1) National Company Law Tribunal (NCLT) constituted with effect from 1 June 2016: Much awaited NCLT has been constituted, initially, with the aim to set up 11 NCLT benches across New Delhi, Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Gauhati, Hyderabad, Kolkata and Mumbai. The Ministry of Corporate Affairs (MCA) has also planned a 10-day colloquium in July for the NCLT members. 2) Certain provisions of Companies Act, 2013, notified with effect from 1 June 2016:
- Issue & redemption of Preference Shares[Section 55(3)]: Companies are now allowed to issue fresh redeemable preference shares where the company is not in a position to redeem preference shares and to pay dividend.
- Re-opening of accounts and voluntary revisions of financial statements or Board’s report [Section 131]: Re-opening of accounts can now be done by companies only after approval of Tribunal. Approval of the Tribunal required for voluntary revision of financial statements or Boards’ Report. Any omission or commission of error therein can now be rectified.
- Compounding of Offences: Offences where the fine exceeds INR 5 lakhs will be directly dealt with by NCLT and offences with fine below INR 5 lakhs will be dealt with by officer authorized by Government or Regional Director.
3) MCA clarifies at the time of undertaking activities under Corporate Social Responsibility (Section 135) companies should not contravene any other applicable laws prevailing in India.
1) Disclosure of the Impact of Audit Qualifications by the Listed Entities under Regulation 33/52 of SEBI Listing Obligations & Disclosure Requirements (LODR), (Amendment) Regulations, 2016 has been notified.
- All listed companies that have already submitted Form A (in case of audit reports with unmodified opinion(s)) for the period ended March 31, 2016 shall be considered as sufficient compliance with the aforesaid Regulation 33/52 of SEBI Listing Obligations & Disclosure Requirements (LODR), (Amendment) Regulations, 2016
- The listed entities that have NOT submitted Form A (in case of audit reports with unmodified opinion(s)) for the period ended March 31, 2016 shall be required to submit the declaration as mentioned in SEBI Circular CIR/CFD/CMD/56/2016 that there has been no modified opinion in the audit report with respect to audited financial statements.
- This shall be made within 30 days from the date of this circular duly signed by either CEO / Managing Director / CFO / Audit Committee Chairman.
- All the listed entities (irrespective of having submitted Form B or not in case of modified opinion (s)) for the period ended March 31, 2016 shall be required to submit the ‘Statement on Impact of Audit Qualifications’ within 60 days from the date of this circular in the format specified in Annexure I.
Foreign Exchange Management Law
1) Compounding of contraventions under Foreign Exchange Management Act, 1999 (FEMA) -Public disclosure of compounding orders:
- Public disclosure of Compounding Orders: For disseminating the information pertaining to compounding orders, it has been decided that compounding orders passed on or after 1 June 2016 shall be published on www.rbi.org.in The data on the website will be updated at monthly intervals.
- Public disclosure of Guidelines on the Amount Imposed during Compounding: As per provisions of Section 13 of FEMA the amount of penalty imposed can be up to three times the amount involved in the contravention. However, the amount imposed is calculated based on (internal) guidance note. Now it has been decided to publish the guidance note on www.rbi.org.in It may, however, be noted that the guidance note is meant only for the purpose of broadly indicating the basis on which the amount to be imposed is derived by the compounding authorities of the Reserve Bank of India.
2) Amendments in the FDI Policy The Foreign Direct Investment (FDI) regime has been further liberalized on 20 June 2016.The following are the new sectoral limits:
|Sector/Activity||New Cap and Route|
|Trading, including through e-commerce, in respect of food products manufactured or produced in India.||100% FDI under government approval route. which was not permitted under existing regime.|
|Setting up of up-linking HUBs/Teleports Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability, Mobile TV||100 % FDI is allowed under automatic route instead of the earlier approval route regime.|
|Pharmaceutical||74% FDI under automatic route is allowed in brownfield pharmaceuticals and investment beyond 74% will continue to be through approval route.|
|Civil Aviation Sector||100% FDI under automatic route in Greenfield Projects instead of the earlier approval route and 74% FDI in Brownfield Projects under automatic route. FDI beyond 74% for Brownfield Projects is under approval route|
|Private Security Agencies||Previously, 49% FDI was allowed under government approval route in Private Security Agencies. As per the new announcement FDI up to 49% is now permitted under automatic route in this sector and FDI beyond 49% and up to 74% would be permitted with government approval route|
- Agencies which have already obtained FIPB approval need not obtain separate license or clearance for establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is Defence, Telecom, Private Security or Information and Broadcasting
- Foreign investment beyond 49% has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to ‘state-of-art’ technology in the country has been done away with.
- FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
1) Income Tax Laws Collection of Tax collection at Source (TCS): Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding INR 10 Lakhs, shall at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration as income tax. The use of the term “motor vehicle” would include all types of vehicles—two-wheelers (such as high-end motorcycles), motor cars, SUVs, trucks and buses. Second hand sales would also be subject to TCS, if the sale value exceeds INR 10 Lakhs. Clarificatory note issued that TCS will not be levied if the cash receipt does not exceed Rs. 2 lakhs even if the sale consideration exceeds Rs. 2 lakhs. Further states that TCS is required to be collected at source on cash component of the sales consideration and not on the whole of sales consideration. 2) Goods and Service Tax (GST) The model draft GST law was released by the finance ministry on 15 June 2016, after State Chief Ministers cleared the way for the roll-out of Goods and Services Tax from 1 April 2017. Taxation of e-commerce transactions at the point of supply, search and arrest powers to senior tax officials, provision for five years of jail for tax evasion, setting up of dispute settlement tribunal and rating to GST taxpayers are some of the highlights of the model law. Author: Vadiraja, Associate