As SEBI reforms startup listing, SMEs must ensure funds are not misused

SME ExchangeAmid SEBI banning as many as 239 entities for alleged money laundering, taxation consultancy PwC has called for a three-year locking-in for the entire pre-listing capital held by promoters to curb tax evasion and other illegal activities through market platforms.

The agency has called for imposing a similar lock-in even for preferential allotments, as prescribed under the capital and disclosure requirement (ICDR) norms so that only serious investors access the market. The PwC report is part of a BSE-mandated review of SME listing process.

The premier bourse last week said that 100 entities were trading on its SME platform. The regulator Securities and Exchange Board (SEBI) on June 29 banned four publicly traded SMEs and 235 other related entities for alledgely misusing the exchange’s platform for money laundering and tax evasion.

The SEBI, in an interim order alleged that these entities made Rs 614 crore in illegal gains through suspected money laundering and tax evasion activities. The four companies banned are EcoFriendly Food Processing Park, Esteem Bio Organic Food Processing, Channel Nine Entertainment and HPC Biosciences. These are traded on the BSE SME Platform.

“The institutional trading platform (ITP) could be utilised as a tool for tax planning by staying invested in an SME for a period more than 12 months and exiting at a very high stock price thereby making huge gains with no tax liability,” PwC said in the report.

Accordingly, the report has suggested that the entire pre-listing capital held by promoters should be locked in for three years as “such restrictive conditions would discourage people from accessing the platform only for tax planning”. The BSE had launched ITP for its SME platform to facilitate start-ups and other SMEs to list without the mandatory IPO process which is time-consuming and capital intensive that small companies can hardly afford.

According to PTI, in addition to allowing SMEs and start-up companies to raise capital, the BSE SME platrfom also provides easier entry and exit options for informed investors like angel investors, venture capitalists and private equity players, apart from offering better visibility and wider investor base and tax benefits to long-term investors.

Meanwhile, the report also called for a reduction in trading lot size and shorter interval for review of lot size after many SMEs, merchant bankers and market-makers cited this as a disincentive for entering the market. The report said market participants want the timeframe to review the lot size to be reduced from the current six months and lower the trading lot requirement of Rs 1 lakh to attract retail investors to the segment.

As SEBI continues to make business easier, it is important SMEs do not eye illegal gains through suspected money laundering and tax evasion activities.

 

MCA extends due date of DIR-3KYC / E-KYC of Directors

MCA extends due date of DIR -3KYC / E-KYC of Directors

In order to update the Directors database of The Ministry of Corporate Affairs(MCA), MCA has requested all Directors holding a DIN to complete DIN KYC before 15th September 2018.

To complete DIN KYC, the Director would be required to file a form known as DIR-3 KYC or DIN e-KYC.

The notification issued by Ministry of Corporate Affairs has been reproduced below:

 

 

Government of India 
MINISTRY OF CORPORATE AFFAIRS

Notification

New Delhi, dated 21st August 2018

G.S.R. …… (E).-In exercise of the powers conferred by sections 396,398,399, 403 and 404 read with sub-sections (1) and (2) of section ‘1-69 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Registration Offices and Fees) Rules, 2014, namely:-

  1. (1) These rules may be called the Companies (Registration Offices and Fees) Fourth Amendment Rules, 2018.
    (2) They shall come into force from the date of their publication in the Official Gazette.
  2. In the Companies (Registration Offices and Fees) Rules, 2014, in the Annexure, under the head VII, for note below Fee for filing e-form DIR-3 KYC, the following note shall be substituted, namely:-

“for the current financial (2018-2019), no fee shall be chargeable till
the 15th September 2018 and fee of Rs.5000 shall be payable on or after the 16th September 2018”.

[F. No. 01/16/2013 CL-V (Pt-I)]

 

Sd/-

K.V.R MURTY, JOINT SECRETARY

Purpose of E-form DIR-3 KYC

The main purpose of e-form DIR-3 KYC is to collect the latest information about the directors of all companies. The information to be provided while completing eKYC procedures include Aadhar, PAN, Passport number, address, phone and email. The information submitted must be authenticated by completing one-time-password (OTP) verification and by signing with Digital Signature of Director and a practising Chartered Accountant.

Applicability

All directors having a DIN as on 31st March of 2018 must file e-form DIR-3 KYC on or before 15th September of 2018. For all Directors who obtained DIN after 31st March, 2018, DIR e-KYC must be filed next year.

Documents Required

The following are the documents required to file E-form DIR-3 KYC:

  • PAN Card for identity proof
  • Aadhar Card for address proof
  • Recent passport size photographs
  • Personal Mobile Number and E-mail ID of director for OTP Verification
  • Digital Signature Certificate of the director (DSC) that must be registered on MCA Portal
  • Passport (if the person holds a foreign citizenship)

Certifying Authority

The E-form DIR-3 KYC has to be duly certified by the Practicing Chartered Accountant (PCA), Practicing Company Secretary (PCS) or Practicing Cost Accountant.

Penalties

If the DIN holders do not file DIR-3, the MCA will mark them as deactivated. If the DIN holder files e-form DIR-3 KYC after 31st August 2018, a fee of Rs. 5,000 will be charged.

Time Limit

All directors to whom DIN has been allocated as of March 2018, the e-form DIR-3 KYC has to be filed by September 15, 2018. Originally, the MCA had provided a due date of 31st August which was subsequently changed to 15th September.

 

SEBI calls for stringent laws against erring auditors, valuers

SEBI has proposed giving the board of directors of the company the authority to take appropriate action after conducting an investigation against the individual or firm that violates any regulations or submits a false certificate or report.

India’s capital market regulator has proposed amendments to tighten laws governing auditors and other third-party individuals hired by listed companies for auditing financial results, among other things.

The Kotak Committee, formed to come up with proposals for improving corporate governance, last year recommended that the Securities and Exchange Board of India (SEBI) should have clear powers to act against auditors and other third-party individuals or firms with statutory duties under the securities law.

Auditing lapses have caused several frauds to go unnoticed for years and the capital market regulator has had no direct control on the auditing firms.

SEBI has proposed giving the board of directors of the company the authority to take appropriate action after conducting an investigation against the individual or firm that violates any regulations or submits a false certificate or report.

The proposed changes come months after Punjab National Bank, India’s second largest state-run lender, stunned markets after uncovering a $2 billion loan fraud that had gone undetected for years.

Merchant bankers, credit rating agencies, custodians, among others, are registered and regulated by SEBI but chartered accountants, company secretaries, valuers and monitoring agencies do not come under any direct regulators.

The amendments would mean auditors must ensure certificates or reports issued by them are true in all material respects and they must exercise all due care, skill and diligence with respect to all processes involved in issuance of the report or certificate.

The auditors would be responsible to report in writing to the audit committee of the listed company or the compliance officer on any violation of the securities law they noticed.

In January, SEBI barred Price Waterhouse from auditing listed companies in India for two years after an investigation into a nearly decade-old accounting fraud case in a software services company that became India’s biggest corporate scandal.

SEBI has sought feedback and comments on the draft regulations over the next 30 days.

 

Link: Business Today

Updating the KYC of all directors by MCA

As part of updating its registry, MCA would be conducting KYC of all Directors of all companies annually through a new eform viz. DIR-3 KYC to be notified and deployed shortly.

Accordingly, every Director who has been allotted DIN on or before 31st March, 2018 and whose DIN is in ‘Approved’ status, would be mandatorily required to file form DIR-3 KYC on or before 31st August,2018.

While filing the form,the Unique Personal Mobile Number and Personal Email ID would have to be mandatorily indicated and would be duly verified by One Time Password(OTP).

The form should be filed by every Director using his own DSC and should be duly certified by a practicing professional (CA/CS/CMA).

Filing of DIR-3 KYC would be mandatory for Disqualified Directors also.

After expiry of the due date by which the KYC form is to be filed,the MCA21 system will mark all approved DINs (allotted on or before 31st March 2018) against which DIR-3 KYC form has not been filed as ‘Deactivated’ with reason as ‘Non-filing of DIR-3 KYC’.

After the due date filing of DIR-3 KYC in respect of such deactivated DINs shall be allowed upon payment of a specified fee only, without prejudice to any other action that may be taken.

SEBI tweaks rules for IPOs, buybacks and takeovers

The Securities and Exchange Board of India (Sebi) on Thursday eased several rules relating to Initial Public Offers (IPO), rights issues, buybacks and takeovers. The regulator’s board approved these changes as also those relating tenures of managing directors of market intermediaries. The capital markets watchdog reduced the time for announcing the price band of initial […]
The Securities and Exchange Board of India (Sebi) on Thursday eased several rules relating to Initial Public Offers (IPO), rights issues, buybacks and takeovers.

The regulator’s board approved these changes as also those relating tenures of managing directors of market intermediaries. The capital markets watchdog reduced the time for announcing the price band of initial public offers (IPO) from five working days before the opening of the issue to two working days. This will give companies more time to fix the price band.

 

Companies now need to provide investors with financial disclosures — for public issues and rights issues — for only three years. Currently, information is provided in the offer documents for five years. Also, companies need to provide only consolidated audited financial disclosures in the IPO offer document; audited standalone financials of the issuer and subsidiaries must be disclosed on the company website.

 

Following a board meeting on Thursday, the capital markets regulator tweaked the buyback norms. The buyback period has been defined as the time between the board resolution or the date of declaration of results for a special resolution authorizing the buyback of shares and the day on which the shares are paid.

Also, Sebi has amended the takeover rules. It has given companies additional time to revise the open offer price upwards till one working day before the start the tendering period.

 

The Sebi board also approved some recommendations of R Gandhi committee on regulations relating to market infrastructure institutions (MIIs). For rights issues the threshold for submission of the draft letter of offer to Sebi has been increased to Rs.10 crore as against the earlier prescribed Rs 50 lakh. The regular also tweaked the rules relating to the underwriting of all non-SME public issues. If 90% of the fresh issue of share is subscribed, the underwriting will be restricted to that portion only. Accordingly, the requirement to underwrite 100% of the issue without regard to the minimum subscription requirements has been deleted.

 

Sebi also reduced minimum anchor investor size to Rs 2 crore from the existing Rs 10 crore, for SME issuances. This will allow companies to attract more anchor investors for an issue.

 

The board has permitted eligible domestic and foreign entities to hold up to 15% shareholding in case of Depository and Clearing Corporation. Moreover, multilateral and bilateral financial institutions, as notified by the government, have also been recommended to hold up to 15% in an MII. Moreover, Sebi has decided to limit the tenure of managing directors of an MII for a for a maximum of two terms of up to 5 years each or up to 65 years of age, whichever is earlier. The requirement would also apply to incumbent MDs of MIIs.

 

The regulator is also looking into the issues regarding IPO ICICI Securities in ICIC AMC bought the large stake.The regulator had sought details of a significant investment made by ICICI Prudential Mutual Fund in the IPO of ICICI Securities. “Yes we are looking into that, and we have sought some information from them, and we are yet to get their replies,” Tyagi said.

 

Source: Financial Express