Government prepares to strike off registration of over 2 lakh companies

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Defunct or Inactive Companies - Fast Track Exit Scheme / Strike off of companies under Companies Act, 2013
Defunct or Inactive Companies – Fast Track Exit Scheme / Strike off of companies under Companies Act, 2013

The government plans to cancel the registration of more than two lakh companies that have not been carrying out business for a considerable period of time, amid stepped up efforts to tackle the black money menace.

More than two lakh companies, spread across various states, have been served with show cause notices as they have not been carrying out any operation or business activity for a prolonged time.

The Corporate Affairs Ministry’s move also comes against the backdrop of overall efforts by the authorities to crack the whip on shell companies, suspected to be used for money laundering activities.

The Registrars of Companies (RoCs) in various states and union territories have issued notices to more than two lakh firms under the Companies Act, 2013, according to information available with the Ministry.

These notices have been issued under Section 248 of the Act, which is implemented by the Ministry. This section pertains to striking off names of companies on certain grounds.

With the issuance of notices, the companies concerned have to explain their position and if the responses are not satisfactory, then their names would be struck off by the Ministry.

Data showed that RoC Mumbai has issued notices to more than 71,000 companies while RoC Delhi has served notices to over 53,000 firms, among others.

As per the regulations, an RoC can seek explanation from a company if the latter has not commenced business within one year of getting incorporated under the Act.

Notice is also issued if a particular company has not been carrying out business for at least two continuous financial years and has not applied for dormant status.

Such entities are given a time of 30 days to submit objections if any.

The Ministry has power to remove or strike off the names of such entities from the “register of companies” if the response is not satisfactory.

Earlier this month, the Ministry had amended the Companies (Removal of Names of Companies from the Register of Companies) Rules.

There are more than 15 lakh registered companies in the country.

 

India’s Internet economy to double to $250 billion by 2020

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India’s internet economy is slated to double to $250 billion and the number of 4G-enabled devices is envisaged to jump six times to 550 million by calender 2020

India’s internet economy is slated to double to $250 billion and the number of 4G-enabled devices is envisaged to jump six times to 550 million by calender 2020, says a joint study by the Boston Consulting Group (BCG) and The Indus Entrepreneurs (TiE).

Total number of mobile internet users, the study says, is likely to nearly double to 650 million by 2020, and per user data consumption levels are estimated to grow 10-to-14 times to as much as 7-to-10 GBs a month from a current level of 700 MB per month per user.

The BCG-TiE study expects the growth of the country’s internet economy to be propelled by e-commerce and financial services, with the share of digital transactions likely to more than double to nearly 30-40% by 2020.

But the study cautions that the number of high-speed internet users in India continues to remain “limited to only 56%” of the total number of mobile internet users. This is since a sizeable chunk of such users continue to use feature phones, and are accordingly, constrained by device capability and internet speed.

As a result, “average data consumption per user (in India) continues to be low at less than 1 GB data/month, vis-à-vis developing economies like Indonesia and Brazil (at 2-to-3 GB/month) and developed economies like Japan and US (at 9-to-11 GB/month)”.

According to the BCG-TiE study, a combination of low fixed-line broadband coverage, a high proportion of feature phones among mobile handsets in use and high data prices have been key contributing factors behind low internet consumption in the county so far.

Nevertheless, the study expects high-speed mobile internet adoption levels to surge in the country from current the 56% to 85% of total the mobile internet base by 2020 as Indians are increasingly doing more than just calling on their handsets. “One in every four, accesses internet on their mobile phones, summing to 391 million internet users, which for perspective is bigger the population of US,” said BCG and TiE in their joint study.

Furthermore, the country’s devices ecosystem, it said, is leapfrogging by 2-3 years, and the emergence of 4G enabled feature phones is expected to give a fillip to high-speed internet access, going forward.

So much so, the study suggests that 3G smartphones are likely to get phased out by 2018, and be entirely replaced by 4G smartphones inundating the market.

Source: http://cio.economictimes.indiatimes.com/news/internet/indias-internet-economy-to-double-to-250-billion-by-2020-study/58262924

Medical tourism is forex top spinner

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Accounts for 70% of health services exports, finds survey

Medical tourism has been the largest contributor to India’s total health services exports, accounting for 70 per cent of the total revenues of $890 million earned in 2015-16, according to the first comprehensive government survey on the sector.

Asian countries, led by Bangladesh, Iraq, Pakistan and the Maldives, accounted for more than 60 per cent of the foreign exchange earnings of health services.

India’s major trade partners, the US and the EU, accounted for 14 per cent and 11 per cent, respectively, according to the survey compiled by the Directorate-General of Commercial Intelligence and Statistics under the Commerce Department.

■ 60% of the earnings come from Bangladesh, Iraq, Pakistan and the Maldives

■ 14% from the US

■ 11% from the EU

“The personalised services and care that patients in India get is much cheaper than the services offered in developed countries and even in countries in the ASEAN, Middle East and the CIS states,” Commerce Secretary Rita Teaotia noted in her comments.

“This, together with the support of the government in promoting India as a healthcare hub, research in healthcare and advances in information and communication technology have enhanced India’s export of health services,” Teaotia added.

Contract research was second-highest forex earner among health services, accounting for 27 per cent of export revenue. Clinical trials and telemedicine accounted for about 3 per cent of export earnings.

Orthopaedics, oncology, neurology and cardiology are the top four export revenue earners; strikingly, Ayurveda is a close fifth, much above other branches including urology, haematology, general medicine and nephrology.

The report is part of the Commerce Department’s efforts to develop a framework to collect statistics on services trade. The DGCI&S launched its pan-India survey on international trade in services in June 2016.

Along with information on medical and health value travel, the survey also captured information on telemedicine, clinical trials, contract research, distance health education and temporary overseas movement of personnel from the surveyed units.

The survey is likely to be undertaken on an annual basis by DGCI&S.

Source: http://www.thehindubusinessline.com/economy/medical-tourism-is-forex-top-spinner/article9657255.ece

SoftBank infuses Rs 1,675 crore in Ola Cabs; fresh funds to help Bengaluru co take on rival Uber

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Japanese investor SoftBank has pumped in about Rs 1,675 crore in fresh funding in Indian transportation startup Ola to give it more muscle to take American rival Uber head-on.

SoftBank subsidiary SIMI Pacific Pte picked 12,97,945 shares valued at Rs 10 at a premium of Rs 12,895 in ANI Technologies — which runs Ola — filings with the Registrar of Companies showed.

Reuters

The allotment of shares was done in November last year, it added.

The latest funding, however, is believed to have come at a lower valuation.

According to sources, the move comes at a time when Softbank is working on selling Snapdeal, an e-commerce platform it invested heavily in India, to larger rival Flipkart.

The Bengaluru-based firm was aggressively looking at raising funds to compete with Uber, the world’s most valuable start-up. After selling its Chinese business to Didi last year, Uber has now set sights on India making it one of its top priorities.

Though Indian Internet companies have seen a boom in user base, their valuations have come down as investors are now focusing on path to profitability and building a sustainable business model. Flush with private equity and venture capitalist money, many start-ups continue to have high burn rate that has been a concern for investors.

Earlier this week, India’s largest e-commerce firm Flipkart raised $1.4 billion from Tencent, eBay and Microsoft in a round that saw its valuation fall from $15 billion to $11.6 billion now.

Source: http://www.firstpost.com/business/softbank-infuses-rs-1675-crore-in-ola-cabs-fresh-funds-to-help-bengaluru-co-take-on-rival-uber-3383644.html

India eases rules to allow merger of Indian companies with foreign firms

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Under the new rules, the merger will also require prior approval of the Reserve Bank of India.

India will allow local companies to merge with overseas firms, easing rules to help home-grown businesses restructure their expanding global operations, and pave the deck for more listings of securities on capital markets abroad.

“Until now, only inbound mergers were permitted. With outbound mergers now permissible, there would be a lot of opportunities for Indian companies to acquire, restructure, or list on offshore exchanges as well,” said Mehul Shah, a partner at Khaitan and Co.

Until the federal notification by the corporate affairs ministry on April 13, India had permitted only inbound mergers. The merger would be in compliance with the Companies Act, 2013, and require prior approval of the Reserve Bank of India (RBI).

The notification also lists certain jurisdictions on the foreign companies, covering countries that comply with rules such as being members of the Financial Action Task Force (FATF) and whose central banks are members of the Bank for International Settlements (BIS).

Experts, however, believe that certain related laws must be amended before these rules take effect. “There would be need to have clarifications under tax laws. Exchange control regulations need to be re-looked and clarified to give effect to this notification. Also, an obligation is cast on RBI to provide approval for these mergers, as today, the RBI does not have mechanisms in place for this,” Shah added.

“Now exchange control regulations, securities laws, etc will need to be amended to facilitate a practical implementation of the amended law,” said Amit Maru, partner-transaction tax at EY.

The notification amends the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, notified in December 2016. Previously, mergers or demergers were governed by the Companies Act, 1956 before the notification of provisions of the Companies Act, 2013.

But, there were some gaps in the rules governing mergers. The latest notification seeks to fill these gaps. For instance, the law was earlier unclear on prior RBI approval even for inbound mergers, it is now clear that the nod is necessary.

“It might take some time for an Indian company to merge into a foreign company as it is not only one law but a host of laws which have to be amended before this becomes operational. For instance, income tax laws will have to be amended to give you a tax-neutral merger status because all mergers today are otherwise tax-neutral.” said Maru.The government had recently exempted firms, with Indian revenue of less than Rs 1,000 crore, from seeking the prior approval of the Competition Commission of India (CCI) while going in for a merger.

SEBI set to block P-Note route for NRIs to prevent laundering of black money

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The regulator wants to tighten the rules amid concerns that various variants of P-Notes have been floated since the implementation of GAAR on April 1.

The regulator plans to put in place a clear bar on non-resident Indians (NRIs) and entities owned by them and resident Indians subscribing to participatory notes, a move aimed at preventing possible round-tripping or laundering of black money.

The Securities and Exchange Board of India (SEBI) is set to tweak its regulations to this effect at its upcoming board meeting on April 26 after the finance ministry recently wrote to the regulator. Such a restriction is already implied through the answer to a frequently asked question (FAQ) but the regulator feels this lacks legal sanctity.

“Most of Sebi’s FAQs themselves clearly state that they should not be regarded as interpretation of law, and that they should not be treated as a binding opinion or guidance from SEBI,” said Moin Ladha, associate partner, Khaitan & Co. “Therefore, in case of any contradictions between the regulations and FAQs, the regulations would prevail. While FAQs do indicate the position SEBI is taking, they cannot be said to override or expand the scope of the regulations.”

P-notes are a derivative instruments issued offshore to those who want to bet on the country’s stocks and bonds without registering themselves with SEBI. The regulator wants to tighten the rules amid concerns that various variants of P-notes have been floated since the implementation of General Anti Avoidance Rules (GAAR) on April 1.

Investments via P-notes had declined to a 43-month low of Rs 1.57 lakh crore in December but rebounded in January to Rs 1.75 lakh crore before dropping again to Rs 1.70 lakh crore in February. There could be a resurgence in P-note issuance as these are exempted from capital gains tax under the amended tax treaties with Singapore and Mauritius that took effect on April 1.

Legal experts said the concept of NRI itself is a grey area and defining it would be crucial for regulators. They said the prohibition should be strictly enforced to prevent round-tripping of Indian money. “The concern of round-tripping of Indian money, particularly when leading industrialists may have a foreign passport, was always a concern,” said Sandeep Parekh, founder, Finsec Law Advisors. SEBI relies on the income tax definition on what constitutes an NRI.

“The concept of who is an NRI itself is a grey zone ranging from income tax definition which is based on residency to citizenship laws which are typically drafted very broadly to include any person of Indian origin and their kith and kin who are born abroad,” Parekh said. “Defining an NRI within this spectrum would be crucial to allow legitimate money in from immigrants who have left India several generations ago and are doing exceedingly well.”

In recent discussions with a leading custodian, the latter gathered the impression that the regulator was not comfortable with NRIs as a group holding a majority interest in a Category II foreign portfolio investors (FPIs) even though regulations do not restrict this. Rules require Category II FPIs to be broad-based — the minimum number of investors should be 20 and no single investor can hold more than 49%. However, NRIs as a group cannot hold more than 49% in Category III FPIs.

Source :  http://timesofindia.indiatimes.com/business/india-business/sebi-set-to-block-p-note-route-for-nris-to-prevent-laundering-of-black-money/articleshow/58215743.cms

World Bank says Indian economy to grow at 7.2% in FY18

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World Bank says Indian economy to grow at 7.2% in FY18

Having seen a “modest setback” due to demonetisation last fiscal, the Indian economy will claw back to 7.2% growth this financial year and rise further to 7.5% in 2018-19, says a World Bank report.

In its report on South Asian Economy, the World Bank said that “significant risks” to economic growth could emanate from fallout of demonetisation on small and informal economy, stress in the financial sector and uncertainty in global environment. Also, a rapid increase in oil and other commodity prices could have a negative implication for the economy, it added.

The country’s economic growth is expected to see an uptick at 7.2% this fiscal and further accelerate to 7.5% in 2018-19, the report said. The growth slowed down to 6.8% in 2016-17 due to a combination of weak investments and the impact of demonetisation, the World Bank said, adding that timely and smooth implementation of the GST could prove to be a significant “upside risk” to economic activity in 2017-18.

As per the report, the economic growth is projected to increase gradually to 7.7% by 2019-20, underpinned by a recovery in private investments, which are expected to be crowded in by the recent increase in public capex and an improvement in the investment climate.

“India’s economic momentum suffered a modest setback due to demonetisation, while the poor and vulnerable likely witnessed a larger negative shock. The economy is expected to recover and growth will gradually accelerate to 7.7 per cent by 2019-20,” it said.

The demonetisation, the World Bank said, caused an immediate cash crunch, and activity in cash reliant sectors was affected. The GDP growth slowed to 7% during the third quarter of 2016-17, from 7.3% during the first half of the fiscal. India’s fiscal, inflation and external conditions are expected to remain stable, the US-based multilateral lending agency said, adding that the centre will continue to consolidate modestly, while retaining the push towards infrastructure spending.

“Inflation will stabilise, supported by favourable weather and structural reforms. Normal monsoons have so far offset increases in petroleum prices,” it said. Referring to the external factor, it said exchange rate has appreciated, partly reflecting expectations of a narrowing inflation gap between India and the US and limited external vulnerabilities as the current account deficit is expected to remain below 2% of the GDP and fully financed by FDI inflows.

It said challenges to India’s favourable growth outlook could stem from continued uncertainties in the global environment, including rising global protectionism and a sharp slowdown in the Chinese economy, which could further delay a meaningful recovery of external demand. It said there is a great uncertainty about the extent to which demonetisation caused small, informal firms to exit and shed jobs. Also, private investment continues to face several impediments in the form of corporate debt overhang, stress in the financial sector, excess capacity and regulatory and policy challenges.

Source: http://www.livemint.com/Industry/KreF9rUByhFuQClcbJaRrM/World-Bank-says-Indian-economy-to-grow-at-72-in-FY18.html