The Companies (Amendment) Bill, 2016 introduced in Loksabha

by | posted in: Company Incorporations, e-filing of MCA Returns, Corporate Updates | 0

On 16th March 2016 Lok Sabha has passed the Companies (Amendment) Bill 2016 to further amend the Companies Act, 2013

The Act introduced significant changes related to disclosures to stakeholders, accountability of directors, auditors and key managerial personnel, investor protection and corporate governance. However, Government received number of representations from industry Chambers, Professional Institutes, legal experts and Ministries/Departments regarding difficulties faced in compliance of certain provisions. Amendments of the Act were carried out through the Companies (Amendment) Act, 2015 to address the immediate difficulties arising out of the initial experience of the working of the Act, and to facilitate “ease of doing business”.

The changes introduced are broadly aimed at addressing difficulties in implementation owing to stringency of compliance requirements; facilitating ease of doing business in order to promote growth with employment; harmonization with accounting standards, the regulations of Securities and Exchange Board of India Act, 1992 and the Reserve Bank of India Act, 1934; rectifying omissions and inconsistencies in the Act, and carrying out amendments in the provisions relating to qualifications and selection of members of the National Company Law Tribunal and the National Company Law Appellate Tribunal in accordance with the directions of the Supreme Court.

The Companies (Amendment) Bill, 2016, inter alia, proposes the following, namely:—

  • Simplification of the private placements: Simplification of the private placement process by doing away with separate offer letter, by making filing of details or records of applicants to be part of return of allotment only, and reducing number of filings to Registrar;

Earlier, there was significant difficulty was created by the Companies Act, with the unduly restrictive set of provisions pertaining to private placements. This over-ambitious scheme of regulation was a direct result of some incidents in the past. One such provision requires every private placement to be routed through a separate bank account opened for this purpose, and a bar on utilization of the money until allotment. More often than not, the amount received in private placement is large, and companies cannot afford to keep the amount idle.

Now, this private placements process has been simplified with the Companies (Amendment) Bill, 2016.

(b) Allow unrestricted object clause in the Memorandum of Association dispensing with detailed listing of objects, self-declarations to replace affidavits from subscribers to memorandum and first directors;

(c) Provisions relating to forward dealing and insider trading to be omitted from the Act;

(d) Requirement of approval of the Central Government for Managerial remuneration done away with:

Requirement of approval of the Central Government for Managerial remuneration above prescribed limits is replaced by approval through special resolution by shareholders;

Central Government control on managerial remuneration is eliminated. Section 197, which places limits on managerial remuneration, will now require special resolution only, if the limits placed under the law are exceeded.

(e) Loans to entities in which directors are interested:

A company may give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirement;

 (f) Provisions easing business by overseas entities

In support of the “Make in India” policy, it is quite appropriate that the Companies (Amendment) Bill, 2016 must have enabled foreign owned businesses to form companies in India. Accordingly, there are several provisions to facilitate foreign-owned businesses:

– EGM of a wholly-owned subsidiary of a foreign company may be called anywhere in India.

– The requirement for a resident director provided in section 149 is sought to be amended to provide that in case of newly incorporated companies the condition may be satisfied subsequent to incorporation, rather than before incorporation.

– Remove restrictions on layers of subsidiaries and investment companies

(g) Allow for exempting class of foreign companies from registering and compliance regime under the Act;

(h) Align prescription for companies to have Audit Committee and Nomination and Remuneration Committee with that of Independent Directors;

(i) Test of materiality to be introduced for pecuniary interest for testing independence of Independent Directors;

(j) Disclosures in the prospectus required under the Companies Act and the Securities and Exchange Board of India Act, 1992 and the regulations made thereunder to be aligned by omitting prescriptions in the Companies Act and allowing these prescriptions to be made by the Securities and Exchange Board of India in consultation with the Central Government;

(k) Provide for maintenance of register of significant beneficial owners by a company, and filing of returns in this regard to the Registrar;

(l) Removal of requirement for annual ratification of appointment or continuance of auditor;

(m) Amend provisions relating to Corporate Social Responsibility to bring greater clarity.

http://www.prsindia.org/uploads/media/Companies,%202016/Companies%20bill,%202016.pdf

Canadian fund commits Rs 1012 crore for renewable energy in India

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CDPQ, which deals primarily in public and para-public pension and insurance plans, also announced the establishment of its Indian office in New Delhi.

Canada’s institutional fund manager Caisse de depot et placement du Quebec (CDPQ) on Wednesday said it has committed an investment of $150 million (Rs 1012.05 crore) in the Indian renewable energy sector. CDPQ, which currently manages $248 billion (Rs 16.73 lakh crore) in net assets, invests globally in major financial markets, private equity, infrastructure and real estate.

“CDPQ plans to commit $150 million to renewable energy investments in India,” the company said in a statement.

Over the next 3-4 years, CDPQ will use its commitment to target hydro, solar, wind and geothermal power assets with investments likely to take the form of select partnerships with leading Indian renewable energy companies, it added.

“We believe that India stands out as an exceptional country to invest in, given the scope and quality of investment opportunities, the potential for strategic partnerships with leading Indian entrepreneurs and the current government’s intention to pursue essential economic reforms,” CDPQ President and CEO Michael Sabia said.

CDPQ, which deals primarily in public and para-public pension and insurance plans, also announced the establishment of its Indian office in New Delhi. It appointed Anita Marangoly George managing director of its South Asia operations.

George, who joins the company from the World Bank where she was working on the global practice on energy, had helped finance the first commercial solar project in the country, the statement said. She will be taking up the new assignment from April 1 this year, it added.

 

Source: http://www.dnaindia.com/money/report-canada-s-fund-manager-commits-rs-1012-crore-investment-in-indian-renewable-energy-2187291

Paragon Partners launches $200M India-focused mid-market PE fund

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Indian private equity investor Siddharth Parekh and entrepreneur Sumeet Nindrajog are launching a $200 million India focused fund. The duo announced today that they have raised $50 million in commitments, marking the first close of their $200 million private equity fund, Paragon Partners Growth Fund I (PPGF-I). Established in August 2015, PPGF is an Alternative Investment Fund(AIF)-Category II Private Equity fund looking to invest in high growth mid-market private companies in India.

 

The fund will focus on five core sectors, including consumer discretionary, financial services, infrastructure services (capex light), industrials and healthcare services. The fund claims to have an advanced pipeline of investment opportunities across these sectors and plan to invest in 10-15 mid-market companies in India, with an average deal size of $10-20 million.

 

In line with this, Paragon Partners plans to pursue an active investment approach, contributing to the advancement of its portfolio companies in three core areas: business development, organizational development, and operational efficiency.

 

Paragon Partners’ Advisory Board will also work hand-in-hand with its investment and operations professionals to drive value in its portfolio companies. The board includes Deepak Parekh (Chairman, HDFC Ltd.), Harsh Mariwala (Chairman, Marico Ltd. & Founder Member), Sunil Mehta, (Chairman, SPM Capital Advisors Pvt Ltd) and Jeff Serota (ex Sr. Partner at Ares Private Equity) amongst others. Siddharth, Co-Founder, Paragon Partners, commenting on the first close, said,

 

We believe the next decade in India will see a strong resurgence of growth in key sectors such as manufacturing, financial services and infrastructure.

 

With its first close, PPGF-I has invested $10 million as growth capital in Capacite Infraprojects Limited, a Mumbai based firm which is engaged in the construction of buildings (including super high rise structures) and factories, for large real estate developers, corporates and institutions  across the Mumbai, NCR and Bengaluru regions.

 

Established in August 2012, Capacite is promoted by Rahul Katyal, Rohit Katyal, and Subir Malhotra. It will look to grow and expand to more locations on a selective basis moving forward. Commenting on the investment, Rohit, Director at Capacite said,

 

Within a span of three years, Capacite has achieved significant scale with an expected top line of ~Rs 1,000 cr for the current financial year, backed by a gross order book of  Rs 5,400 cr. We are delighted to partner with Paragon Partners, as Capacite embarks on its next wave of growth.

 

PPGF-I claims to have seen interest from onshore and offshore institutions, family offices and HNI’s. Domestic investors include India Infoline, Edelweiss Group and Infina Finance Private Limited (an associate of Kotak Mahindra Bank Limited).  The fund also claims to have received a significant commitment from the Fairfax group based in Canada. With additional discussions in progress, the fund expects to close on further commitments in coming months.

 

The Indian startup ecosystem has seen an uprising in the past few years and there is now both internal and external interest in investing in early and mid-stage companies. In September 2015, Kalaari Capital had raised a $290 million India focused fund. In December 2015, Blume Ventures had raised $30 million for its Fund II to invest in 35-45 startups. In February 2016, early stage investor, Kae Capital too raised $30 million for its second fund, with an aim to allocate 10% of the fund to cater to non-tech start-ups.

 

Reports also suggest that Sequoia Capital had closed a $920 million India focussed fund in February 2016, though Sequoia is yet to confirm the same. Other marquee investors like SAIF Partners, Accel Partners, and Lightspeed India, have racked up fresh funds in the recent past.

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PE inflows from foreign funds in real estate up 33%

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Total private equity investments from foreign funds in Indian real estate increased 33%, from $1,676 million (around R11,306 crore) in 2014 to $2,220 million (around R14,974 crore) in 2015, according to latest findings of global real estate consultancy Cushman & Wakefield.

 

Owing to high property prices and high investment potential, Mumbai was accounted for about 35% of the total foreign investments in 2015, followed by Delhi NCR accounting for about 25% of the investments.

Sanjay Dutt, managing director, Cushman & Wakefield India said, “The three large cities; Mumbai, Bengaluru and Delhi-NCR continue to attract the highest investments in India and account for about 75% of these investments.

However, with government initiatives to de-stress these cities, relaxed FDI norms and focus to improve infrastructure across the country, other cities in India are likely to witness rise in PE investments going forward.”

The structured debt deals accounted for almost half (49% in value terms) of the total PE investments in 2015.

The structured deals strategy, though moderated due to increased competition, offers returns in the range of 15% – 17% to its investors.

Source: http://www.financialexpress.com/article/industry/companies/pe-inflows-from-foreign-funds-in-real-estate-up-33/221723/

Indian start-ups get back to basics

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

India’s start-ups have a new catchphrase – back to basics. Traditionally, these businesses have focused on fundamentals -invest to grow while ensuring one doesn’t burn money in chasing eyeballs that do not translate into revenue and profit.

The year 2015 was an aberration, with soaring valuations and nearly Rs 36,000 crore or $5 billion in venture capital and private equity money pumped into start-ups. Now, with a global reset by investors to tighten their belts and relook at how businesses are run, India has also been hit.

TREADING CAUTIOUSLY
  • Investors pumped $5 bn in start-ups in 2015
  • As global investors tighten belts, Indian start-ups are impacted
  • Investors seek to look at business value than valuation of business
  • Morgan Stanley writes down investment value in Flipkart by 27 per cent
  • Now, investors are focusing on business fundamentals
  • Start-ups shed jobs, cut down on high spends and focus on building sustainable business

Several entities that followed the burn-cash model have been forced to shed jobs and improve their business models. Among the more known names, Zomato, Housing and TinyOwl have shed jobs. Flipkart, the largest e-commerce company and the most highly valued start-up, saw investor Morgan Stanley mark down the value of its (minority) stake by 27 per cent. While factors such as growing competition and not meeting the growth targets could have influenced this, the message for the rest of the start-up system was clear – pull up your socks.

“One thing which certainly happened was that the valuations of B2C (business to consumer) companies weren’t justified. What you’re seeing is more in terms of right-sizing or to be fairly valued,” said Sanjay Nath, managing partner at Blume Ventures. “I wouldn’t use the term ‘bubble’, as that would signify India’s fundamentals are not strong. That’s definitely not the case.”

The fundamentals of India as a market are very strong, he adds. There’s a huge growth in smartphone sales, the uptake of third-generation (3G) technology data connectivity is growing and 4G services are coming in. Growth in tier-II and tier-III cities is very high, and as these are highly underpenetrated, the opportunities are immense.

“Recession is when good companies are built. I’m not saying there’s one, so these are good times,” says Shashank N D, co-founder and chief executive officer of Practo, a health care technology entity.

To grow fast and outdo the competition, several start-ups in the B2C space, especially the segments of foodtech and hyperlocal, began to offer discounts and cash-backs, despite making a loss on each such transaction. This unsustainable model of business is on the way out. Investors now are pressurizing companies in their portfolio to focus on operational efficiency, improve productivity, keep costs low and move to profitability.

“Suddenly, a view to profitability is coming in and the view of discounting and cash-backs is being rolled away slowly. It’s being done very subtly, which is why nobody is noticing it, but it’s happening,” said Ash Lilani, managing partner and co-founder at Saama Capital. “A lot of good investors are making sure their good companies are financed for the next 18-24 months. But, it’s rationalisation, it’s (about) coming back to earth.”

Start-ups have begun looking at ways to conserve cash, with the slump in funding the market is currently going through. Despite this, there’s a lot of optimism that the market will recover and investors will open their purse strings, though it is presumed the pace of investments would substantially reduce.

“The overall investment in the latter part of 2016 should catch up, as you can’t just not make investments and sit because the money is there. Unnecessary funding or crazy funding which was happening will slow down a bit but good companies will raise much more money this year,” said Shekhar Kirani, managing partner at Accel Partners India.

Rajan Anandan, managing director of Google India and prolific backer of start-ups as an angel investor, says the best is yet to come out of India. “If you think of this evolution as a series of (cricket) test matches, let’s say it’s a five-test series and we’re at the first test in the third day. We have to finish the first test, go to the second, then the third. It’s very early. There are going to be periods of ups and downs; it’s a bump in the road,” was the way he put it.

Source: http://www.business-standard.com/article/companies/indian-start-ups-get-back-to-basics-116030700027_1.htm

RBI proposes easier access to foreign capital for start-ups

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The Reserve Bank of India (RBI), in its sixth bi-monthly monetary policy statement, has proposed steps to improve ease of doing business for start-ups through easier access to foreign capital and by enabling smoother transfer of ownership. RBI Governor Raghuram Rajan said the central bank wants to simplify the process and will create an enabling framework for attracting foreign venture capital (VC).

“We are supporting the start-up process by making it easier to raise (capital), often from abroad, but also simplify the compliance with regulations, including putting forms online,” Rajan said during the post-policy press conference on Tuesday.

For easing cross-border transactions, RBI has proposed (in consultation with the government of India) that in case of transfer of ownership of a start-up, permitting receipt of the consideration amount on a deferred basis could be done. It has also proposed to enable escrow arrangement or indemnity arrangement up to a period of 18 months.

In addition, RBI has also proposed (in consultation with the government) to permit start-ups access to rupee loans under the external commercial borrowings framework with relaxations of eligible lenders. It is also looking at issuing innovative foreign direct investment (FDI) instruments like convertible notes by start-ups. Further, RBI is looking into the proposal of issuing shares without cash payment through sweat equity or against any legitimate payment owed by the company, the remittance of which does not require any permission under the Foreign Exchange Management Act (Fema).

Harish H V, partner, Grant Thornton India LLP, said these measures are for helping start-ups in their operations and fundraising. “We look forward to further relaxations around convertible notes as promised. These steps, together with the start-up action plan and more initiatives expected from the ministry of corporate affairs and the Budget, should help the cause of the Stay In India and creating value in India… Every step counts,” he said.

RBI said the aim was to enable start-ups, irrespective of the sector, to receive foreign VC investment and also enable transfer of shares from foreign VC investors to other residents or non-residents.

The central bank has also proposed simplifying the process for dealing with delayed reporting of FDI-related transactions by building a penalty structure into the regulations. The notifications/circulars under Fema, wherever necessary, will be issued shortly.

The regulator said electronic reporting of investment and subsequent transactions will be made on the e-Biz platform only. Here, submission of physical forms will be discontinued with effect from February 8.

Source: http://www.business-standard.com/article/finance/rbi-proposes-easier-access-to-foreign-capital-for-start-ups-116020200565_1.html

Foreign firms rush to India’s online marketplace

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India’s booming online marketplace business has attracted a new wave of merchants and sellers from countries such as China, South Korea, Japan, Singapore and the US. In fact, thousands of sellers are getting into tie-ups with Indian e-commerce players to kick-start operations in the country.

 

According to industry insiders, around 50,000 sellers from China, South Korea and Singapore are planning to enter India through online marketplace players.

 

“In business-to-business (B2B) segment, there is no online organised player in the country right now. The market is being created for the online businesses,” said Sanjay Sethi, co-founder and CEO of Shopclues. The company has brought in DHgate, the second largest player in China after Alibaba, on to its platform. It’s also getting 25,000 South Korean merchants on board. Tie-ups are also in process with Singapore Traders Association to enable them to sell on Shopclues.

 

American retail major Walmart is also exploring ways to tie up with leading e-commerce companies in India, including Flipkart, Snapdeal, ShopClues, Grofers and Bigbasket. It is learnt that German wholesale giant Metro Cash and Carry is also in talks with e-commerce marketplace players to sell its products online.

 

Meanwhile, e-commerce giant Alibaba is looking to make a big bang entry into India’s marketplace via One97 Communications-owned Paytm.

 

Alibaba is expected to be the support behind Paytm’s China product portfolio. With that in place, Paytm will aim to become the biggest Indian player insofar as the number of sellers on the platform is concerned. With eight million sellers, Alibaba has the widest seller range as well as product portfolio.

 

This is not for the first time that Paytm is planning to sell Alibaba’s product range. During Diwali last year, Paytm had the whole product catalogue sourced from Alibaba and merchants from China were directly shipping products to customers in India, saving Paytm the hassle of finding warehouses.

 

As for the second top player in China, DHgate, online B2B would be a gateway into India and an opportunity to get connected to 350,000 sellers through the Shopclues portal.

 

DHgate plans to list its products across categories, including electronics, accessories, beauty products and sports. “From China we are getting around 10,000 SKUs (stock keeping units) listed. It is not a retail business and the target audience for this business are other businesses in India,” said Sethi.

 

The foreign investment rules vary across retail platforms and companies often resort to complex structuring to bypass policy. While foreign direct investment (FDI) is capped at 51 per cent in multi-brand retail with states having the last say on whether international players would be permitted to operate or not, there’s no limit of foreign investment in single-brand and business-to-business or cash and carry.

 

In e-commerce, however, FDI is not permitted. But, e-commerce players are mostly run with foreign money by operating marketplace platforms, where rules have not been framed yet.

Source: http://www.business-standard.com/article/companies/foreign-firms-rush-to-india-s-online-marketplace-116020100015_1.html