The following is a digest of the major notifications and circulars issued by the regulators during the month of October 2020, which may be of interest to the corporates and professionals, in general.
MCA
Companies (Prospectus and Allotment of Securities) Amendment Rules, 2020
MCA has issued the aforesaid amendment to the Chapter III Rules on 16th October, 2020, which are accessible here: https://www.mca.gov.in/Ministry/pdf/SecuritiesAmendmentRules_16102020.pdf
Rule 14, which deals with Private Placement, has been amended to provide that in case of offer or invitation of securities to Qualified Institutional Buyers (QIBs) it shall be sufficient if the company passes a special resolution only once in a year for all the allotments to such buyers during the year. Already a similar provision is in place in the rule for non-convertible debentures. This new amendment will make it easier for companies looking to raise funds in the form of equity or convertible instruments from outside sources.
General Circular No. 36/2020 on resident director
MCA has issued the aforesaid circular on 20th October, 2020 in order to extend the relaxation given to companies for resident director for the financial year 2020-21 also. This is available at: https://www.mca.gov.in/Ministry/pdf/GeneralCircularNo.36_20102020.pdf
Source: MCA website
SEBI
Standardization of timeline for listing of securities issued on private placement basis
SEBI has issued Circular dated October 5, 2020 on standardization of timeline for listing of securities issued on private placement basis – debt securities, non-convertible redeemable preference shares, securitized debt instruments, security receipts, municipal debt securities, which can be accessed here: https://www.sebi.gov.in/legal/circulars/oct-2020/standardization-of-timeline-for-listing-of-securities-issued-on-a-private-placement-basis_47790.html The circular mandates obtaining listing permission for the aforementioned privately placed securities on T+4 trading day (T being date of closure of issue). The circular comes into force from December 1, 2020.
Changes relating to listing of debt securities
SEBI has issued on 8th October, 2020 as series of amendments in respect of listing of debt securities as follows:
Amendments to Debenture Trustees Regulations
SEBI (Debenture Trustees) (Amendment) Regulations, 2020 have been issued to bring about amendments in respect of trust deeds, requirements in respect of debt securities secured by way of receivables, independent due diligence by debenture trustee before creation of charge on security for debentures. These amendments are available at: https://www.sebi.gov.in/legal/regulations/oct-2020/sebi-debenture-trustees-amendment-regulations-2020_47824.html
Amendments to Issue and Listing of Debt Securities Regulations
Securities and Exchange Board of India (Issue and Listing of Debt Securities) (Amendment) Regulations, 2020 have been issued to introduce amendments to bring the Regulations more in line with the Companies Act, 2013. The amendment regulations are available here: https://www.sebi.gov.in/legal/regulations/oct-2020/securities-and-exchange-board-of-india-issue-and-listing-of-debt-securities-amendment-regulations-2020_47820.html
Amendments to Listing Regulations
SEBI has issued on 8th October, 2020, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2020, relating to Chapter V – Obligations of listed entity which has listed its non-convertible debentures and redeemable preference shares or both. These amendments relate to asset cover, applicability to regulated financial sector entities, documents and intimation to debenture trustees, and initiation of forensic audit. The amendment regulations can be accessed at: https://www.sebi.gov.in/legal/regulations/oct-2020/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-third-amendment-regulations-2020_47821.html and the amended regulations can be accessed at: https://www.sebi.gov.in/legal/regulations/sep-2015/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-regulations-2015-last-amended-on-october-08-2020-_37269.html
Circular dated October 22, 2020 on creation of “Recovery Expense Fund”
As per the aforesaid Circular, in order to enable debenture trustees to promptly enforce their security interest in case of default of listed debt securities, a ‘Recovery Expense Fund’ shall be created by the issuer, which shall be used in the manner as decided in the meeting of debt security-holders. The circular details the manner of creation, utilization and refund of the balance amount to the issuer. Requirements relating to this fund has also been made part of the other regulations relating to debt listing mentioned in the previous paragraphs. The circular is available here: https://www.sebi.gov.in/legal/circulars/oct-2020/contribution-by-issuers-of-listed-or-proposed-to-be-listed-debt-securities-towards-creation-of-recovery-expense-fund-_47939.html
Standardisation of procedure to be followed by Debenture Trustee(s) in case of ‘Default’ by Issuers of listed debt securities
SEBI issued circular dated 13th October, 2020 in respect of standardization of procedure in case of default by issuers of listed debt securities. The circular is available here: https://www.sebi.gov.in/legal/circulars/oct-2020/standardisation-of-procedure-to-be-followed-by-debenture-trustee-s-in-case-of-default-by-issuers-of-listed-debt-securities_47855.html
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Second Amendment) Regulations, 2020
SEBI has issued on 19th October, 2020 the aforesaid amendment regulations to insert a clarification as follows: “For the removal of doubts, it is clarified that any act of diversion, misutilisation or siphoning off of assets or earnings of a company whose securities are listed or any concealment of such act or any device, scheme or artifice to manipulate the books of accounts or financial statement of such a company that would directly or indirectly manipulate the price of securities of that company shall be and shall always be deemed to have been considered as manipulative, fraudulent and an unfair trade practice in the securities market.
Source: SEBI website
RBI
Review of regulatory framework for Housing Finance Companies (HFCs)
RBI has issued a review of the regulatory framework for housing finance companies on 22nd October, 2020. This is available here: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11988&Mode=0
Streamlining QR code infrastructure
RBI has issued the a notification on 22nd October, 2020 on QR code infrastructure for digital payment transactions, which is available here: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11987&Mode=0 All payment system operators shall use only either UPI QR or Bharat QR and shall not use any proprietary QR codes.
Further, RBI has issued a notification on the same date on Framework for Recognition of a Self-Regulatory Organisation for Payment System Operators, available here: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11986&Mode=0
Export Data Processing and Monitoring System (EDPMS) Module for ‘Caution/De-caution Listing of Exporters’ – Review
RBI has issued a circular dated 9th October, 2020 regarding EDPMS. Under the revised procedure, an exporter would be caution-listed by the Reserve Bank based on the recommendations of the AD bank concerned, depending upon the exporters track record with the AD bank and investigative agencies. The AD bank would make recommendations in this regard to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank in case the exporter has come to the adverse notice of the Enforcement Directorate(ED) / Central Bureau of Investigation (CBI) / Directorate of Revenue Intelligence (DRI) /any such other law enforcement agency and/or the exporter is not traceable and/or is not making sincere efforts to realise the export proceeds.
Similarly, the AD bank would also make recommendations to the Regional Office of the Reserve Bank for de-caution-listing an exporter as per the laid down procedure.The circular is available here: https://www.rbi.org.in/scripts/FS_Notification.aspx?Id=11978&fn=5&Mode=0
Source: RBI website
IBBI
New book launched on IBC
IBBI has issued on 31st October, 2020 a handbook entitled “Understanding the IBC: Key Jurisprudence and Practical Considerations”. This is available here: https://www.ibbi.gov.in/uploads/whatsnew/e42fddce80e99d28b683a7e21c81110e.pdf
Serving of copy of the application to the Board, as mandated under Rules 4, 6 and 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
IBBI has issued a circular dated 29th October, 2020 on the aforesaid subject, which is available here: https://ibbi.gov.in//uploads/legalframwork/5d5792eab74d44db2a58e184abd65ab7.pdf The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, requires an applicant to provide a copy of the application for initiating corporate insolvency resolution process against a corporate debtor, inter alia, to the Board, before filing the same with the Adjudicating Authority. For convenience of applicants, the Board has made available a facility on its website at https://www.ibbi.gov.in/intimation-applications/iaaa for serving a copy of the application online to the Board. The format for submission is at Annexure A. A step-by-step guide for submission of the application is at Annexure B. On submission of the application online, the applicant shall get an acknowledgement. The applicants are encouraged to avail of this facility.
Meetings of the Disciplinary Committee and Appellate Panel of RVOs
IBBI has issued a circular on the aforesaid matter on 9th October, 2020, which is available at this link: https://ibbi.gov.in//uploads/legalframwork/2020-10-15-160549-spb4h-cf9ad8a8390be1d25f9443da720c11c5.pdf The Registered Valuers Organisations (RVOs) provide the institutional arrangement for oversight, including the development and regulation of the registered valuers (RV). They grant membership to valuers, who comply with the eligibility requirements as provided in the Rules, conduct the educational courses in valuation and provide the training to the individual members. It has been observed by IBBI that the RVOs have been following different practices in conducting the meetings of the Disciplinary Committee and Appellate Panel. Accordingly, IBBI has now advised that the RVOs ensure the guidelines in the circular.
Source: IBBI website
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