“Governance, Compliances & Risk Management- Companies Act, 2013”

The beginning of new era of compliance has been embarked with the enactment of Companies Act, 2013. The Act has introduced several new concepts and has also tried to modernize many of the requirements by introducing new definitions. Introduction of stringent provisions with heavy penalties mandated the System of Compliance management in a company to ensure the compliances of laws applicable on the company. The act cast duties on Board as well on the Company Secretary to comply with all applicable laws. Secretarial Audit and Compliance management will be effective tools for smart governance. Compliance management is to be in built into the corporate system to avoid instance of non compliance.

Ø  Legal Compliance Systems (LCS)

The LCS may be defined as a method by which corporate manage the entire compliance process starting from creating an inventory of laws as applicable to the company till the implementation of compliance of such law by the respective person/department. Broadly, it includes the compliance search, actual compliance, compliance audit, compliance report, etc. They must establish a compliance management system as a supporting system of risk.

Needs of LCS

PARKING OF EXTERNAL COMMERCIAL BORROWINGS PROCEEDS IN INDIA

 External Commercial Borrowings and Trade Credits availed of by residents are governed by clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act, 1999 read with Notification No. FEMA 3/ 2000-RB viz. Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, dated May 3, 2000, as amended from time to time.

For easing norms of parking external commercial borrowings (ECB),  Reserve Bank of India (“RBI”) has vide its Circular No. 39 dated 21st November, 2014 permitted AD Category -I banks to allow eligible External Commercial Borrowing (“ECB”) borrowers to park ECB proceeds (both under the automatic and approval routes) in term deposits with AD Category- I banks in India for a maximum period of six months before being utilised for the purpose for which they were brought in as a Loan.

ENHANCED REGULATORY FRAMEWORK FOR NBFC’S IN INDIA

ENHANCED REGULATORY FRAMEWORK FOR NBFC’S IN INDIA

With a view to sync regulatory framework with the considerable developed NBFC’s and to mitigate the risk faced by the NBFC’s, RBI has issued a circular on 10^th November, 2014 to make changes in the regulatory framework of the NBFC’s.

The changes contained in the circular are focuses on regulating activities which are systemically important for NBFC’s.

As a exercise of gap analysis of NBFC regulations, we have tried to summaries the highlights of the revised regulatory framework, which are as follows:-

1.      To support the financial sector and technology adoption and due to rising difficulties of services offered by NBFCs, it shall be compulsory for NBFCs to achieve a minimum NOF of Rs. 2 crore by end of March, 2017, as per the target given:- a) Rs. 1 crore by 31^st March, 2016; b) Rs. 2 crore by 31^st March, 2017.

2.      NBFC have been divided in following categories:

a)      NBFC- D

b)      NBFC- ND – Assets Less than Rs. 500 crore

c)      NBFC- ND-SI – Assets of Rs. 500 crore and above

d)      NBFC- ND-SI – Assets of Rs. 500 crore and above

“A single window without grills in Telengana as quoted by Chief Minister of state” Ease of doing business in India- New Industrial Policy of Telengana State

“Minimum inspection and maximum facilitation” the mantra of the newly enacted Telangana State Industrial Project Approval and Self Certification System (TS-IPASS) Act, 2014.

Telangana State Industrial Project Approval and Self Certification System (TS-iPASS) Act, 2014 has repealed the existing Andhra Pradesh State Industrial Single Window Clearance Act of 2002, to facilitate the real time base clearances to industrial units proposed to be set up in the new State.

The act has mandated faster single point clearances development of the required infrastructure for the sector-specific parks to enable investors to start their work on day one from the allotment of land.

The Telangana State Government has enacted this act keeping the vision of hassle free process for issue of various licence, clearances and certification required for setting up industries in the State.

The Highlights of the Acts are worth noting as enshrined herein below:

Single-window clearance

Under the act, Single-window clearance system (TS-iPASS) to be created at three levels first for mega projects as State-Wide investment facilitation Board, second for large industries as State TS-iPASS Committee and last one for small and medium industries as District Committee shall give single point TS-iPASS.

Ensuring The Transparent Regime For Related Party Transaction with “Revised Clause 49 Of Listing Agreement”

With two time amendments in clause 49 of listing agreement SEBI tried to align the provisions under clause 49 with Companies Act, 2013 in respect of woman director, independent director, related party transaction etc. The revised Clause 49 updates and brings into line the Listing Agreement with standard on corporate governance enlightened under Companies Act, 2013. There are also certain changes which are stricter than that mandated in the Companies Act, 2013 for instance disclosures, all RPTs to be preapproved by the Audit Committee,  passing of all related party transactions with the approval of Board of Directors and shareholders irrespective of same in the ordinary course of business and on arm’s length price etc. 

Related Party Transactions As per Clause 49 of Listing agreement

A related party transaction means a transaction for transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged, which means a "transaction" with a related party as a single transaction or a group of transactions in a contract. A ‘Related Party’ is a PERSON or ENTITY that is related to the company. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party, directly or indirectly, in making financial and/or operating decisions and includes the following: