POSH Compliances: Mandatory Requirement in India

With the growth of the concept of Gender Equality and Women Empowerment at workplace, the cases of sexual harassment have also increased manifold over a period of time. Besides implementation of various measures to prevent such acts, there’s no halt for this growing nuisance in the society.

Mandatory Director KYC Update: Avoid Penalty and Disqualification

Every director has to file DIR KYC before 30th September, 2019 in terms of Companies (Appointment and Qualification of Directors) Rules, 2018 and amendments thereafter.

This rule applies to all every person holding DIN, as on 31st March, 2019, including Directors, all designated partner of LLPs, irrespective of DIN being active or inactive and DIN being disqualified, have to get their DIR KYC updated/completed.

National Financial Reporting Authority (“NFRA”) Rules

The Ministry of Corporate Affairs (MCA), Government of India has constituted an independent regulatory body named National Financial Reporting Authority (“NFRA”) and notified the National   Financial Reporting Authority Rules, 2018 (“Rules”) vide Notification dated November 13, 2018, effective from November 14, 2018. The National Financial Reporting Authority (NFRA) is a body constituted under the provisions of Section 132 of the Companies Act, 2013. The constitution of this authority is effective from 1st October 2018.After various recent scams like PNB scam and other financial scams and frauds in the country, NFRA is a very welcoming move by the present government.

 SCOPE OF THE NFRA

Classes of companies and bodies corporate governed by NFRA: NFRA shall have power to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service or undertake investigation of the auditors of the following class of companies and bodies corporate, namely:

a.      Companies whose securities are listed on any stock exchange in India or outside India;

b.      Unlisted public companies having paid-up capital of not less than Rs 500 crores or having annual turnover of not less than Rs 1,000 crores or having, in aggregate, outstanding loans, debentures and deposits of not less than Rs 500 crores as on the 31st March of immediately preceding financial year;

c.   Insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act for the time being in force or bodies corporate incorporated by an Act in accordance with section 1(4)(b) to (f) of the Act;

d.     Anybody corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the NFRA by the Central Government in public interest; and

e.   a body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or net worth of such subsidiary or associate company exceeds 20% of the consolidated income or consolidated net worth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d).

*A company or a body corporate other than a company governed under this rule shall continue to be governed by the NFRA for a period of 3 years after it ceases to be listed or its paid-up capital or turnover or aggregate of loans, debentures and deposits falls below the limit stated therein. *

REPORTING TO NFRA

• Every existing body corporate other than a company governed by these rules, shall inform the NFRA within 30 days of the commencement of these rules, in Form NFRA-1, the particulars of the auditor as on the date of commencement of these rules;
• Everybody corporate, other than a company as defined in section 2(20), formed in India and governed under this rule shall, within 15 days of appointment of an auditor under section 139(1), inform the NFRA in Form NFRA-1, the particulars of the auditor appointed by such body corporate. However, a body corporate governed under sub-rule (1)(e) shall provide details of appointment of its auditor in Form NFRA-1.

 ANNUAL RETURN

A return with the NFRA on or before 30th April every year shall be filed with NFRA in such form as may be specified by the Central Government.

PUNISHMENT IN CASE OF NON-COMPLIANCE: 

lf a company or any officer of a company or an auditor or any other person contravenes any of the provisions of these rules, the company and every officer of the company who is in default or the auditor or such other person shall be punishable as per the provisions of section 450 of the Act.

Introduction of Legal Entity Identifier for large corporate borrowers

 1.        RBI/FEMA has introduced the concept of Legal Entity Identifier (LEI) code as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. LEI is a 20-digit unique code to identify parties to financial transactions worldwide.

2.        The LEI for the participants of the OTC derivatives market has since been implemented vide circular RBI/2016-17/314 FMRD.FMID No.14/11.01.007/2-16-17 dated June 01, 2017 in a phased manner.

3.      In the Statement on Developmental and Regulatory Policies dated October 4, 2017 it was indicated that LEI system for all borrowers of banks having total fund based and non-fund based exposure of ₹ 5 crore and above will be introduced in a phased manner (extract enclosed). Accordingly, it has been decided that the banks shall advise their existing large corporate borrowers having total exposures of ₹ 50 crore and above to obtain LEI as per the timelines provided. Borrowers who do not obtain LEI as per the scheduled timeline are not to be granted renewal / enhancement of credit facilities. A separate roadmap for borrowers having exposure between ₹ 5 crore and upto ₹ 50 crore would be issued in due course.

4.       Banks should encourage large borrowers to obtain LEI for their parent entity as well as all subsidiaries and associates.

5.       Entities can obtain LEI from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF) – the entity tasked to support the implementation and use of LEI. In India, LEI code may be obtained from Legal Entity Identifier India Ltd (LEIIL), a subsidiary of the Clearing Corporation of India Limited (CCIL), which has been recognised by the Reserve Bank as issuer of LEI under the Payment and Settlement Systems Act, 2007 and is accredited by the GLEIF as the Local Operating Unit (LOU) in India for issuance and management of LEI.

6.       Based on the feedback and requests received from market participants, and with a view to enable smoother implementation of the LEI system in non-derivative markets:

a.         The timelines for implementation (Phase I and Phase II) for OTC derivatives are extended as under:

·           Phase 1: Net Worth of Entities above Rs.10000 million – December 31, 2019.

·           Phase 2: Net Worth of Entities between Rs.2000 million - Rs 10000 million December 31, 2019.

·           Phase 3: Net Worth of Entities up to Rs.2000 million– March 31, 2020.

b.        The schedule of large Corporate borrowers from Scheduled Commercial banks (SCB’s) to obtain LEI is as follows:

·           Phase 1: Total exposure to SCBs of 1000 Cr and above – March 31, 2018.

·           Phase 2: Total exposure to SCBs of 500 Cr and 1000 Cr– June 30, 2018.

·           Phase 3: Total exposure to SCBs of 100 Cr and 500 Cr – March 31, 2019.

·           Phase 4: Total exposure to SCBs of 100 Cr and 50 Cr – Dec 31, 2019.

                  

Anjali Suri

Company Secretary

Global Jurix LLP

Advocates & Solicitors

International Legal Consultants

M/+91 8130300046

T/ +91 11 22481711

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Filing of Return BEN-2 For Significant Beneficial Owners

The concept that companies are independent corporate personalities and have separate juristic nature has been often misused for illicit purposes, including money laundering and other illegal activities.

To bring transparency to the manner in which shares of companies are held, and in compliance of India's obligations to align its regulatory framework with the recommendations of Financial Action Task Force, an intergovernmental organization constituted to formulate policies to combat money laundering and terror financing, the Ministry of Corporate Affairs (MCA) notified on 13 June 2018 (i) Section 90 of the Companies Act, 2013 (Act); and (ii) the Companies (Significant Beneficial Owners) Rules, 2018 (SBO Rules).

These prescribe detailed requirements for identifying the individuals who hold 'ultimate' control over a company.

Section 90 of the Act

DISCLOSURE REQUIREMENTS

Section 90 of the Act requires every individual who, either by himself or with others (including a trust and persons resident outside India), qualifies as a significant beneficial owner (SBO) of a company to make a declaration to that company specifying the nature of his beneficial interest. As per Section 90 of the Act, an SBO is an individual who, either by himself or with others, directly or indirectly through persons (resident or non-resident) including trusts holds beneficial interests of at least 10% (the threshold of 25% prescribed under the Act has been lowered to 10% under the SBO Rules), in shares of a company or has the right to exercise significant influence or control (defined in Section 2(27) of the Act) over a company.

Additionally, Section 90 of the Act requires every company to do, inter alia, the following:

• maintain a register of the interest declared by individuals along with the prescribed particulars of such individuals and keep the register open for inspection by shareholders;
•  file a return of SBOs of the company with the Registrar, containing the prescribed particulars;
• give notice to any person whom the company believes to be a SBO of the company or to have been a SBO of the company during the preceding three years and who is not registered as a SBO; and
•  if a person fails to provide the information sought by a company, the company is required to apply to the National Company Law Tribunal (NCLT) for an order directing that the shares in question be subject to prescribed restrictions including those with respect to transfer of shares and suspension of rights attached to the shares, amongst others.

SBO Rules

The SBO Rules significantly expand the definition of SBO as provided in Section 90 of the Act.

Who qualifies as an SBO as per the SBO Rules?

• an individual holding ultimate beneficial interest (as defined in Section 89 (10) of the Act) of not less than 10% in a company but whose name is not entered in the register of members of a company as the holder of such shares;
• in case where the shareholder is a company or a partnership firm, the SBO is the natural person who holds majority stake or control in the company or partnership firm through other means;
• for a trust (acting through its trustee), the SBO shall include the settlor, trustee or beneficiaries of the trust and other persons exercising effective control over the trust; and
• where no natural person is identifiable in case the member is a partnership firm or a company, the SBO would be the relevant natural person who holds the position of senior managing official.

Other key requirements prescribed in the SBO Rules are: 

• every SBO is required to file within the prescribed timelines a declaration in Form No. BEN-I to the company in which he holds the SBO;
• once any declaration is received by a company, the company is, in turn, required to file a return in Form No. BEN-2 with the Registrar in respect of such declaration; 
  
• each company is required to maintain a register of SBOs which shall be available for inspection to shareholders;
•  in case the information is not provided to the company or where the information provided is unsatisfactory, the company may apply to the NCLT for directing restrictions on the shares. The restrictions sought could be prohibition on transfer of subject shares, suspension of voting rights or other prescribed rights; and
• Mutual Funds, Alterative Investment Funds, Real Estate Investment Trusts and Infrastructure, Investment Trusts, which are regulated under the Securities and Exchange Board of India Act, 1999, are exempt from this requirement.

Section 89 of the Act

Section 89 of the Act requires a person, whose name is entered in the register of members of a company as a shareholder but who doesn't hold beneficial interest in such shares as well as the owner of any beneficial interest, to make a declaration to the company specifying the name and other details of the persons who are registered holders and who hold such beneficial interest. Non-compliance of the disclosure obligations can be fatal to the enforceability of any rights attached to such shares in addition to other penal consequences.

Definition of 'Beneficial Interest':

As per the newly notified Section 89(10) of the Act, beneficial interest in the shares of a company includes, directly or indirectly, through contract or otherwise, the right of a person to exercise rights attached to such shares or receive or participate in any dividends or other distribution in respect of the shares.

How does this affect you?

For Companies:

The notification of Section 89 (10) and Section 90 of the Act and the SBO Rules significantly increases the onus on companies to identify and maintain adequate records of and update the Registrar with the details of SBOs. In doing so, companies will not only have to identify shareholders who hold, individually or with others, more than 10% shares of a company, but also those who directly or indirectly exercise control or significant influence in a company. Further, each company is required to give notice to any person whom the company knows or has reason to believe is an SBO or to have been an SBO during the preceding three years and who is not registered as such with the company. Where the information provided upon such notice is not satisfactory, the company is required to apply to the NCLT within a period of 15 days from the expiry of the notice for an order with directions to impose the above restrictions on such shares. Failure to comply with this requirement would attract prescribed monetary penalties.

For Shareholders:

The primary obligation of disclosure of significant beneficial interest has been cast on all natural persons who hold such interest directly and indirectly, regardless of their domicile or residency status.

Natural persons who, either directly or along with others (including through intermediate holding companies or trusts), hold 10% or more shareholding of a company, or who exercise 'significant influence' or 'control' in a company, are required to make a declaration of the nature of their interests to the company together with particulars of instruments embodying the transfer or acquisition of beneficial interest. Failure to comply with this requirement or suppression of any material information would attract both monetary and penal consequences.

Eventually, the Ministry of Corporate Affairs has relented and extended the timelines for filing. The revised timelines for submission of the form BEN-2 is 30.09.2019.

All About How to Register GST in India by Any Liable Taxpayer!

Now, we are active in a well-regulated GST regime in India, since promulgation of the GST Act in July 2017. The GST (Goods and Services Tax) has eliminated the cascading complexities of the various indirect taxes in the country, and has made the whole country a single market for various goods and services. Today, GST registration is mandatory for every liable taxpaying individual and company/firm, under the appropriate category. Now, registering GST is absolutely necessary for paying due taxes to the Government and claiming the input tax credits (ITC).

Ease & Profitability of FDI in India Attract Investors Worldwide!

The massive, steadily progressing, and fast-paced economy of India has been very impressive to percipient and ambitious investors belonging to countries worldwide for making FDI in India into its various economic sectors for over two decades. Most recently, the flagship campaign of Modi Government, the “Make in India” has been very successful for drawing in enormous FDI into its various sectors from hundreds of potential investors falling under diverse categories. The various alluring factors for making foreign directinvestment (FDI) in India are described here in brief, to help prospective investors located in countries across the globe. Our perfect, efficient, and very famous services for facilitating FDI into India are also mentioned for informational purposes.

In general, the following are the most striking and significant facts and factors which have been supporting massive and steady fdi in different sectors ofindia by investors worldwide: ---

Ø India’s economy is one of the largest and fastest progressing in the whole world at present. The majority of its economic sectors are growth-oriented and hence secure and lucrative for FDI.

Ø India has vast, varied, and ever-growing market for products and services of companies and industries active in various sectors. Growing incomes, financial prosperity & liberty of Indians, and changing lifestyles, are further to widen the Indian markets in future.

ØIndia has now rather generous and impressive provisions and regulations related with fdi in india and liberalization of trade policies. The rules and regulations associated with fdi policies, RBI, FEMA, SEBI, etc., have now been quite loosened and favorable to the foreign investors.

Ø  Available are both the automatic and government routes for fdi investments into India. At present, a large number of economic sectors invite FDI up to 74-100% through the automatic route.

Ø  India has easier and cheaper availability of various raw materials, talented professionals, skilled labor, ever-improving infrastructure, and other supportive resources and facilities, such as electricity and transportation.

Ø  India has two national-level stock exchanges of global prominence.

And, there are a variety of favorable policies, relaxations, and facilities offered by India under its ambitious “Make in India” campaign, to encourage FDI into India.  

Well-based in Delhi, our nationwide and internationally famous law firm has been extending expert and expeditious legal and supportive services to the foreign investors for making easy, secure, and optimally profitable FDI in India into its various economic sectors, for over a decade. Almost all segments/fields of the broad sectors of manufacturing and services have been well-served by our veteran and up-to-date company & corporate lawyers, intellectual property lawyers, and business/commercial lawyers. Our services for FDI in India into the desired economic field cover all mandatory and regulatory tasks and processes, at just reasonable service charges. For more information on FDI into India, please visit: http://company-registration-india.weebly.com/fdi-india.html