Variable Capital Company: Singapore proposes a new way of making investments

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Can India replicate this model?

By Simran Jalan (finserv@vinodkothari.com)

Introduction

On March 23, 2017, Monetary Authority of Singapore (MAS) issued a consultation paper[1] for Singapore Variable Capital Companies. On September 10, 2018, the MAS tabled the Variable Capital Companies Bill (the “Bill”)[2] in Singapore Parliament.

The Variable Capital Company (“VCC”) is a corporate structure that is tailored for collective investment schemes (“CIS”). In Singapore, the most commonly used investment fund structures are unit trusts (constituted by way of trust deeds) and investment companies. The legislative framework for VCC seeks to provide an alternative to incorporating a company under the Singapore Companies Act (“CA”) for the formation of CIS in Singapore.

With the introduction of the VCC structure, the fund managers will have greater operational flexibility. This VCC structure will act as a platform for the fund managers to establish a domicile of their investment funds in Singapore.

This Bill will be administered by the Accounting and Corporate Regulatory Authority (“ACRA”) and will act as the registrar. However, the anti-money laundering and counter-financing of terrorism obligations of VCC will be overseen by the MAS. Read more →

Major recommendations of the Committee on Payment Systems on Payment and Settlement System Bill, 2018

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By Vishes Kothari & Simran Jalan  (finserv@vinodkothari.com)

Introduction

Major reforms are being proposed to the Payments and Settlement Systems Act, 2007 so as to be able to catch up with the fast changing payments landscape in the country.

An Inter-Ministerial Committee was constituted in October, 2017 to finalise the draft bill called the Payment and Settlement System Bill, 2018[1] and was comprised of representatives from the RBI, UIDAI, Department of Financial Services (DFS), Department of Electronics and Information Technology (DEIT), Department of Economic Affairs (DEA) and the Department of Legal Affairs (DLA). The Committee has recently submitted its recommendations.

The committee has proposed sweeping changes in the payments sector. The formation of Payments Regulatory Board (“PRB”), an independent regulator of the payments system distinct from the central bank is perhaps the most significant. This separates the regulation of payments from the functions of the central bank, The PRB is formed with the broad objectives of consumer protection, systematic stability, and resilience. It further aims to bring about competition and innovation. Moreover the Bill proposes to put banks and non-banks at par by making authorization criteria to operate payment and settlement systems ownership neutral.

Further significant changes include the introduction of the concept of designated payment systems and infrastructure systems. Both are discussed in detail below.

The Bill has 100 sections as compared to 38 sections in the existing Payment and Settlement Systems Act, 2007 (“PSS Act”). Read more →

Blended lending in priority sector – the new scheme of Bank-NBFC participation

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Implementation issues of MCA’s mandate for compulsory DEMAT in case of WOS

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– Shares required to be credited in personal demat accounts of nominee holders

CS Vinita Nair (corplaw@vinodkothari.com)

To view this article, please visit https://www.moneylife.in/article/implementation-issues-of-compulsory-demat-for-wholly-owned-subsidiaries/55381.html

 

SAST amendments brought by SEBI

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-imposes a complete prohibition on a fugitive economic offender

By Munmi Phukon (corplaw@vinodkothari.com)

SEBI on 11th September, 2018 has notified the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2018[1]. The key changes are highlighted below:

Chapter I- Preliminary

[Reg. 2(1)]- Definitions

Clause (j)- Frequently traded shares

As per existing definition, the traded turnover of the shares (to be treated as frequently traded shares) was required to be determined during the period of 12 calendar months preceding the month in which public announcement is made.

Now, the period of 12 months will be calculated from the month preceding the month in which the public announcement was actually required to be made.  Therefore, even in case of failure to make an open offer, the 12 months shall be counted from the month in which the offer was required to be made.

Insertion of new clause (ja)- Definition of “fugitive economic offender”

To mean an individual who is declared a fugitive economic offender under section 12 of the Fugitive Economic Offenders Act, 2018 (17 of 2018).

The insertion of the definition is in relation to the new Reg. 6B which is covered below.

Chapter II- Substantial Acquisition of Shares, Voting Rights or Control

 

Reg. 5A- Delisting offer

The existing proviso to the Regulation provides that an upfront declaration of the intention to delist the shares of the target company is required to be made at the time of publication of the detailed public statement. In order to bring more clarity, the said proviso has been amended to specifically provide that any subsequent declaration of delisting shall not suffice.

Insertion of new Reg. 6B- Prohibition applicable to fugitive economic offender

The new Reg. is different from Reg. 6A inserted vide SAST (Second Amendment) Regulations, 2016 which is applicable to a wilful defaulter. Reg. 6A prohibits a wilful defaulter to acquire shares or enter into any transaction that would attract the obligation to make a public announcement of an open offer for acquiring shares under these regulations. Evidently, the restriction is to acquire so much of shares or to enter into any transaction which in turn shall require making of a public offer. Further, a wilful defaulter has been made eligible to make a competing offer in accordance with the regulations.

On the other hand, fugitive economic offender has been completely prohibited from making a public announcement of an open offer or making a competing offer for acquiring shares or entering into any transaction, either directly or indirectly, for acquiring any shares or voting rights or control of a target company. Therefore, the prohibition is not only on making an open offer or competing offer but on any acquisition.

Reg. 7(2)- Offer size for voluntary offer

The existing Reg. provided the minimum offer size to be additional 10% of total shares of the target company. The same has now been linked to voting rights and accordingly, minimum offer size for voluntary offer shall be for additional 10% of the voting rights.

Reg. 10- General exemptions from making an open offer

Clause (a) of Reg. 10(1) provides exemption to inter se transfer between certain categories of persons including transfer among group companies being holding- subsidiary, fellow subsidiary etc. An explanation to the said clause has been inserted to bring clarity that the company as referred to in the clause shall include a body corporate.

CHAPTER – III- Open Offer Process

 

Reg. 17(3)- Form of escrow account

An explanation has been inserted under the Reg. explicitly mentioning that the cash component of the escrow account may be maintained in an interest bearing account, subject to the merchant banker ensuring that the funds are available at the time of making payment to the shareholders.

Reg. 18(2)- Mode of sending of letter of offer

An explanation has been inserted to provide electronic mode as the eligible mode of sending letter of offer to the shareholders. However, on receipt of a request, a physical copy shall have to be issued from any shareholder to receive a copy of the letter of offer in physical format, the same shall be provided. The letter if offer shall specifically mention the same.

 

[1] http://egazette.nic.in/WriteReadData/2018/189777.pdf