Consolidated weekly update for the period February 12, 2012 to February 18, 2012

Weekly Updates

February 12, 2012 to February 18, 2012

Secretarial Department

 

Updates from the Ministry of Company Affairs
Sr No	Circular/ Notification number	Particulars	Applicability
1	MCA General Circular no 1/2012 dated February 10, 2012.	Filing of conflicting returns by contesting parties – clarification regarding	to all the Companies Registered under the Companies Act 1956 and this circular is addressed to all the Regional Directors and to all the Registrars of Companies
Updates from SEBI
2	SEBI Circular no CIR/MIRSD/2/2012 dated February 15, 2012	Setting up of additional Investor Grievance Redressal Mechanism at Stock Exchange	To all Recognized Stock Exchanges
Updates from IRDA
3	Discussion paper	On tying / bundling in insurance	NA
Updates from RBI
4	RBI/2011/12/399 A.P. (DIR Series) Circular No. 79	Clarification - Purchase of Immovable Property in India – Reporting requirement	-  all the authorized dealers in Foreign Exchange, - all the persons resident outside India who has established a branch, office or other place of business in India in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000.

Filing of conflicting returns by contesting parties – clarification regarding

MCA Circular – February 10, 2012:

We draw your attention to the MCA General Circular no 1/2012 dated February 10, 2012.

Applicability:

This circular is applicable to all the Companies Registered under the Companies Act 1956 and this circular is addressed to all the Regional Directors and to all the Registrars of Companies.

Purpose of this Circular:

This circular has been brought in to regulate the conflicts arising during the filing of returns with regard to Appointment or Change of Directors. As in few cases it has been noticed that the consent with regard to the removal/ resignation/ change of the Director is not attached or due process of law has not been followed. 

Crux of this circular:

-   As said above in order to remove these conflicts the company is required to mandatorily file    the   attachment

    relating to the cause of cessation/ change and all other supporting documents along with form 32 with the 

    concerned ROC.

-    In case any of any aggrieved director with regard to his cessation in the Company he may file a complaint in the Investor Complaint Forum and the ROC will mark the Company as having ‘Management dispute.’ Until the dispute between the Company and the Director is resolved by an order/ interim order from a Court/ Tribunal of the Competent jurisdiction the forms filed by the Company / the Director will not be approved/ registered / recorded.

MCA Circular: http://mca.gov.in/Ministry/pdf/General_Circular_No_01_2012.pdf

Setting up of Investor Grievance Redressal Mechanism at Stock Exchanges

SEBI Circular dated February 15, 2012

We draw your attention to the SEBI Circular no CIR/MIRSD/2/2012 dated February 15, 2012.

Applicability:

This circular is applicable to all the Stock Exchanges and it is an information being provided to all the investors.

Purpose of this Circular:

To intimate the investors that by the following timelines additional Investor Grievance Redressal Mechanism would be set up by NSE and BSE: 

Sr No	Place where the mechanism is being set up	Date by when the mechanism would be set up
1.	Ahmedabad	March 31, 2012
2.	Hyderabad	March 31, 2012
3.	Kanpur	September 30, 2012
4.	Indore	September 30, 2012

Crux of this circular:

•    With a view to protect the interest of the Investors the stock exchanges had set up the Investor Grievance  Redressal Mechanism.
•    At present NSE and BSE is providing redressal mechanism and arbitration facility at four regions namely  Delhi, Mumbai, Kolkata and Chennai.
•    On examining the number of complaints and the arbitrations filed by the investors the stock exchanges felt  the need to set up few more redressal mechanisms to make it more convenient for the investors to file their grievances and arbitration cases near their places. This mechanism would help in increasing the investor confidence in the stock markets. 
•   These Investor Grievance Redressal Mechanism that would be set up in future shall abide to all the  applicable circulars issued by SEBI in this regard.

SEBI Circular: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1329302960178.pdf

Discussion Paper on Tying/ Bundling in Insurance

Crux of the discussion paper:

IRDA has come out with a discussion paper in bundling of insurance products with other financial services or goods (Cross selling of products).

It is noted by the authorities that due to cross selling the consumers could face various issues or concern and they could even be fallen as prays towards the unfair trade practices that could be adopted by various companies when it impedes the consumer’s choice or when the consumer finds it difficult or impossible to makes price comparisons.

Therefore the authorities have brought forward this discussion paper to invite suggestions/ views/ feedback and major concerns in cross selling of products there by it would help them to bring in transparency.

It is also to be noted that cross selling facilitates service providers to use existing channels to reach out to those who are looking to buy insurance products along with the tied up goods. However the authorities taking steps to ensure that the consumers are not put to any kind of disadvantage because of cross selling of products.

In this regard the discussion paper is available on the following link at the suggestions/ views/ feedback in invited to be presented on or before March 15, 2012.

IRDA Circular :

http://www.irda.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo1611&flag=1&mid=Insurers%20%3E%3E%20General%20%3E%3E%20Circulars

 

Clarification - Purchase of Immovable Property in India –
Reporting requirement

RBI Circular – February 15, 2012:

We draw your attention to the RBI Circular RBI/2011/12/399 A.P. (DIR Series) Circular No. 79 dated February 15, 2012.

Applicability:

This circular is applicable to:

-          all the authorized dealers in Foreign Exchange,

-         all the persons resident outside India who has established a branch, office or other place of business in India in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000.

Exemptions:

The liaison office is excluded.

Purpose of this Circular:

This circular has been brought in to bring in greater clarity when an immovable property has been acquired by a person who is a citizen of India or a Person of Indian Origin.

Crux of the Circular:

As per this circular when the above said persons acquire any immovable property in India in accordance with the provisions of the said regulation, then the said person has to file a declaration in the specified format (Form IPI annexed to the RBI circular RBI/2011/12/399 A.P. (DIR Series) Circular No. 79 dated February 15, 2012 ) to the RBI within 90 days from the date of such acquisition.

RBI Circular: http://rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7008

RBI Circular dated February 15, 2012 - Clarification - Purchase of Immovable Property in India – Reporting requirement

RBI Circular – February 15, 2012:

We draw your attention to the RBI Circular RBI/2011/12/399 A.P. (DIR Series) Circular No. 79 dated February 15, 2012. 

Applicability:

This circular is applicable to:

-          all the authorized dealers in Foreign Exchange, 

-        all the persons resident outside India who has established a branch, office or other place of business in India  in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000.

Exemptions:

The liaison office is excluded.

Purpose of this Circular:

This circular has been brought in to bring in greater clarity when an immovable property has been acquired by a person who is a citizen of India or a Person of Indian Origin.

Crux of the Circular:

As per this circular when the above said persons acquire any immovable property in India in accordance with the provisions of the said regulation, then the said person has to file a declaration in the specified format (Form IPI annexed to the RBI circular RBI/2011/12/399 A.P. (DIR Series) Circular No. 79 dated February 15, 2012 ) to the RBI within 90 days from the date of such acquisition.

RBI Circular: http://rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7008

IRDA - Discussion Paper on Tying/ Bundling in Insurance

Crux of the discussion paper:

IRDA has come out with a discussion paper in bundling of insurance products with other financial services or goods (Cross selling of products).

It is noted by the authorities that due to cross selling the consumers could face various issues or concern and they could even be fallen as prays towards the unfair trade practices that could be adopted by various companies when it impedes the consumer’s choice or when the consumer finds it difficult or impossible to makes price comparisons.

Therefore the authorities have brought forward this discussion paper to invite suggestions/ views/ feedback and major concerns in cross selling of products there by it would help them to bring in transparency.

It is also to be noted that cross selling facilitates service providers to use existing channels to reach out to those who are looking to buy insurance products along with the tied up goods. However the authorities taking steps to ensure that the consumers are not put to any kind of disadvantage because of cross selling of products.

In this regard the discussion paper is available on the following link at the suggestions/ views/ feedback in invited to be presented on or before March 15, 2012.

IRDA Circular :

http://www.irda.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo1611&flag=1&mid=Insurers%20%3E%3E%20General%20%3E%3E%20Circulars

SEBI Circular dated February 15, 2012 - Setting up of Investor Grievance Redressal Mechanism at Stock Exchanges

SEBI Circular dated February 15, 2012

We draw your attention to the SEBI Circular no CIR/MIRSD/2/2012 dated February 15, 2012.

Applicability:

This circular is applicable to all the Stock Exchanges and it is an information being provided to all the investors.

Purpose of this Circular:

To intimate the investors that by the following timelines additional Investor Grievance Redressal Mechanism would be set up by NSE and BSE: 

Sr No	Place where the mechanism is being set up	Date by when the mechanism would be set up
1.	Ahmedabad	March 31, 2012
2.	Hyderabad	March 31, 2012
3.	Kanpur	September 30, 2012
4.	Indore	September 30, 2012

Crux of this circular:

•    With a view to protect the interest of the Investors the stock exchanges had set up the Investor Grievance  Redressal Mechanism.
•    At present NSE and BSE is providing redressal mechanism and arbitration facility at four regions namely  Delhi, Mumbai, Kolkata and Chennai.
•    On examining the number of complaints and the arbitrations filed by the investors the stock exchanges felt  the need to set up few more redressal mechanisms to make it more convenient for the investors to file their grievances and arbitration cases near their places. This mechanism would help in increasing the investor confidence in the stock markets. 
•   These Investor Grievance Redressal Mechanism that would be set up in future shall abide to all the  applicable circulars issued by SEBI in this regard.

SEBI Circular: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1329302960178.pdf

Filing of conflicting returns by contesting parties – clarification regarding

MCA Circular – February 10, 2012:

We draw your attention to the MCA General Circular no 1/2012 dated February 10, 2012.

Applicability:

This circular is applicable to all the Companies Registered under the Companies Act 1956 and this circular is addressed to all the Regional Directors and to all the Registrars of Companies.

Purpose of this Circular:

This circular has been brought in to regulate the conflicts arising during the filing of returns with regard to Appointment or Change of Directors. As in few cases it has been noticed that the consent with regard to the removal/ resignation/ change of the Director is not attached or due process of law has not been followed.  

Crux of this circular:

-    As said above in order to remove these conflicts the company is required to mandatorily file the attachment relating to the cause of cessation/ change and all other supporting documents along with form 32 with the concerned ROC.

-    In case any of any aggrieved director with regard to his cessation in the Company he may file a complaint in the Investor Complaint Forum and the ROC will mark the Company as having ‘Management dispute.’ Until the dispute between the Company and the Director is resolved by an order/ interim order from a Court/ Tribunal of the Competent jurisdiction the forms filed by the Company / the Director will not be approved/ registered / recorded.

MCA Circular: http://mca.gov.in/Ministry/pdf/General_Circular_No_01_2012.pdf

Today's One pager on - Amendment to the Equity Listing Agreement – Feb 8, 2012

Amendment to the Equity Listing Agreement – Feb 8, 2012

SEBI Circular – February 8, 2012:

This note is based on the SEBI circular no. CIR/CFD/DIL/1/2012 dated February 08, 2012.

Applicability:

It is applicable to all Listed Companies with immediate effect. This amendment forms part of the existing Listing Agreement of the Stock Exchange.

Highlights of the Amendments:

a.  Amendment to Clause 40A

Clause 40 A: In addition to the existing methods which listed company can adopt to achieve minimum public shareholding, the listed company may also achieve the minimum level of public shareholding through Institutional Placement Programme (IPP) interms of Chapter VIII-A of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended. Further, sale of shares by promoters through stock exchanges shall be now carried out in terms of SEBI circular CIR/MRD/DP/05/2012 dated February 1, 2012.

b. Amendment to Clause 43 & 43A

In order to enhance disclosure requirements, listed entities have been mandated to

disclose utilization of funds raised upon conversion/ exercise of warrants issued

along with public or rights issue of specified securities.

For further information please follow the below links

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1328697776007.pdf

Today's One Pager on - External Commercial Borrowings – Simplification of Procedure

External Commercial Borrowings – Simplification of Procedure

Meaning of External Commercial Borrowings (ECB):

An external commercial borrowing (ECB) is a financing facility used in India to facilitate the access to foreign money by Indian corporations and Public Sector Undertakings. ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies. For infrastructure and greenfield projects, funding up to 50% (through ECB) is allowed. In telecom sector too, up to 50% funding through ECBs is allowed. In this regard RBI has now come out with a circular on simplifying the procedure of ECB.

However, ECB is not a free flow facility and is bound by certain restrictions like ECBs cannot be used for investment in stock market or speculation in real estate.

RBI Circular – February 7, 2012:

This note is based on the RBI circular no. RBI/2011-12/390 A.P. (DIR Series) Circular No. 75 dated February 07, 2012.

Applicability:

This circular is applicable to all the Authorized Dealer Category – I Banks.

Crux of this circular:

As per this circular all the following request has to be referred by the Authorised dealer category – I Banks to the Foreign Exchange Department, Central Office, Reserve Bank of India for necessary approval.          

-          Reduction in the amount of ECB

-          changes in the drawdown schedule where the original average maturity period is not maintained

-          reduction in the all-in-cost of the ECB after obtaining the Loan Registration Number (LRN)

Conclusion:

We can say that the guiding principles that would have been followed by RBI for formulating the policies that are applicable to ECB’s are to facilitate the corporates to keep borrowing long term maturities at a low cost, and encourage infrastructure and export sector financing which are crucial for the overall growth of the economy

Although there are disadvantages in ECB it is still high on the list of sources of funds for corporate in the market, as it is believed that debt can be easily hedged of raising funds, as swaps and futures can be used to manage the interest rate risk.

Traditionally, funds from the international market have been cheaper compared to the local markets, and they continue to remain so with the liquid conditions prevailing in the international markets.

RBI Circular: http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/ECS75070212F.pdf

Today's One Pager

COMPANY SECRETARIES

SECTION 383A OF THE COMPANIES ACT

Introduction

A Company Secretary may in simple terms be defined as ‘amateur’ advocate. Albeit not in real terms is a Company Secretary an ‘amateur’ but the importance lies in the fact that he performs the role of an advocate in a company in ‘commercial sense’. Invariably, the general perception of an advocate is that he/she takes the side of law and do not think in business sense. However, a Company Secretary gives a different dimension. He/she may be considered as a lawyer in commercial sense whose primary job is to help the Directors to carry on business within legal realms framed.

We’ll understand a little more about this under the following two heads:

In the eyes of Law

General perspective

Appointment of Company Secretary Even though table A of Schedule I to the Companies Act provides that the Board may appoint the Company Secretary and in the event the Board appoints so, only the Board can remove him, neither the Companies Act, 1956 nor the regulations concerning Company Secretaries provide the modus operandi of Company Secretary’s appointment. (So the question as to whether it is the company or the Board that has the authority/ responsibility to appoint the CS remains open to interpretation). However, given the importance that law places on Company Secretaries as well as the role being played, it is ideal that a Company Secretary is appointed by the Board of Directors. Since, it is not compulsory that a Board Meeting has to be held for such appointment, a resolution passed by circulation is equally valid. This is reiterated by the Secretarial Standards issued by the Institute of Company Secretaries of India. Section 383A of the Companies Act can be considered as a stepping stone to the Professional growth however it is left to the Professionals themselves to cement their place in this dynamic Corporate World.

What holds Company Secretary a unique to the Professional realm? As indicated above, Company Secretary is an advocate in commercial sense. Given his knowledge of accounting and taxation aspects as well, he/she helps in filling the vacuum of financial literacy in explaining certain aspects to the Board, which the members of the Board not necessarily be aware of. The uniqueness of a Company Secretary is his/her knowledge of various vicissitudes to the dynamic needs of business besides the capability to handle any situations, and his unique position in that he deals with the Board of Directors more than any other non-director officer of the company, and has the responsibility to sign the financials of the Company, along with the .Directors So where does the corporate stands in utilizing the services of Company Secretary? Company Secretaries are still being dealt with as ‘Cost Centre’ whose primary responsibility is being restricted to ensure compliance with Companies Act as well as Listing Agreement with Stock Exchanges. However, there are companies which are able to make better utilization of their services and reap better benefits therefrom in terms of quality of compliances as well as profit making. It is important to educate the people associated with the Company Secretaries position to understand their real worth and for Company Secretaries themselves to elevate their stature from a mere law administrator.

Notice and Minutes of the meeting

Person authorized to convene the meeting:

A general meeting of the company convened by the person unauthorized by the board is considered to be invalid. However, it can be valid only if the board ratifies the same Before the meeting. Hooper Vs Kerr., Stuart & Co., (1900) Sec 171 of the Companies Act.

Validity of the notice and minutes:

When the notice convening the meeting does not specify a particular business to be transacted thereat then the company can not transact/ deal with the same in the said meeting. If any transaction is carried on in contravention to this, then such a transaction is considered to be void. Kaye Vs. Croydon Tramways Co.,

However when a particular transaction is taken up under the item any other business with the permission of the chair, then the transaction is said to be valid. Sunil Dev Vs Delhi & District Cricket Assn.,

Conclusion:

The Notices of the AGM and EGM should contain all those transactions that would be discussed in the meeting and the Minutes of the AGM or the EGM should synchronize with the same.

In the Board meeting by including an agenda item as any other business with the permission of the chair, facilitates the company to discuss all those points also that are not included in the agenda.