities that engage in financial transactions worldwide in order to improve the quality and accuracy of financial data systems for better risk management post the global financial crisis by establishing a global reference system.
Prior to the present SEBI Circular, all non-individual borrowers availing an aggregate exposure[1] of Rs. 5 crore and above from banks and financial institutions were mandated to obtain LEI Code over the prescribed timeline.
Read more →Evolution of concept of related parties and related party transactions
-Team Vinod Kothari and Company | corplaw@vinodkothari.com
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Our Resource Centre on Related Party Transactions can be viewed here
Continuing Disclosures by listed entities: Regulation 30 of SEBI LODR
– Vinod Kothari | corplaw@vinodkothari.com
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Our article on Reg 30 of LODR Regulations can be viewed here
Presentation on Annual Secretarial Compliance report
– Vinita Nair, Senior Partner | corplaw@vinodkothari.com
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A sigh of relief for the HVDLEs, not shy from compliance
Extension of “comply or explain” period in respect of corporate governance norms
– Nitu Poddar | corplaw@vinodkothari.com
SEBI in its board meeting dated March 29, 2023 decided to extend the timeline for “comply or explain” period for the High Value Debt Listed Entity (HVDLE) for compliance of corporate governance norms (i.e. regulation 16 to 27 of LODR Regulations) till March 31, 2024. A HVDLE is a company having listed debt and an outstanding value of such listed debt of Rupees 500 crore and above. It is to be noted that the HVDLEs were given a timeline of two financial years[1] (FY 21-22 and 22-23) to comply with the corporate governance norms or explain the reason for non-compliance in the quarterly corporate governance report to be filed with the stock exchange(s). Given this extension of mandatory compliance of the said norms – can the HVDLEs just sit back and relax till March 31, 2024? No, they will still have to endeavor to comply. Any short compliance requires reporting to the exchanges on a quarterly basis.
Read more →Bond market needs a friend, not parent
Policies seem to be working at cross-purposes
Vinita Nair, Senior Partner | corplaw@vinodkothari.com
The need to promote bond markets is almost cliched, and does not require elaboration. However, when one observes the regulatory and fiscal developments concerning bond markets in recent times, one wonders whether there is a clear and unified sense of direction. The role of policymaker may be supporting, reformative, protective, promotional, etc. Sometimes, protective regulation may also be intended to play a promotional role – for example, if investors’ interest is better protected, it may promote investor confidence and hence, appetite. However, it is hard to see a clear theme in the spate of changes concerning bond markets in the recent past.
Fiscal measures:
As regards fiscal measures, there are several changes in the Budget 2023 that may be directly or indirectly affecting the bond markets. The Budget saw market-linked debentures[1], a bit controversial development, as a case of fiscal arbitrage, and killed the same, resulting in the death of the instrument. The exemption from withholding tax exemption in case of listed bonds was taken away – which will be difficult to understand as the theoretical justification for withholding tax is the possibility of tax leakage in case of destination-based tax. The case for the leakage is difficult to make, as listed bonds are issued in demat format, and hence, all transactions take place through regular banking channels. If the intent of policymakers was to promote retail investment in bonds, this is certainly antithetical to that objective.
Another fiscal change, which may have a long-term negative impact, is the denial of long-term capital gain treatment to investment in debt mutual funds[2]. Debt mutual funds were also responsible for the demand-side of corporate bonds. Mutual fund’s share in the outstanding corporate bonds as at the end of FY 2022 stood at 15.85%[3]
Read more →Entering in FY 23-24: Regulatory review of corporate law developments
– Payal Agarwal, Deputy Manager (payal@vinodkothari.com)
As the new financial year 23-24 commences, we look back at where we stand at the end of FY 22-23, in terms of the regulatory developments. While there has been no substantial traffic in terms of regulatory developments to the Companies Act, the migration of various forms in MCA’s V3 portal proved to be (and still continues to be so in some cases) a turmoil, with a standstill in the fundraising process, and other practical difficulties, even resulting in levy of additional fines.
There has been significant traction on the part of SEBI too. 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. Having stiffed the nerves of the Compliance Officers in the listed entities through the quarterly compliance certificates, the same has been finally absorbed in the annual secretarial compliance reports under the Listing Regulations.
Read more →SEBI amends its comprehensive PIT FAQs: Explains contra trade restrictions
Aisha Begum Ansari & Sanya Agarwal | corplaw@vinodkothari.com
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