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Company Law, SEBI, RBI,

Accounting & Audit etc. January 2016

OCOctober20142014

CNK Knowledge Tracker ……Be a Step Ahead

CNK Knowledge Tracker, January 2016 For Private Circulation only Co Law, SEBI, RBI, Accounting & Audit etc.

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Contents Corporate Law Updates

Companies (Amendment) Act, 2015 3

Companies Act, 2013- Rules and Amendment Rules 3

Circulars from the Ministry of Corporate Affairs 5

Circulars from SEBI 6

Circulars from IRDA 9

Accounting and Auditing

Guidance Notes 12

Exposure Drafts 12

Reserve Bank of India/ FEMA

RBI Notifications/ Orders & Circulars 14

Other Regulatory Announcements 20

Disclaimer and Statutory Notice 21



Corporate Law Updates

Companies (Amendment) Act, 2015

The MCA had notified the above Act on 25th May 2015, which states that the amendment

Act will come into force on such date as the Central Government (CG) may, by notification

in the Official Gazette, appoint. Different dates may be appointed for different provisions of

this Amendment Act.

The MCA has now appointed 14th December 2015 as the date on which Section 13 and 14

of the above Act will come into force.

The corresponding section under Companies Act, 2013 are-

Section 143 (12)- relating to fraud reporting by auditors (including the threshold for such

reporting) and

Section 177(4)(iv)- relating to omnibus approval for related party transactions (RPT)by

Audit Committee (AC).

Companies Act, 2013 – Rules and Amendment

Rules

Companies (Audit and Auditors) Amendment Rules, 2015

Amendment of Paragraph 13 - Reporting of frauds by auditor and other matters

Paragraph 13 of the Companies (Audit and auditors) Rules, 2014 has been substituted. The

amended paragraph states, among other matters, that if an auditor, has reason to believe that

an offence of fraud, which involves or is expected to involve individually an amount of Rs. 1

crore or above, is being or has been committed against the company by its officers or

employees, the auditor should report the matter to the CG.

The auditor should report the matter to the CG as under:

The auditor should report the matter to the Board or the AC, as the case may be,

immediately but not later than 2 days of his knowledge of the fraud, seeking their reply

or observations within 45 days.

On receipt of such reply or observations, the auditor should forward his report and the

reply or observations of the Board or the AC along with his comments to the CG within

15 days from the date of receipt of such reply or observations.



In case the auditor fails to get any reply or observations from the Board or the AC

within the stipulated period of 45 days, he should forward his report to the CG along

with a note containing the details of his report that was earlier forwarded to the Board or

the AC for which he has not received any reply or observations.

If the amount is less the Rs.1 crore, the auditor should report the matter to the Board or

the AC immediately but not later than 2 days of his knowledge of the fraud.

Each fraud reported to the AC or the Board during the year should be disclosed in the

Board’s Report with the prescribed details.

The provision of this rule will also apply, mutatis mutandis, to a Cost Auditor and a

Secretarial Auditor during the performance of his duties under Section 148 (CG to specify

audit of items of cost in respect of certain companies) and Section 204 (Secretarial Audit of

bigger companies) of the Companies Act, 2013 respectively

For details refer: http://mca.gov.in/Ministry/pdf/Amendement_Rules_14122015.pdf

Companies (Meetings of Board and its Powers) 2nd Amendment Rules,

2015

Omnibus approval for RPT by AC

The Companies (Amendment) Act, 2015 contains provision relating to omnibus approval of

RPT by AC, which is applicable from 14th December 2015.

The MCA has notified Companies (Meetings of Board and its Powers) 2nd Amendment

Rules, 2015, which contains specific requirements relating to omnibus approval for RPT by

AC. Accordingly, after Rule 6 , another Rule 6A pertaining to Omnibus approval for RPT

on annual basis has been inserted.

For details refer: http://mca.gov.in/Ministry/pdf/Amendement_Rules_14122015_1.pdf

Companies (Share Capital and Debentures) 3rd Amendment Rules, 2015

Insertion of additional class of company which can issue secured debentures for a

period of 10-30 years

In Clause 18 pertaining to Debentures, in sub-rule (1), in clause (a) following sub-clause has

been inserted –

(iv) Companies permitted by a Ministry or Department of the CG or by Reserve Bank of

India or by the National Housing Bank or by any other statutory authority to issue

debentures for a period exceeding 10 years.

http://mca.gov.in/Ministry/pdf/Amendement_Rules_14122015.pdf

http://mca.gov.in/Ministry/pdf/Amendement_Rules_14122015_1.pdf



Companies (Management and Administration) 3rd Amendment Rules,

2015

Amendment of Annual Return

In the Companies (Management and Administration) Rules, 2014 Form No. MGT-7

(Annual Return) has been substituted.

The substituted form is available on:


Limited Liability Partnership (Amendment) Rules, 2015

Removal of the requirement to intimate RoC on conversion into LLP

The MCA has issued the above Rules which came into force from 19th October 2015. The

amendment rules, among other matters, have removed the requirement of intimating the

Registrar of Companies (RoC) where a private company or unlisted public company has

been converted into a Limited Liability Partnership (LLP).

Circulars from the Ministry of Corporate Affairs

(MCA)

Relaxation of additional fees and extension of last date of in filing of

forms MGT-7 (Annual Return) and AOC-4 (Financial Statement) under

the Companies Act, 2013- State of Tamil Nadu and UT of Puducherry

General Circular No. 16/2015 dated 30th December 2015

Due to heavy rains and floods in the State of Tamil Nadu and UT of Puducherry, the normal

life/work was affected, it has been decided to relax the additional fees payable for the State

of Tamil Nadu and UT of Puducherry on e-forms AOC-4, AOC (CFS) AOC-4 XBRL and

e- Form MGT-7 up to 30th January 2016, wherever additional fee is applicable.




Circulars from Securities and Exchange Board of

India (SEBI)

FAQs on SEBI (Share Based Employee Benefits) Regulations

SEBI has issued FAQ on SEBI (Share Based Employee Benefits) Regulations, 2014 –

Relating to un-appropriated inventory of shares

Clarifying that the restriction on grant of ESOPs to independent directors will apply only

on fresh grants of ESOPs after the commencement of the SEBI (Share Based Employee

Benefits) Regulations, 2014 and the Companies Act, 2013. Any grant already made prior

to commencement of these provisions will remain valid, i.e., an independent director can

exercise such ESOPs, subject to fulfillment of terms and conditions of the ESOP

schemes framed by the companies in terms of the relevant regulations.

For details refer: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1448017049051.pdf

Disclosures in the Abridged Prospectus and Price Information of

past issues handled by Merchant Bankers

SEBI has prescribed the disclosure requirements in the abridged prospectus in accordance

with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations,

2009 and the Companies Act, 2013.

The disclosure requirements in the abridged prospectus have been rationalised in

consultation with Investor Associations and market participants. The revised abridged

prospectus improves the readability and contains relevant information for the investor to

take well informed investment decision.

The revised format of abridged prospectus according to Regulation 58 (1) and Part D of

Schedule VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, is

placed at Annexure I of this circular. The formats for disclosure of price information of past

issues handled by merchant bankers as specified vide SEBI Circular no.

CIR/CFD/DIL/5/2011 dated 27th September 2011 has been revised and is placed at

Annexure II of this circular. Pursuant to applicability of this Circular, this SEBI Circular

dated 27th September 2011 will be rescinded.

This Circular will be applicable on issues opening for subscription from 1st December 2015

and a copy of abridged prospectus will be filed with SEBI.


http://www.sebi.gov.in/cms/sebi_data/attachdocs/1448017049051.pdf




Format of uniform Listing Agreement

SEBI has issued format of a simplified listing agreement which is uniform across all types of

securities/listed entities. A listed entity which has previously entered into agreement(s) with a

recognised Stock Exchange(s) to list its securities is required to execute a fresh listing

agreement with such Stock Exchange by 1st March 2016 (within 6 months of the date of

notification of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

i.e. 2nd September 2015).


Various circulars pertaining to the Listing Regulations.

On 2nd September 2015, SEBI notified the SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015 (Listing Regulations). Subsequently, SEBI has issued

various circulars pertaining to the Listing Regulations. They are-

Dated Particulars

4th November 2015 Format for Business Responsibility Report

27th November 2015 Format for financial results(FR) for listed entities which have listed their debt instruments and /or non-cumulative redeemable preference shares

Format for statements/reports to be submitted to Stock Exchange(s)by listed entity which has listed its securitised debt instruments

30th November Schemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957

Formats for publishing FR

Manner of achieving minimum public shareholding

Disclosure of holding of specified securities and Holding of specified securities in dematerialised form

Non-compliance with certain provisions of Listing Regulations and Standard Operating Procedure for suspension and revocation of trading of specified securities

Issue of No Objection Certificate for release of 1% of issue amount

The above circulars are applicable from 1st December 2015.

For details of the above circular refer:

http://cnkindia.com/SEBI%20Listing%20Regulations%202015.pdf


http://cnkindia.com/SEBI%20Listing%20Regulations%202015.pdf



SEBI (Listing Obligations and Disclosure Requirements) (Amendment)

Regulations, 2015

In the Listing Regulations, there has been an amendment in Regulation 34 (Annual Reports)

sub regulation (2) which states the details which the Annual Report should include.

In clause (f), for the words top 100 listed entities, the word ‘for the top 500 listed

entities’ has been substituted;

In the proviso to clause (f), for the words top 100 listed companies, the words ‘top 500

listed entities’ has been substituted

Clause (f) now reads as-

For the top 500 listed entities based on market capitalization (calculated as on March 31 of every financial

year), business responsibility report describing the initiatives taken by them from an environmental, social and

governance perspective, in the format as specified by the Board from time to time:

Provided that listed entities other than top 500 listed companies based on market capitalization and listed

entities which have listed their specified securities on SME Exchange, may include these business

responsibility reports on a voluntary basis in the format as specified.

This circular will come into force on 1st April 2016.

For details refer:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1450865541906.pdf

FAQs on SEBI (Listing Obligations and Disclosure Requirements)

(Amendment) Regulations, 2015

SEBI issued the above FAQs on 8th January 2016 to clarify certain aspects of ambiguities. It

clarifies on following, among other issues:

Definition of ‘associate company’ and ‘related party’ as per Companies Act 2013 or

applicable Accounting Standards.

Certification of Compliance Certificate in the absence of CEO/CFO

Related party abstain from voting in case of approval of material RPT

Designating independent director of listed entity on the Board of ‘unlisted subsidiary’ or

only on ‘unlisted material subsidiary’

Effective date of posting of disclosures on listed entity's website have been clarified by

the regulator.

For details refer:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1452241689373.pdf





Circulars from Insurance Regulatory and

Development Authority (IRDA)

Constitution of Implementation Group on Ind-AS in the Insurance

Sector

IRDA has taken a stand that insurance sector in India would be converged with IFRS after

the revised standard on Insurance Contracts i.e. IFRS 4 is pronounced by IASB. The same

was also conveyed to MCA. The MCA has considered the same and vide notification dated

16th February 2015 has exempted the insurance sector from the applicability of Ind-AS

(equivalent of IFRS in India). While the revised standard IFRS 4 is still under finalisation, in

order to prepare the Indian insurance sector towards convergence with Ind-AS, IRDA, has

constituted an Implementation Group (IG) to lay down a roadmap for the same.

The IG should examine the implications of implementing Ind-AS, address the

implementation issues and facilitate formulation of operational guidelines to converge with

Ind-AS in the Indian Insurance sector.

Some of the terms of reference of the IG are as under:

Review the applicability of Ind-AS notified by MCA in the insurance sector

Study the impact of Ind-AS on the insurance sector

Provide the roadmap in addressing the IT system requirements on an ongoing basis

Identify IRDAI Regulations/stipulations which need to be reviewed in the light of Ind-

AS implementation

Prepare formats for the financial statements of insurers under Ind-AS

For details refer:

https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2678&f

lag=1

Exposure draft (ED) on IRDAI (Assets, Liabilities, and Solvency Margin

of General Insurance Business) Regulation, 2015

The Insurance Laws (Amendment) Act, 2015 has amended the Insurance Act 1938. This has

led to existing Regulations on Assets, Liabilities and Solvency Margin of Insurers being

defunct.

The major changes in the draft Regulations as compared with current Regulations are listed

below:

Introduction of “Control Level of Solvency Margin”

https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2678&flag=1




Introduction of Technical Reserve Committee

Introduction of 27 lines of business

Allowance for other forms of capital in the calculation of Solvency Margin.

Changes are also been made in format of Statement of Assets, Statement of Liabilities and

Statement of Solvency margin.

For details refer:


lag=1

ED on Regulations on Preparation of Financial Statements and Auditor’s

Report of Insurance companies

The IRDAI in consultation with the Insurance Advisory Committee has proposed to notify

the regulations as per draft IRDAI (Preparation of Financial Statements and Auditor’s

Report of Insurer) Regulations, 2015

The draft regulations include the following:

Formats to capture “Preference Share Capital”

Format for Head Office Account applicable to foreign reinsurer operating through

branch office established in India)

Separation of Shareholders funds and Policyholders funds of other than life insurance

companies

New Schedule to capture “Policy Liabilities” under “Other than life Insurance” is

introduced

Stipulation that no investment property is to be purchased for self-use from funds of

participating business is expressly quoted

For details refer:


lag=1

Insurance Regulatory and Development Authority of India (Other forms

of Capital) Regulations, 2015

These regulations allows an insurer to have other forms of capital in the form of preference

shares, debentures and other debt instruments as may be approved by the IRDAI.

For details refer:


lag=1









Discussion Paper on Convergence to Ind-AS in Insurance Sector

In the Budget Speech for FY 2014-15, the Finance Minister had indicated a need to

converge Ind-AS with International Financial Reporting Standards (IFRS). Indian

companies are to adopt new Ind-AS from the FY 2015-16 voluntarily and from FY 2016-17

on mandatory basis.

This discussion paper covers the approach towards convergence towards Ind-AS in the

insurance sector from the date which will be notified by IRDA separately. The Standing

Committee on Accounting Issues of IRDA has recommended draft of the Regulations on

Financial Statements and Auditors’ Report which are compliant to Ind-AS. Additionally, it

has been recommended that certain Ind-AS will not be applicable while, in some cases carve

outs are recommended.

The draft is open for comments from all the stakeholders. The date of applicability of these

recommendations along with any other recommendations of the IG on Ind-AS will be

notified in due course.

For details refer:


lag=1





Accounting and Auditing

Guidance Notes

Withdrawal of 5 Guidance Notes on Accounting

The ICAI has, vide announcement dated 21st October 2015, decided to withdraw the

following 5 Guidance Notes (GN) on Accounting as the same are no longer relevant in the

present day context in view of the requirements of the Companies Act, 2013:

GN No

Issued in

Nomenclature

3 1982 GN on treatment of reserve created on revaluation of fixed assets

7 1989 GN on accounting for depreciation in companies

8 1994 GN on some important issues arising from the amendments to Schedule XIV to the Companies Act, 1956

26 2008 GN on applicability of Accounting Standard (AS) 20, Earnings Per Share

27 2008 GN on remuneration paid to Key Management Personnel-Whether a Related Party Transaction

Exposure Drafts

ED of GN on Some Important Issues arising from Schedule II to the

Companies Act, 2013

This Guidance Note is issued with the objective to provide guidance on certain significant

issues that may arise from the practical application of Schedule II with a view to establish

consistent practice with regard to the accounting for depreciation.

For details refer: http://resource.cdn.icai.org/39829research29402.pdf

ED of the Accounting Standard (AS) 8, Accounting Policies, Changes in

Accounting Estimates and Errors

The ICAI has issued the above ED of the revised AS 8, to be applied under Indian GAAP.

The revisions are being done to bring Indian GAAP nearer to Ind-AS.

For details refer:

http://online.icai.org/comments/asb/viewdetailcomment.html?commentdoc_id=35

http://resource.cdn.icai.org/39829research29402.pdf




ED of new /revised Standards on Auditing (SA)

In order to converge with the newly issued International Standards on Auditing (ISA) the

following SA on reporting would need to be amended. ICAI has, therefore, issued ED of

the following new/revised SA:

Revised

SA 700

Forming an Opinion and

Reporting on Financial Statements

http://resource.cdn.icai.org/40071aasb29

713-1.pdf

New

SA 701

Communicating Key Audit Matters

in the Independent Auditor’s

Report


713-2.pdf

Revised

SA 705

Modifications to the Opinion in

the Independent Auditor’s Report


713-3.pdf

Revised

SA 706

Emphasis of Matter Paragraphs

and Other Matter Paragraphs in

the Independent Auditor’s Report


713-4.pdf

Revised

SA 260

Communication with Those

Charged with Governance


713-5.pdf

Revised

SA 570

Going Concern http://resource.cdn.icai.org/40076aasb29

713-6.pdf

ED on Amendments in Transitional Provisions of AS

The existing AS which were notified under the Companies Act, 1956 under the Companies

(AS Rules) 2006 have to be notified afresh under Section 133 of the Companies Act, 2013.

Certain existing AS which were notified in 2006 contain ‘Transitional Provisions’ (TP). The

objective of these TP is to prescribe the accounting treatment when an AS becomes

applicable for the first time. Accordingly, in 2006, there was some justification to include

these 'transitional provisions'. As now the AS are being notified afresh, so from the

perspective of their re-notification, TP are being re-examined.

The Accounting Standards Board of ICAI has issued the above ED of following AS for

comments:

AS (Revised ) 10 Property, Plant and Equipment

AS 11 The Effects of Changes in Foreign Exchange Rates

AS 21 Consolidated Financial Statements

http://resource.cdn.icai.org/40071aasb29713-1.pdf














AS 22 Accounting for Taxes on Income

AS 23 Accounting for Investments in Associates in Consolidated Financial

Statements

AS 25 Interim Financial Reporting

AS 26, Intangible Assets

AS 28 Impairment of Assets

AS 29 Provisions, Contingent Liabilities and Contingent Assets

For details refer:


Reserve Bank of India (RBI)/Foreign

Exchange Management Act, 1999

(FEMA)

Notifications/ Orders & Circulars

Following amendments are made to Notification No. FEMA 20/2000-

RB dated 3rd May 2000-

The RBI vide Notification No.353/2015 RB dated 6th October 2015 has now allowed

Non- Resident Indian to subscribe to the National Pension System governed and

administered by Pension Fund Regulatory and Development Authority (PFRDA) on

repatriable basis. The subscriptions should be in conformity with the PFRDA Act and

should be made through normal banking channels either by inward remittance or out of

funds held in his NRE/FCNR/NRO account.

The RBI vide Notification No. 355/2015-RB dated 16th November 2015 has inserted

new schedule 11, amending the Transfer Regulations, thereby allowing foreign investment

through investment vehicles, subject to certain terms and conditions. An "investment

vehicle" is defined to be an entity that is registered and regulated under relevant regulations

governing the said Investment Vehicle.




The RBI vide Notification No. 354/2015-RB dated 30th October 2015 and DIPP press

note no. 12 dated 24th November 2015 has introduced key amendments /

clarifications in FDI Policy, as follows:

Amendment /Clarification in Sectoral Cap for Foreign Investments in India.

Sector Revised Liberalised Position

Agriculture &

Animal

husbandry

Need for meeting additional conditions by the companies dealing in

development of transgenic seeds/vegetables which was previously

provided has been dispensed with.

Plantation

In addition to tea plantations, the Government has decided to open

certain other plantation activities namely; coffee, rubber, cardamom,

palm oil tree and olive oil tree plantations with 100% foreign

investment under automatic route.

Defence

manufacturing

Foreign investment up to 49% was previously allowed under

Government approval route. Now, foreign investment up to 49% is

allowed under automatic route (subject to some conditions). However,

the Government approval will be required when it results in change in

ownership or transfer of stake from existing shareholder to a new

foreign investor.

Portfolio investment and foreign venture capital investment have now

been hiked from 24% to 49% and that too through the automatic route.

Broadcasting

Carriage

Services

Earlier Foreign investment up to 49% was allowed under automatic

route and government approval was required for investment beyond

49% and up to 74%. Now foreign investment up to 49% continues

under automatic route and beyond 49% and up to 100% Government

approval will be required.

Broadcasting

Content

Services

Earlier for Terrestrial Broadcasting FM (FM Radio) and up-linking of

‘News & Current Affairs’ TV Channels, the FDI cap up to 26% was

allowed. Now the said limit is increased to 49% under Government

approval.

Earlier for Up-linking / Down-linking of Non-‘News & Current

Affairs’ TV Channels FDI up to 100% was subject to Government

approval. The same is now 100 % under automatic route.

Air Transport

Earlier foreign investment up to 49% was allowed only in Scheduled Air

Transport Service/ Domestic Scheduled Passenger Airline services

under automatic route. Now Regional Air Transport Services will also

be eligible for foreign investment up to 49% under automatic route.




Further FDI cap of 74% under automatic route for non-scheduled air

transport services has now been increase to 100% Automatic Route.

Ground

Handling

Services

(“GHS”)

Earlier for GHS FDI was allowed up to 49% under Automatic Route

and beyond that up to 74 % under government route, subject to

Sectoral regulations and security clearance. Under the Revised policy

100 % FDI under automatic route is allowed.

Construction

Development

Sector

Under the revised FDI policy, several conditions which were prescribed

earlier have been removed including the area restriction of floor area of

20,000sq.mtr. in construction development projects and minimum

capitalisation of USD 5 million which needed to be brought in within

six months of the commencement of business. Also, foreign investors

have been allowed to exit and repatriate their investment under

automatic route before the completion of the project provided they

complete a lock-in period of three years.

Further, transfer of stake from NR to NR, without repatriation of

investment will neither be subject to any lock-in period nor any

government approval. Nonetheless, exit is permitted at any time if

project or trunk infrastructure is completed before the lock-in period. It

has also been provided that each phase of the construction

development project would be considered as a separate project for the

purposes of the FDI policy.

Further, with the amendment in the definition of real estate business, it

is specified that earning of rental income on lease of property, not

amounting to transfer will not be regarded as real estate business, which

was earlier prohibited.

The FDI is Real Estate Investment Trusts (REIT) is also permitted

under Schedule 11 of the revised FDI Policy.

Wholesale trade

Earlier, wholesale cash and carry though was under 100% automatic

route they were not allowed to open retail shops to sell the commodity

directly to consumers. Under the revised policy a single entity will be

permitted to undertake both the activities of Single Brand Retail

Trading and wholesale cash and carry, provide:

it maintains separate books of accounts for the two arms of the

business and has them audited by statutory auditors and;

Each arm of the business complies with the conditions attached to

the FDI policy relating to wholesale Cash & Carry businesses and

for retail businesses.

Single-brand

Retail trading

So far, single-brand retailers with FDI were not allowed online trading

in any form. Now, an entity which has been granted permission to




(SBRT)

undertake SBRT will be permitted to undertake ecommerce activities.

It has been clarified that Indian brands are equally eligible for

undertaking SBRT.

It has been decided that certain conditions of the FDI policy on the

SBRT Sector such as, products to be sold under the same brand internationally

and investment by non-resident entities as the brand owner or under legally tenable

agreement with the brand owner, will not be made applicable in case of FDI

in Indian brands.

The rule that mandates single-brand retailers to locally procure 30% of

their goods sold in India over a span of five years remains; however, the

new policy will allow the retailer to meet the said 30% norm from the

time it opens the first store. Until now, the five-year deadline started

from the date of receipt of foreign direct investment (FDI). Further, in

case of ‘state-of-art’ and ‘cutting edge technology’ sourcing norms can

be relaxed subject to Government approval.

Therefore for the purposes of FDI policy, Indian manufacturer would

be the investee company, who would be the owner of the Indian brand

and; manufactures in value terms at least 70% of its products in-house,

and sources at most 30 %from other Indian manufacturers.

Manufacturing

and E-

commerce

The term ‘manufacture’ has been introduced and it reads as a change in

a non-living physical object or article or thing- (a) resulting in

transformation of the object or article or thing into a new and distinct

object or article or thing having a different name, character and use; or

(b) bringing into existence of a new and distinct object or article or

thing with a different chemical composition or integral structure.

Now, the manufacturer will be permitted to sell its product through

wholesale and/or retail, including through e-commerce under automatic

route

Banking –

Private Sector

Earlier the FDI in Private Sector banks (including investments by

FII/FPI/QFI) was allowed up to 74% of which up to 49% was allowed

under the automatic route and beyond that through the Government

approval.

Under the revised FDI a composite cap is introduced by removing the

sub-limits for FDI and FII, thereby allowing Private sector banks

/FIIs/FPIs/QFIs to invest up to the Sectoral limit of 74% under

automatic route, provided there is no change of control and




management of the investee company.

Credit

Information

Companies

(CIC)

Earlier FDI up to 74%as allowed under automatic route which has now

been increase to 100 %under the Automatic route.

Sub Limit of 24% investment by a FII/FPI under the PIS in case of

listed CIC has now been removed

Duty Free

Shops

100% FDI is permissible under automatic route in duty free shops

located and operated in the customs bonded areas which was earlier not

permitted under FDI Policy.

As per press note 12 dated 24th November 2015 of DIPP following amendments to

consolidated FDI policy has also been made.


Dormant /

Shell Company

Earlier, FDI in any company without operations required prior approval of

the Government.

Under the revised policy, Indian company which does not have any

operations and also does not have any downstream investments, which is

having business activities under automatic route and without FDI-linked

performance conditions, will be permitted to have infusion of foreign

investment under automatic route.

However approval of the Government will be required for such companies

for infusion of foreign investment for undertaking activities which are under

Government approval route, regardless of the amount or extent of foreign

investment.

Further, as and when such a company commences business(s) or makes

downstream investment, it will have to comply with the relevant Sectoral

conditions on entry route, conditionalities and caps.

Share Swap

For Investments in Sectors under Automatic Route, no Government

approval will be required for FDI by way of swap of shares.

However, Government approval will still be required for FDI by way of

swap of shares in Sectors under government approval route.

The condition of valuing the shares as per the extant pricing guidelines still

needs to be complied with.




NRI Entity

Earlier investments by foreign companies/ trusts etc. would tantamount to

FDI and accordingly were subject to Sectoral caps and pricing guidelines etc.

In other words, beneficial treatment given to NRIs in the FDI policy was

available only if they invested in their individual capacity.

Investment by companies/ trusts/ partnerships owned & controlled by

NRIs on non-repatriation basis will now be treated as domestic investment.

Conditionalities

for the

purposes of

FDI in LLP

FDI in Limited Liability Partnerships (LLP) which was earlier allowed under

Government approval route is now permitted automatic route, subject to the

following conditions:

FDI is permitted under the automatic route in LLPs operating in

sectors/ activities where 100% FDI is allowed, through the automatic

route and there are no FDI-linked performance conditions.

An Indian company or LLP having foreign investment will be permitted

to make downstream investment in another company or LLP in sectors

in which 100% FDI is allowed under the automatic route and there are

no FDI- linked performance conditions.

FDI in LLP is subject to the compliance of the conditions of LLP Act,

2008.

Downstream

Investments

Downstream investments, which was earlier restricted only to companies,

have been extended to LLPs with similar conditionality’s as given in the

relevant FEMA notification.

Definition of

"Control"

The definition of term “control” for the purposes of FDI in LLP has now

been defined and will mean right to appoint majority of the designated

partners, where such designated partners, with specific exclusion to others,

have control over all the policies of the LLP.

Definition of

"Owned"

The definition of “owned” has now been extended to LLPs whereby, a LLP

will be considered as owned by resident Indian citizens if more than 50% of

the investment in such an LLP is contributed by resident Indian citizens and

/ or entities which are ultimately ‘owned and controlled by resident Indian

citizens' and such resident Indian citizens and entities have majority of the

profit share.



Other Regulatory Announcements

Removing of grace period of 5 days on payment of Provident Fund (PF)

contribution by the employers by 15th of the following month

As per EPF Scheme, 1952, EPS Scheme, 1995 and EDLI Scheme, 1976, the employers are

required to pay the contributions and administrative charges within 15days of the close of

every month. The employer is allowed 5 days grace to remit the contribution.

Since in the present era, employers compute the wages and EPF liabilities electronically and

file Electronic Challan-cum-Return (ECR), the time taken for calculation of PF dues and its

remittance in the bank has also reduced. Therefore, it has been decided that the concession

of 5 days available to the employers for depositing the contribution and other dues be

withdrawn from February 2016 (contributions for month of January 2016 and payable in

February 2016).

The Payment of Bonus (Amendment) Act, 2015

The Payment of Bonus (Amendment) Act, 2015 (Bonus Act, 2015) has been published in

the Gazette of India on 1st January, 2016. The provisions of the Bonus Act, 2015 will be in

force from 1st April 2014.

The Bonus Act, 2015 envisages the following –

Enhancement of eligibility limit under Section 2(13) from Rs.10,000/- per month to

Rs.21,000/- per month; and

Calculation Ceiling under Section 12 from Rs. 3,500 to Rs.7000 or the minimum wage

for the scheduled employment, as fixed by the appropriate Government, whichever is

higher.



DISCLAIMER AND STATUTORY

NOTICE This e-publication is published by CNK & Associates, LLP Chartered

Accountants, India, solely for the purposes of providing necessary information

to employees, clients and other business associates. This publication summarises

the important statutory and regulatory developments. Whilst every care has been

taken in the preparation of this publication, it may contain inadvertent errors for

which we shall not be held responsible. The information given in this

publication provides a bird’s eye view on the recent important select

developments and should not be relied solely for the purpose of economic or

financial decision. Each such decision would call for specific reference of the

relevant statutes and consultation of an expert.

This document is a proprietary material created and compiled by CNK &

Associates LLP. All rights reserved. This newsletter or any portion thereof may

not be reproduced or sold in any manner whatsoever without the consent of the

publisher.

This publication is not intended for advertisement and/or for solicitation of

work.



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