27 Dec 2015

Fraud reporting norms increase responsibility on auditors: Report

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate & Business Advisory Services, Corporate Updates | 0
Immaterial frauds will now form a part of the annual report, and the requirement to report immaterial frauds to the central government has been done away with, it noted.

Statutory auditors will now have to mandatorily report to the Centre all corporate frauds amounting to Rs. 1 crore or above.

 

By specifying a threshold of Rs. 1 crore, the Corporate Affairs Ministry (MCA) has now done away with the requirement to report immaterial frauds to the Centre.

 

The Ministry has also now spelt out the procedure for fraud reporting to the Centre. First, the auditor has to inform the Board or audit committee and seek their views within 45 days.

 

On receipt of audit committee’s views, the auditor would have to within 15 days send his report to the Centre.

 

For frauds involving amounts lower than Rs. 1 crore, statutory auditors now need to report this matter only to the audit committee of the company, the Ministry has said amending rules for this purpose.

 

The reporting to the audit committee would have to be done not later than two days of his knowledge of the fraud.

 

Prior to this Ministry move, the company law required statutory auditors to report to the Centre all frauds by the company or against it.

 

Vishal Seth. Managing Director and National Leader IFRS and Financial Reporting Advisory, Protiviti India, Indian arm of a global consulting firm, said this threshold of Rs. 1 crore was a “fairly reasonable” given the magnitude of transactions in India.

 

“This is a big change in India. There was a need for a threshold and the Ministry has now specified it,” Seth told Business Line here.

 

Meanwhile, KPMG in India said in a note that the Ministry’s move on fraud reporting would increase responsibility of auditors. The amended rule prescribing the timelines for fraud reporting indicates the effort the Ministry is putting to increase the efficiency and timelines of such reporting, KPMG has said.

 

Related party transactions

 

The Ministry has now amended rules to specify that an audit committee would be empowered to provide “omnibus approvals” for related party transactions (RPTs) so long as certain conditions are met.

 

The conditions specified by the Ministry are largely similar to the Listing Regulations.

 

Yogesh Sharma, Partner, Grant Thornton India LLP, said this will certainly assist in ease of doing business without compromising the intent of the law.

 

Moreover, omnibus approval process was already included in the SEBI listing guidelines and hence this change will align the two requirements, he added.

 

For RPTs, the Company Law enacted in 2013 required every individual transaction to be approved by the Audit Committee. This made the approval process inefficient and delayed the decision making. For instance, each repeat transaction also required a separate approval.

 

The company law amendments in 2015 enabled “omnibus approval” for RPTs on annual basis that meet specified conditions prescribed in rules. The Ministry has now specified the conditions under which such omnibus approvals could be provided.

 

Reacting to the Ministry’s move, CA Institute President Manoj Fadnis welcomed the threshold specified by the Ministry. “This will bring certainty to the auditors as to the frauds that are to be reported to the central government and those that are to be reported to the audit committee,” he told Business Line .

Greater vigil

  • The auditor must first report the fraud to the company’s audit panel
  • The audit panel will have to give its views in 45 days
  • Within 15 days of that, the auditor will have to send his report to the Centre
  • Frauds amounting to less that Rs. 1 crore will need to be reported only to the company’s audit panel

Source: http://www.thehindubusinessline.com/todays-paper/tp-news/rules-eased-auditors-need-to-report-to-centre-corporate-frauds-of-over-rs-1-cr/article8029996.ece

23 Dec 2015

SEBI relaxes listing, fund-raising norms for startups

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In a major boost for startups, capital markets regulator SEBI has relaxed its regulations for them to list and raise funds through a dedicated platform on domestic stock exchanges, rather than going overseas. Under the new norms approved by SEBI’s board, the stock exchanges would have a separate institutional trading platform for listing of startups from the new age sectors, including e-commerce firms, while the minimum investment requirement would be Rs 10 lakh.

For their listing, SEBI has relaxed the mandatory lock-in period for the promoters and other pre-listing investors to six months, as against three years for other companies. Besides, the disclosure requirements for these companies have also been relaxed, SEBI Chairman U K Sinha told reporters after the board meeting.

At least 25 per cent of their pre-issue capital would need to be with institutional investors for technology startups, while this requirement would be 50 per cent for companies from other areas. Sinha said “Indian startup space is very vibrant and the country is ranked number five as far as startups are concerned. More than 3,100 startups are there in the country and a large number of M&As have also happened.” “However, most of these startups were thinking of listing outside. We have made a very special provision for startups,” he added.

According to PTI, under the new norms, 75 per cent shares can be reserved for institutional investors, while allocation can be on discretionary basis for such investors. For non-institutional categories, it will be on proportional basis.

SEBI has also provided for reclassification of promoters as public investors provided they let go all their special rights, including voting powers, and do not own more than 10 per cent stake. However, an outgoing promoter can serve as a CEO or hold other senior positions for up to three years if the same is approved by the company’s board.

Source: http://yourstory.com/2015/06/sebi-startups-funding/

23 Dec 2015

SEBI allows foreign venture funds to register as FPIs, plans to finalize listing norms for startups soon

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

Capital markets regulator SEBI has said that Foreign Venture Capital Investors (FVCIs) can be granted registration as a foreign portfolio investor if they meet certain guidelines.

The announcement came following a query from designated depository participant seeking clarification with regard to any restrictions on applicants, holding registration as a FVCI, from obtaining registration as a FPI (Foreign Portfolio Investor).

FVCI is an investor incorporated or established outside of India who can invest either in a domestic venture capital fund or a venture capital undertaking (domestic unlisted company), while FPI comprises of FIIs, sub-accounts and Qualified Foreign Investors.

In the circular, Securities and Exchange Board of India (SEBI) said depository participants may consider an applicant, holding FVCI registration, for grant of registration as a FPI.

The capital markets regulator “do not expressly prohibit FVCI from holding registration as a FPI.” However, the registration is subject to certain criteria like the applicant complies with the eligibility criteria as prescribed under the FPI regulations.

Other criteria include funds raised, allocated and invested must be clearly segregated for both registrations, reporting of transactions must be done separately and there should be clear segregation of securities held under FVCI and FPI registrations.

“Separate accounts must be maintained with the custodian for execution of trades. However, such an applicant shall have same custodian for its activities as FPI and FVCI,” SEBI noted.

Also, to attract technology startups to the domestic stock markets, SEBI is all set to make their listing and fund raising requirements easier. The final norms, which would be presented for approval from the SEBI’s board later this month, have been finalised after taking into account suggestions from all stakeholders to the draft guidelines released in March, sources said.

Asking technology startups founded by Indians to remain within the country, SEBI Chairman U K Sinha, last weekend, had promised an easier set of regulations for them to get listed and raise funds from the domestic stock market. “We are going to take a decision very soon in this regard. We are looking into how to make it easier for them to raise money,” Sinha had said.

The new norms are expected to help startup companies raise funds within India and stop their flight to overseas markets. “What is happening today is most of these startups, who have been reasonably successful, they are getting attracted to the New York Stock Exchange or Singapore Stock Exchange,” Sinha had said.

“They do not want to get listed here for varieties of reasons. They are getting attracted to foreign markets. Our effort is to provide a mechanism that they get listed in India itself, for the benefit of the country and for the benefit that the country’s startups remain within the country,” he had added.

Under the new norms, the entire pre-issue capital is expected to be locked-in for a period of six months for all shareholders. At present, promoters are required to offer a minimum of 20 per cent of post-issue capital as lock-in for a period of three years. Besides, SEBI is expected to make easier disclosure norms for startup listings. While filing the draft offer document with the capital market watchdog, such firms will only need to disclose broad objectives in line with the major international jurisdictions.

SEBI has already made it easier for the Small and Medium Enterprises (SMEs) to raise money from capital markets. “SMEs are primarily dependent on bank loans today and we know that banks have their own limitations. We have created separate platforms for SMEs at the two top exchanges BSE and NSE. We have balanced the requirement of safeguarding the investors and also facilitating the fund requirement of the SMEs.
Source: http://yourstory.com/2015/06/sebi-allows-foreign-venture-funds/

23 Dec 2015

BSE plans platform for listing startups, easy access to capital

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Leading stock exchange BSE has set up an advisory group to suggest ways to develop BSE Hi-Tech, a platform to help startups list and access capital from sophisticated investors in the securities market. The 13-panel group, which held its first meeting, includes experts from the start-up ecosystem, investors, merchant bankers and legal professionals who will advise BSE on the newly proposed framework on BSE Hi-Tech, which will be based on the new institutional trading platform norms announced by regulator SEBI in August 2015.

Nasscom’s Ravi Gururaj, Khaitan & Co partner Rajiv Khaitan, Tie executive director Naveen Raju and Accel Partners partner Shekhar Kirani, are among the members in the group. “In order to develop BSE Hi-Tech, a platform where young fast growing companies can list and access capital from sophisticated investors, the Exchange has decided to form an advisory group,” the BSE said in a statement.

The group is mandated to interact with various stakeholders including the government, Sebi and industry associations and support in framing policies for the creation of a robust platform. “Deliberations and suggestions will be forwarded to the regulator for their consideration,” the exchange added.

In recent years, the Indian startup ecosystem has witnessed tremendous growth and has come into its own driven by factors such as massive funding, consolidation activities, evolving technology and a burgeoning domestic market. These entrepreneurs need a platform to reach out to potential investors and raise funds to fuel growth.

Source: http://yourstory.com/2015/12/bse-startup-listing/

24 Nov 2015

Foreign inflow boost for alternative investment funds

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The move by the Reserve Bank of India (RBI) to allow foreign investment into alternative investment funds (AIFs) through the automatic route is likely to boost inflows.

 

In a notification on Thursday, the central bank said those residing outside India (including a registered foreign portfolio investor or a non-resident Indian) might acquire, purchase, hold, sell or transfer units of an AIF. Downstream investment by an AIF shall not be regarded as foreign investment if the sponsor or the manager or the investment manager is ‘owned and controlled’ by Indian.

 

“The notification paves the way for foreign money to come into AIFs without the Foreign Investment Planning Board (FIPB)’s intervention and be treated as domestic capital, subject to conditions. This could lead to a fresh surge of foreign flows in Indian listed and unlisted securities,” said Tejesh Chitlangi, partner, IC Legal.

 

Earlier, every foreign investment proposal in AIFs had to be cleared by FIPB. In some cases, foreign investments would suffer due to the sectoral limits being hit.

 

Importantly, the amendment provides that downstream investments by such investment vehicles, sponsored or managed by Indian-owned and controlled entities, will be treated as domestic investment. With this, investment vehicles so sponsored or managed will be free to invest in all sectors, without any of the sectoral restrictions imposed under the Foreign Direct Investment rules.

Foreign inflow boost for alternative investment funds

 

“Overall, this is an extremely positive development and it is hoped that this is followed with suitable tweaks to the tax laws to address certain vexed issues surrounding these investment vehicles,” added Kalpesh Maroo, partner, BMR and Associates LLP.

 

However, there is one caveat that could be a hindrance. RBI has said this easing of foreign investment won’t be applicable for limited liability partnerships (LLPs), as it would be difficult to determine the Indian sponsors in such structures. And, 60 per cent of the assets in AIFs are sponsored through LLPs.

 

“There is a caveat in the regulations that the Securities and Exchange Board of India (Sebi) is the regulator to determine the sponsor of these investment pooling instruments. We will approach Sebi for checking on the Indian nationality of the sponsors,” said a legal expert, requesting anonymity. Sectoral sources say close to 200 AIFs operate out of India.

 

Source: http://www.business-standard.com/article/markets/foreign-investment-boost-for-alternate-investment-vehicles-115112000837_1.html

30 Oct 2015

SEBI cuts IPO paperwork drastically

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From December 1, companies filing for a public issue of securities (IPO/FPO and the like) have to come out with abridged prospectus containing all material and appropriate information on the issue to enable informed decision-making by investors.

Amending its public issue regulations, equities and commodities market regulator SEBI said the abridged prospectus should consist of five sheets of paper printed on both sides in A4 size booklet form.

SEBI has mandated that information given in tabular format should not be repeated in text format in the abridged prospectus. The abridged prospectus would also contain the application form in a manner by which tearing off the application form would not mutilate the prospectus, SEBI said.

Generic information not specific to the issuer shall be brought out in the form of a General Information Document, said SEBI.

30 Oct 2015

Govt approves 16 FDI proposals worth Rs 4,722 cr

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

The government has cleared 16 foreign investment proposals, including that of HDFC Capital and Ageon Religare Life Insurance Company, amounting to Rs 4,722 crore.
The investment proposals were approved following the recommendation for the same by the Foreign Investment Promotion Board (FIPB), headed by economic affairs secretary Shaktikanta Das.
“The government has approved 16 proposals of foreign direct investment amounting to Rs 4,722 crore,” the finance ministry said in a statement.
However, it rejected 8 proposals including that of Cipla Health Limited and Apollo Hospitals Enterprise Limited.
The Board cleared proposal of HDFC Capital Advisors Limited which alone entails investments of Rs 2,400 crore.
The company sought approval for issue of units to Green Light, it said.
“HDFC Fund proposes to make investments in equity, equity linked instruments, redeemable preference shares, non-convertible debentures and other debt securities of listed or unlisted investee companies engaged in real estate construction development projects which are permitted under the SEBI AIF Regulations as a Category II AIF,” it said.
Besides, Ageon Religare Life Insurance’s proposal worth Rs 559.96 crore was cleared by FIPB.
The approval was sought for the transfer of shares to Aegon India Holding thereby raising the foreign shareholding from 26 percent to 49 percent.
Among others, Sun Pharma Research Advanced Company Ltd’s proposal worth Rs 250 crore, Synergia Life Sciences Pvt Ltd (Rs 40 crore) and the post facto approval for Aditya Birla Nuvo’s Rs 377 crore plan were cleared during a meeting held on 29 September.