SME….! A New Opportunity for Private Company..!!!

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SME ExchangeIn the Present era, the market is booming up so every company wants to take the opportunity to capitalize the same more from market and want to get maximum benefits out of that.

Listing will help them enter capital markets (SME Exchange) and finally to graduate on to mainboard. The SME platform provides opportunity to entrepreneurs to raise equity capital for growth and expansion. It also provides immense opportunity for investors to identify and invest in good SMEs at an early stage.

Let’s see what are the ways available for companies to avail such benefits.

What is SME?

SME means Small and medium-sized enterprises or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits.

What is SME Exchange?

“SME exchange” means a trading platform of a recognized stock exchange having nationwide trading terminals permitted by the Board to list the specified securities issued in accordance with this Chapter and includes a stock exchange granted recognition for this purpose but does not include the Main Board”.

So now question that arises is how those benefits can be obtained…. the simplest answer is by listing in SME Platform.

What are the Criteria for Listing?

  • Incorporation

The Company shall be incorporated under the Companies Act, 1956 or 2013.

  • Financials

Post Issue Paid up Capital

The post-issue paid up capital of the company shall be at least Rs. 3 crores.

  • Net-worth

Net worth (excluding revaluation reserves) of at least Rs. 3 crores, as per the latest audited financial results.

  • Net Tangible Assets

At least Rs. 3 crores as per the latest audited financial results.

  • Track Record

Distributable profits in terms of Section 123 of the Companies Act 2013 for at least two years out of immediately preceding three financial years (each financial year has to be a period of at least 12 months). Extraordinary income will not be considered for the purpose of calculating distributable profits. Or

The net worth shall be at least Rs. 5 crores.

  • Other Requirements

It is mandatory for a company to have a website.

It is mandatory for the company to facilitate trading in demat securities and enter into an agreement with both the depositories.

There should not be any change in the promoters of the company in preceding one year from date of filing the application to Different Exchange for listing under SME segment.

  • Disclosures

A certificate from the applicant company / promoting companies stating the following

  1. a) ” The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).”

Note: Cases where company is out of BIFR is allowed.

  1. b) There is no winding up petition against the company, which has been admitted by the court or a liquidator has not been appointed.
  • Migration from Different Exchange SME Platform to the Main Board

The companies seeking migration to Main Board of Different Exchange should satisfy the eligibility criteria It is mandatory for the company to be listed and traded on the Different Exchange SME Platform for a minimum period of two years and then they can migrate to the Main Board as per the guidelines specified by SEBI vide their circular dated 18th May 2010 and as per the procedures laid down in the ICDR guidelines Chapter X B.

What are the Benefits of Listing in SME

1. Easy access to Capital

Different Exchange SME provides an avenue to raise capital through equity infusion for growth oriented SME’s.

2. Enhanced Visibility and Prestige

The SME’s benefit by greater credibility and enhanced financial status leading to demand in the company’s shares and higher valuation of the company.

3. Encourages Growth of SMEs

Equity financing provides growth opportunities like expansion, mergers and acquisitions thus being a cost effective and tax efficient mode.

4. Ensures Tax Benefits

In case of listed securities Short Term Gains Tax is 15% and there is absolutely no Long Term Capital Gains Tax.

5. Enables Liquidity for Shareholders

Equity financing enables liquidity for shareholders, provides growth opportunities like expansion, mergers and acquisitions, thus being a cost effective and tax efficient mode.

6. Equity financing through Venture Capital

Provides an incentive for Venture Capital Funds by creating an Exit Route and thus reducing their lock in period.

7. Efficient Risk Distribution

Capital Markets ensure that the capital flows to its best uses and that riskier activities with higher payoffs are funded.

8. Employee Incentives

Employee Stock Options ensures stronger employee commitment, participation and recruitment incentive.

How are the Listing Procedures done?

This is as simple as we understand & execute the following steps!!!

Planning

The Issuer Company consults and appoints the Merchant Banker/s in an advisory capacity.

Preparation

The Merchant Banker prepares the documentation for filing after, conducting due diligence regarding the Company i.e checking the documentation including all the financial documents, material contracts, government approvals, Promoter details, planning the IPO structure, share issuances, and financial requirements

Process

Application procedure:

Submission of DRHP/Draft Prospectus – These documents are prepared by the Merchant Banker and filed with the Exchange as well as with SEBI as per requirements.

Verification & Site Visit – Different Exchange verifies the documents and processes the same. A visit to the company’s site shall be undertaken by the Exchange official .The Promoters are called for an interview with the Listing Advisory Committee.

Approval – Different Exchange issues an In-Principle approval on the recommendation of the Committee, provided all the requirements are compiled by the Issuer Company.

Filing of RHP/Prospectus – Merchant Banker files these documents with the ROC indicating the opening and closing date of the issue.

Once approval is received from the ROC/MCA, they intimate the Exchange regarding the opening dates of the issue along with the required documents.

Public Offering

The Initial Public Offer opens and closes as per schedule. After the closure of IPO, the Company submits the documents as per the checklist to the Exchange for finalization of the basis of allotment.

Post Listing

Different Exchange finalizes the basis of allotment and issues the notice regarding Listing and Trading.

Any Guidelines for Listing?

Yes the Company has to follow the below guidelines.

Capital
The post issue face value capital should not exceed Rs. Twenty-five crores.

Trading lot size

The minimum application and trading lot size shall not be less than Rs. 1,00,000/- .

The minimum depth shall be Rs. 1,00,000/- and at any point of time it shall not be less than Rs. 1,00,000/-.

The investors holding with less than Rs. 1,00,000/- shall be allowed to offer their holding to the Market Maker in one lot.

However in functionality, the market lot will be subject to revival after a stipulated time.

Participants
The existing Members of the Exchange shall be eligible to participate in SME Platform.

Underwriting
The issues shall be 100% underwritten and Merchant Bankers shall underwrite 15% in their own account.

So at last we can say that, if you want to increase the reputation of your company in the developing Countries like India, then you should have to register your Company in SME Platform because ultimately your company gets reputation as it is traded in Exchange Platform so Goodwill of the company  also increases and ultimately you achieve your profit.

This is best platform provided to the company for those companies who have not much of Paid Up Capital and also are less reputed but by registering in SME Platform, the company not only gets reputation all over India at large but also the company gets Profit by availing Tax benefits up to some extent. Thus,Small companies can now think big.

So considering the above fact, companies should have to opt for this option and after few years, the company would also be transferred from SME Platform to Main Board, hence your company is considered as the same as other reputed companies.

So by considering the Current Market Scenario every Private Company as well as Unlisted Public Company has to think on this matter and work accordingly. Though this facility has been available since long but few of them were able to grab this opportunity. Now it’s time to rethink about this opportunity.

SME Capital Markets so far

The SME Capital market in India has seen a flurry of activities in past 3 years. SME Platform has opened up immense opportunities not only for the small and medium enterprises to maximize wealth and gain visibility but also provides new investment opportunity to investors.Increasing number of companies are participating on SME Exchanges of BSE and NSE.
So far, 119 companies have got listed on BSE SME Exchange and 11on NSE Emerge. Further, several companies have filed their draft offer documents with these Exchanges. The total market capitalization of SME Exchanges has peaked over INR 10,000 Crores. These facts are remarkable, given the initial phase of SME capital markets that too in challenging times when even Main Board primary markets have witnessed little activity.

 

Growth Opportunities for SMEs

These recent initiatives of capital markets aim at bridging the gap between SMEs and capital markets by providing an opportunity to SME entrepreneurs to raise growth capital and reap benefits of listed space. SME entrepreneurs spot a ray of fresh light and hope for raising growth capital in economical and tax efficient manner and move up the ladder towards next-level growth. In the process, this opens up as a immense opportunity for capital markets, market intermediaries and professionals.

China commends India’s GDP growth; says keen to invest more

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

China has complimented India for “doing a good job” in maintaining an impressive growth rate despite a global slowdown and is keen on working together to push for reforms in the international financial system to offset the inherent weaknesses.

Stating that his country was keen to ramp up investments in India, Chinese Foreign Minister Wang Yi said the two major emerging economies can contribute significantly in helping the world economy by keeping up their growth momentum.

“First of all, we both need to grow our own national economies. On this front, we want to commend India for doing a good job in promoting economic growth,” said Wang.

Wang, who was here to attend Foreign Ministers’ meeting of RIC (Russia, India, China) grouping, further said reform of global financial system is key to protect the interest of developing countries and for recovery of the world economy.

“We need to join hands in playing a positive role in improving the global economic and financial governance because that will help protect the interests of the developing countries. It will also help the world economy to embark on a path of strong recovery,” Wang said.

He said China was “optimistic” about the prospect of deeper relationship between the two countries.

“Of course, we will be happy to invest more in India. There is no doubt about it,” he added.

After witnessing nearly three decades of close to double-digit growth, China has seen a decline in its growth rate, making room for India to replace it as the fastest-growing major economy of the world.

However, Chinese economy remains much bigger than that of India in terms of the overall size.

China clocked 6.9% growth in 2015 when India is estimated to have grown by 7.3%. The IMF has projected Indian economy to grow at 7.5% in 2016 and 2017.

The Chinese Foreign Minister also said his government was “looking forward” to President Pranab Mukherjee’s upcoming visit to China.

SEBI registered AIF count hits 200-mark

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Markets regulator Sebi has allowed as many as 209 entities to set AIFs, pooled-in investment vehicles for real estate, private equity and hedge funds, over a period of 42 months.

The 209 Alternative Investment Funds (AIFs) have been registered with Sebi since August 12.

Among the newly registered AIFs are Kotak India Real Estate Fund, Ideaspring Capital Fund, IDFC Private Equity Fund and Canara Bank Venture Development Trust.

AIFs are funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy. Under Sebi guidelines, AIFs can operate broadly in three categories.

The Securities and Exchange Board of India (Sebi) rules apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds among others.

The regulator had notified in May 2012, the guidelines or this class of market intermediaries.

The Category-I AIFs are those funds that get incentives from the government, Sebi or other regulators and include social venture funds, infrastructure funds, venture capital funds and SME funds.

The Category-III AIFs are those trading with a view to making short-term returns and includes hedge funds among others. The Category-II AIFs can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day-to-day operational requirements.

These AIFs include private equity funds, debt funds or fund of funds, as also all others falling outside the ambit of above two other categories.

 

Source: http://www.business-standard.com/article/pti-stories/sebi-registered-aif-count-hits-200-mark-116042000467_1.html

Startup funding: Money will not dry up, will look for quality

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According to Indian Angel Network president Padmaja Ruparel, there has been an increase of 20% in the number of deals but the overall amount has gone up by 12%

While there are concerns about money drying up for start-ups in the country this year, venture capitalists say there is more money coming into the country but it will find its way only into quality ventures.

As a result, venture capitalists are going into a lot more details than before. So no more raising of funds and picking up cheques in coffee shops. And this is not bad, they reckon, as many people were starting up ventures just because capital was easily available.

Indian Angel Network president Padmaja Ruparel said that he has seen an increase of  20% in the number of deals but the overall amount has gone up by 12%.

“There is a huge interest among the investor groups in a variety of sectors. But there is much more diligence on how much money is required,” said Ruparel. There will be much deeper, sharper diligence and unit economics would be in focus, she said at a panel discussion on Raising and Deploying Funds in a Changed World at TieCon Pune, 2016.

Amid this talk of gloom and doom, people have raised huge funds but then they will be deployed carefully, said Sanjay Nath, co-founder Blume Ventures. “There is no rush to deploy funds and more time will be taken on deals,” he said adding, “good companies and quality founders are raising larger rounds of money.”

SAIF Partners MD & Advisor Alok Goel said around $2.5 billion would be deployed in two to three years and all this talk of money not being there was not true. “The most risk averse guys were becoming entrepreneurs just because capital was available and this was a risk. The craziness of the last 15 months of funding was worrying,” Goel said.

Remaining bullish about 2016, he said the consumer pain points were still there and those who could cut through the clutter would get funding.

Goel said the VC industry had seen three distinct phases in the country – prior to 2013 it was all about replicating successfully models of the West here; between 2013 an 2015 ideas were being copied here before even being tested and tried in the US, which doubled the risk in the business and was not going to work. The new phase is about looking at India specific problems and solving them instead, he said.

Qualcom Ventures VP Karthee Madasamy said such ups and downs were part of the cycle and they remain unfazed. “We have done six plus follow-on and new deals last year. We will do the same this year and have no plans to change that,” said Madasamy.

He expects India to do well in the area of hardware in the next few years with lot of start-ups coming up in India in this sector.

Source: http://www.financialexpress.com/article/industry/companies/deeper-due-diligence-precedes-start-up-funding/239822/

If you bought property but have not deposited TDS, you may get a tax notice

by | posted in: Corporate Updates, Income Tax,e-Filing- Individuals, Firms, Companies | 0
While the rule has been in effect since June 1, 2013, many buyers are unaware or often confused about how to calculate the tax.If you bought property worth more than Rs 50 lakh and did not deduct tax at source (TDS) or failed to deposit the amount with the income tax department on time, you may have to pay a penalty of up to Rs 1 lakh.

Several taxpayers recently received notices from the department for no t doing so. Anyone buying real estate worth more than Rs 50 lakh has to deduct 1% of the price of the property before paying the seller. That 1% TDS has to be deposited with the tax department using Form 26 QB.

“The income tax department recently matched the TDS data with the data they received from the property registrar for property transactions over `50 lakh. Wherever there was a discrepancy, either the buyers failed to deduct or deposit the TDS, a notice has been sent,” said Vaibhav Sankla, director, H&R Block.

While the rule has been in effect since June 1, 2013, many buyers are unaware or often confused about how to calculate the tax. TDS has to be calculated on the total sale price  and not the amount exceeding Rs 50 lakh.

“Sometimes total sale price, which exceeds `50 lakh in aggregate, may be payable in instalments. The TDS in that case must be deducted from each instalment no matter how small the instalment is. Most people fail to do that,” said Archit Gupta, founder, ClearTax.in.

In case the payment is made in instalments, then TDS needs to be deducted at the time of making each payment. This TDS, deducted each time while paying the instalment, is to be deposited with the department by way of return cum challan (Form 26QB) within seven days of the following month of making the payment. Failing to do so can, apart from the dues and late filing interest, attract a penalty under Section 271H of up to Rs 1 lakh.

For those who have received a notice, the immediate corrective step to avoid paying a penalty is to pay the TDS along with the applicable interest and late filing fee.

The interest payable under Section 201 is 1% per month if tax wasn’t deducted and 1.5% in case this was done but not paid.

“This interest is calculated on the TDS amount from the date of payment, whether paid in lump sum or in instalments,” said Sankla. Take the example of a property purchased in January 2015 worth Rs 60 lakh where the first Rs 20 lakh was paid that month and the rest in June that year. For the first instalment of Rs 20 lakh, the interest will be applicable from January onwards, while that on the second payment will be from June 2015. There is also a late filing fee under Section 234E for delaying the interest payment of `200 per day, subject to the maximum of taxes due. There may be some leniency if the seller has already paid capital gains tax or claimed capital gains exemption (on the sale of property).

“The intent of the department is that there is no tax evasion. So, if the seller has already paid the taxes, the buyer can submit Form 26A certificate from a chartered accountant and request that penalty under Section 234E should not be levied,” said Gupta. Though this will save you from the late filing fee, the interest under Section 201 will still apply.

Buyers should also remember to issue Form 16B. “It is generated via TRACES and the seller may not be able to take tax credit for TDS deducted in case of non-filing or latefiling of Form 26QB,” said Gupta. Penalties remain the same for failing to do so.

Source:http://economictimes.indiatimes.com/articleshow/51901867.cms

 

Government looks to resolve 100 transfer pricing issues; seeks to sign more advanced agreements

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Income Tax,e-Filing- Individuals, Firms, Companies, India & International - Corporate updates | 0
Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies

In a significant move towards a more progressive taxation policy the revenue officials have set an aggressive target of resolving about 100 transfer pricing issues by signing advance pricing agreements (APAs) with multinationals this fiscal, people close to the development said.

The government, through the Central Bureau of Direct Taxes (CBDT), had signed a record 55 APAs with multinationals in 2015-16. In all, the Indian government has signed 64 APAs, including 62 in the last two years. Now the government is getting more ambitious and officials are confident about achieving the target.

“We are already working on about 175 cases (APAs), and the target is achievable,” said a person close to the development. “Also, the officers who are dealing with the issue have now got fair amount of experience and work would be faster going ahead.”

Samir Gandhi, partner at Deloitte Haskins & Sells LLP, said, “In last one year, we have seen that the government has been very active in resolving the transfer pricing cases through the APAs. Going forward it is very likely that we will see more number of cases being resolved.”

An APA is mainly an agreement between a tax payer—mostly multinationals— and tax authority— CBDT in India’s case—where the transfer pricing methodology is determined. The methodology to calculate taxes could then be used for an agreed period of time on the tax payer’s future international transactions.

Transfer pricing disputes are mainly related to the calculation of profit made by multinational companies and how they have been shifted to their parent. Many firms have gone to court, challenging the government’s transfer pricing calculations. In July 2012, the government introduced the APA programme, which allows companies and the revenue authorities to negotiate the rate at which tax is to be paid and avoid disputes. Of the total APAs signed last year, 53 were unilateral agreements while two were bilateral agreements.

A unilateral APA is an agreement between the tax payer and the tax authority of the country (CBDT). A bilateral agreement is signed by these two plus the tax authority of the country where the multinational is headquartered.

Industry trackers expect that some more “complicated” APAs would be signed this year. “Going ahead some of these cases (APAs) will involve relatively complex cases/transactions and also application of TP methodologies of profit split and TNMM (transactional net margin method),” said Gandhi of Deloitte. Industry experts said the shift from a time when India was considered to be one of the most aggressive in the world on transfer pricing to the current situation has happened in last two years.

“There are primarily two developments which have happened in last one year in the context of transfer pricing disputes,” said Rohan K Phatarphekar, partner and national head, global transfer pricing services, at KPMG. “One is the government’s agenda of having a non-adversarial tax regime and improving the ease of doing business, which has resulted in lesser amount of transfer pricing adjustments, and the other is the CBDT circular clearly laying out the guidelines as to when a case needs to be referred for transfer pricing assessment which has reduced the overall number of cases picked up for scrutiny,” he said.

Experts also pointed out that the government’s stance on liberal transfer pricing comes at a time when many multinationals face the prospect of increasing disputes across the world. Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies.

Companies and tax consultants said that not only is the Indian government going all guns to resolve old issues in last one year, but also there has been no major transfer pricing demand as officials did not take an aggressive stance. Currently there are about 650 pending cases in APA, according to a report by Deloitte.

Going ahead, a lot of disputes also set to be resolved due to mutual APAs signed between Indian authorities and their US counterpart. This is mainly because the US Internal Revenue Service (IRS) has started accepting bilateral APA applications with India from February 16, 2016, the Deloitte report said.

Source:
http://economictimes.indiatimes.com/articleshow/51886742.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst