News Summary
FAQs on Cyber Security Directions

The Indian Computer Emergency Response Team (CERT-In) is the national agency administered with the responsibility of dealing with Cyber Security incidents in India. It has the power to call for information and issue directions to service providers, intermediaries, data centres, body corporate and any other person for carrying out the responsibilities assigned to it.

CERT-In has issued new set of directions on 28th April, 2022 to strengthen cyber security in the country which shall come into force w.e.f 26th June, 2022. One of the highlights of the directions is reporting of cyber incidents within 6 hours of noticing such incidents. In order to help the stakeholders to understand the nuances of the directions, CERT-In has released FAQs on the directions.

The FAQs deal with basic terminologies, scope of the directions, clarifications about directions issued and explains the types of cyber security incidents to be reported.

Open FAQS on Cyber Security Directions of 28.04.2022
MCA Updates
Companies (Share Capital and Debentures) Amendment Rules, 2022

The instrument of transfer of securities Form SH-4 has been amended vide notification dtd 04th May, 2022. A declaration that either the transferee is required to obtain or not required to obtain prior government approval as prescribed under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 has been added in the form SH-4.

Open Notification No G.S.R 335(E) dtd 04.05.2022
Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022

Two amendments have been made to Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 vide MCA Notification dtd 05th May, 2022. They are as follows: –

  1. No offer under private placement shall be made to a body corporate incorporated in, or a national of, a country which shares a land border with India unless such body corporate or the national has obtained prior approval from the Government under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Such approval is required to be attached to the private placement offer cum application letter (PAS-4).
  2. Amendment to form Part-B of PAS-4: – the requirement to obtain such prior government approval or not for investment has to be selected in the applicable check box.

Prior approval under FEMA was in existence since 2020 but now the requirement has been synchronized with the provisions under the Companies Act, 2013 through the documentation.

Open Notification No G.S.R 338(E) dtd 05.05.2022
Clarification for holding of AGM through VC up to 31.12.2022

In reference to its General Circular no. 20/2020 dtd 05.05.2020 and General Circular no. 02/2022 dtd 13.01.2021 and General Circular no 19/2021 dtd 08.12.2021, MCA vide General Circular no. 2/2022 dtd 05.05.2022 has clarified that companies whose AGMs are due in the year 2022 may conduct their AGMs on or before 31st December, 2022 through VC or OAVM.
In the earlier circulars, MCA had allowed companies whose financial year ended on or before 31.03.2022 to conduct their AGM in 2022 through VC or OAVM up to 30th June, 2022. With the recent MCA circular dtd 05.05.2022 it is clear that companies following different financial year ie; Jan- Dec or any other period can also conduct their AGM which is due in 2022 through VC or OAVM.

Open Circular No. General Circular no. 2/2022 dtd 05.05.2022
Clarification for Holding of EGM through VC up to 31.12.2022

MCA vide its General Circular no. 3/2022 dated 05th May, 2022 has allowed companies to conduct their Extra-Ordinary General Meetings (EGM) through VC or OAVM or to transact items through postal ballot for a period up to 31st December, 2022 in accordance with the framework provided in its General Circulars issued during 2020 and 2021.

Open Circular No. General Circular No.3/2022 dtd. 05.05.2022
Companies (Incorporation) Second Amendment Rules, 2022

MCA vide Notification dtd 20th May, 2022 has notified the following amendments to the Incorporation Rules which shall come into effect from 01st June, 2022:-

  1. The declaration by first subscribers and first directors to be given in Form No. INC- 9 has been amended to include check boxes for declaration regarding compliance of prior government approval stipulated under FEMA Non-Debt Instruments, Rules, 2019.
  2. PART B of Form INC-32(SPICE+) has been amended to include an additional declaration regarding obtaining of security clearance where the person seeking appointment is a national of a country which shares a land border with India. If option yes has been selected a copy of the security clearance is also required to annexed to the form.
Open Notification No G.S.R 363(E) dtd. 20.05.2022
Form 11 LLP- Relaxation of additional fees

The MCA vide its General Circular no.04/2022 dated 27th May, 2022 has granted extension of timeline for filing Annual Return of Limited Liability Partnership in Form 11 LLP without additional fees up to 30th June, 2022.

Open Circular No. General Circular no. 04/2022 dtd 27.05.2022
Relaxation in additional fees for LLP filings

The MCA vide its General Circular no. 6/2022 dtd 31st May, 2022 has granted extension of timeline for all the event based forms to be filed by LLPs for which the due date falls between 25th February, 2022 and 31st May, 2022 up to 30th June, 2022 without paying additional fees.

Open Circular No. General Circular no. 06/2022 dtd 31.05.2022
SEBI Updates
SEBI (Collective Investment Schemes) (Amendment) Regulations, 2022

‘Collective Investment Scheme’(CIS) is a scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors are pooled and utilised with a view to receive profits, income, produce or property, and is managed on behalf of the investors. CIS is offered and managed by ‘Collective Investment Management Company’(CIMC). CIMCs are companies which are incorporated under the Companies Act, 1956 or the Companies Act, 2013 and registered with SEBI with the objective of organising, operating and managing a CIS. They are regulated by SEBI (Collective Investment Schemes) Regulations, 1999 (SEBI CIS Regulations). Gift Collective Investment Management Company Limited is India’s first and only CIMC registered with SEBI. SEBI has been actively monitoring compliance of the CIS regulations and have debarred several entities which have floated CIS without obtaining the necessary registration. In January, 2022 SEBI came out with a consultation paper on CIS and in furtherance of the same, SEBI has notified multiple amendments to the CIS Regulations through Notification dtd 10th May, 2022. Highlights of the amendments are as follows: –

1. Amendment to definition clauses- Certain definitions have been amended as follows: –

Reg Prior to Amendment Post Amendment

“auditor” means a person qualified to audit the accounts of companies under the Companies Act, 1956;”

“auditor” means a firm, including a limited liability partnership, constituted under the Limited Liability Partnership Act, 2008, who is eligible and qualified to audit the accounts of a company under section 141 of the Companies Act, 2013 (18 of 2013);
2(ea) No definition prior to amendment “designated employees” of the Collective Investment Management Company includes: (i) chief executive officer, chief investment officer, chief risk officer, chief information security officer, chief operation officer, fund manager, compliance officer, sales head, investor relation officer, heads of other departments and dealer of the Collective Investment Management Company; (ii) persons directly reporting to the chief executive officer (excluding personal assistant/ secretary); (iii) fund management team and research team; (iv) other employees as identified by Collective Investment Management Companies or trustees.”
2(p) “fraud”, has the same meaning as is assigned to it in section 17 of the Indian Contract Act, 1872 (9 of 1872); “fraud” means a fraud as defined in sub-clause (c) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003;
2(v) “relative” means a person who is a relative, as defined in section 6 of the Companies Act, 1956 (1 of 1956); “relative” means a person as defined in section 2(77) of the Companies Act, 2013 (18 of 2013).

2. Conditions for eligibility – Earlier one of the eligibility conditions for the applicant (company) was that they should have a net worth of not less than Rs. 5 Crores or a minimum net worth of Rs. 3 Cores at the time of application which should be increased to Rs. 5 Cores within 3 years from grant of registration. The same has been substituted and a list of stringent sound-track-record requirements has been put in place among other eligibility conditions which existed previously.

3. Restrictions on Investment & Representation in another CIMC- Regulation 9B inserted for imposing the following restrictions:- a) CIMC or its promoter or their associates or group companies have been restricted from holding shareholding or voting rights of 10% or more individually or collectively, directly or indirectly in a CIMC or in the trustee company of another CIMC. Representation on the Board of a CIMC or trustee company of a CIMC has also been prohibited. b) A shareholder holding 10% or more of shareholding or voting rights in a CIMC or trustee company of CIMC shall not directly or indirectly hold 10% or more of shareholding or voting rights in another CIMC or trustee company of another CIMC. They shall not be entitled to be represented on the board of the CIMC or trustee company of another CIMC. Where such provisions have been breached incidentally as a result of merger, acquisition, scheme of arrangement or any other arrangement involving the promoters of CIMC, its shareholders or trustee companies, their group companies or associates, a period of one year from date of coming into force of such arrangement has been given to comply with the aforesaid restrictions.

4. Investment by designated employees- Investment by CIMC and its designated employees in schemes of the CIMC will be permitted as may be prescribed by SEBI. This restriction has been inserted as an additional obligation of the CIMC under Regulation 14.

5. Closure of Subscription List- Sub-regulation 6 inserted under Regulation 24 for imposing conditions to be satisfied upon closure of subscription list in the event of launch of CIS. (a) minimum subscription amount of Rs. 20 Crores; (b) minimum 20 investors; and (c) no person shall hold more than 25% of the assets under management of scheme: The application money will have to be refunded if there is a failure to comply with the aforesaid conditions.

6. Offer Period – Changed from not more than 90 days to not more than 15 days with maximum of additional 15 days with due public notice by CIMC before expiry of initial 15 days.

Open SEBI Notification No. SEBI/LAD-NRO/GN/2022/84 dtd 10th May, 2022
Relaxation from compliance with certain provisions of the SEBI LODR

Annual report to shareholders

SEBI vide its circular dtd 13th May, 2022 provided relaxation from compliance of certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR) up to 31st December, 2022. The relaxations granted are as follows: –

  1. Requirement under Regulation 36(1)(b) of SEBI LODR to send hard copy of annual report to the shareholders who have not registered their email addresses is dispensed with up to 31st December, 2022. However listed entities are required to send hard copy of full annual report to those shareholders who request for the same. Further the notice of Annual General Meeting published by advertisement in terms of Regulation 47 of the SEBI LODR shall contain a link to the full annual report.
  2. In case of general meetings held through electronic mode, the requirement of sending proxy forms under Regulation 44 (4) of the SEBI LODR is dispensed with up to December 31, 2022.
Open SEBI Circular no. SEBI/HO/CFD/CMD2/CIR/P/2022/62 dtd 13.05.2022

Annual report to holders of Non-Convertible Securities

Exemption has been granted under Regulation 58(1)(b) of SEBI LODR from dispatch of annual report to holders of non-convertible securities up to 31st December, 2022 vide SEBI circular dtd 13th May, 2022.

Open SEBI Circular no. SEBI/HO/DDHS/P/CIR/2022/0063 dt 13.05.2022
Simplification and Standardization of process for Transmission of Securities

SEBI had amended the provisions for transmission of securities through amendment to SEBI LODR vide notification dtd 25th April, 2022. In furtherance to the same SEBI has released a circular dtd 18th May, 2022 providing for simplified transmission process and standardized formats of documents to be submitted for transmission of securities.

Open SEBI Circular no. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/65 dtd 18.05.2022
Streamlining the process of Rights Issue

On 22nd January, 2020 SEBI had released a circular for streamlining the rights issue process. Para C(e) of Annexure I of the Circular dealt with Trading in Rights Entitlements (REs) on secondary market platform of the Stock Exchanges. The said trading in REs with T+2 rolling settlement was required to be commenced on the date of opening of the issue and closed at least four days prior to the closure of rights issue. Compliance of the same could not be ensured in instances where there were trading holidays between last date of REs trading date and issue closure date.
Representations were received in this regard and SEBI vide Circular dtd 19th May, 2022 has amended the said provision of the Annexure by substituting the words “at least four days” to “at least three working days”. The circular is applicable with immediate effect for all rights issue and fast track rights issue.

Open SEBI Circular no. SEBI/HO/CFD/SSEP/CIR/P/2022/66 dt 19.05.2022
Revised format of security cover certificate, monitoring and revision in timelines- Non-Convertible Securities

SEBI Circulars released in October and November 2020 providing for format of security cover certificate, periodical monitoring, disclosures by Debenture Trustees (DTs) and creation of Recovery Expense Fund (REF) have been revised vide SEBI Circular dtd 19th May, 2022. The same is in furtherance to the amendments to SEBI Regulations for Non-Convertible Securities notified on 11th April, 2022. Highlights of the revisions to Circular are as follows: –

  1. Revised format of the Security Cover– has been revised to provide a holistic picture of all the borrowings and the status of encumbrance on the assets of the listed entity. The revised format for security cover is provided in Annexure I of the Circular. The manner of preparation has been described in the Circular.
  2. Monitoring of covenants– Listed entity to furnish the compliance status with respect to financial covenants of the listed debt securities certified by statutory auditor of listed entity to DTs on quarterly basis. DTs have also been entrusted with proactive and effective monitoring of covenants as per guidelines described in the circular.
  3. Disclosure Requirements– Disclosures by DTs to Stock Exchange (SE) shall be made
    1. within 48 hours of issuance of consent/ no-objection certificate by DT to listed entity and
    2. in case of breach of minimum-security cover within 48 hours of such breach.
  4. Revision in timelines– The timelines for submitting various reports by DTs to SEs have been revised as follows:- .
    Report Timeline
    Security Cover Certificate and website disclosure of the same and quarterly compliance report for all quarters except last quarter W/n 75 days from end of each quarter
    Above requirement for last quarter W/n 90 days from end of the financial year (FY)
    Valuation report and title search report Once in 3 years w/n 75 days from end of the FY
    Half yearly compliance report W/n 75 days from end of each half year
    Details of other activities carried out by Debenture Trustee(s) including type of activity, description of activity etc Same as above

    It is also clarified that half-yearly compliance report shall be reviewed by the Board of Directors of the DT before submission to SEBI.

  5. Monitoring REF– It has been clarified that the purpose for creation of REF is to be read as for “enforcement/ legal proceedings” instead of “enforcement of security”. This clarification comes amidst the ambiguity relating to applicability of REF in case of unsecured debentures. Other guidelines have been provided for in the circular.

The revised requirements come into force with immediate effect except those covered under Para A and B above. The same shall come into force only w.e.f 01st October, 2022.

Open SEBI Circular no. SEBI/HO/MIRSD/MIRSD_CRADT/CIR/P/2022/67 dt 19.05.2022
IBBI Updates
Withdrawal of Circular dtd 26th August, 2019

The IBBI had issued a Circular dated 26th August 2019 clarifying that the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 (Amendment Regulations 2019) will be applicable only to liquidation processes which commenced on or after 25th July 2019.
In order to bring more clarity, Explanations have been inserted under Regulations 2A, 21A, 31A and 44 through the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2022 notified on 28th April, 2022. Accordingly, the 26th August, 2019 circular has been withdrawn by IBBI w.e.f. 06th May, 2022.The amended Regulations deals with the following aspects of liquidation process:-

  1. Regulation 2A-Contributions to liquidation costs
    The liquidator shall call upon the financial creditors, being financial institutions, to contribute the excess of the liquidation costs over the liquid assets of the corporate debtor in proportion to the financial debts owed to them by the corporate debtor.
  2. Regulation 21A- Presumption of security interest
    The secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest in Form C or Form D as provided in Schedule II of the Regulations.
  3. Regulation 31A- Stakeholders’ Consultation Committee
    The liquidator shall constitute the Stakeholders’ Consultation Committee within sixty days from the liquidation commencement date in the manner prescribed in the Regulations.
  4. Regulation 44- Completion of liquidation
    The liquidator shall liquidate the corporate debtor within a period of one year from the liquidation commencement date. Where a sale is attempted under Regulation 32A (1), additional period up to 90 days will be allowed.
Open Notification No. No. IBBI/LIQ/2/2022 dtd 06.05.2022
Income Tax Updates
Reporting of certain transactions by Banks/Post Office to IT Dept

Following Transactions along with your PAN and/or Aadhar will be reported by Banks /Post Office Bank to Income tax Department:

  1. Cash depositor deposits aggregating totwenty lakh rupeesor more in a financial year,in one or morebank or a co-operative bank or post officeaccount.
  2. Cash withdrawalor withdrawals aggregating totwenty lakh rupeesor more in a financial year, inone or morebank or a co-operative bank or post officeaccount.
  3. Opening of a current accountor cash credit account by a person with bank or a co-operative bank or post office.

Limit of Rs. 20 Lakhs is to be counted in a financial year considering cumulative transactions.

Open Notification No. G.S.R. 346(E) dtd 10.05.2022
Amendment to certain forms under IT

The following forms have been amended vide Central Board of Direct Taxes (CBDT) notification dtd 09th May, 2022: –

  1. FORM No. 3CF (Application form from scientific and industrial research organisations for approval under section 35 of the Income-tax Act)
  2. Form 10A (Application for registration of charitable or religious trust or institution under clause (aa) or clause (ab) of sub-section (1) of section 12A of the Income-tax Act, 1961)
  3. FORM No. 10AB (Audit report under section 12A(b) of the Income-tax Act, 1961, in the case of charitable or religious trusts or institutions)
  4. FORM No. 10BD (Statement of Donations)
  5. FORM No. 10BE (Certificate of Donations)
Open Notification No. G.S.R. 343(E) dtd 09.05.2022
Amendment to Rule 44E- Application for advance ruling

The Central Board of Direct Taxes has amended Rule 44E of the Income Tax Rules, 1962 vide Notification dtd 05th May, 2022 which relates to application for obtaining advance ruling. The following forms have also been amended through the said notification: –

  1. Form No. 34C (Form of application by a non-resident applicant for obtaining an advance ruling under section 245Q (1) of the Income-tax Act, 1961)
  2. Form 34D (Form of application by a resident applicant seeking advance ruling under section 245Q (1) of the Income-tax Act, 1961 in relation to a transaction undertaken or proposed to be undertaken by him with a non-resident)
  3. Form 34DA (Form of application by a resident applicant referred to in section 245N(b)(iia) seeking advance ruling under section 245Q (1) of the Income-tax Act, 1961 in relation to a transaction undertaken or proposed to be undertaken by him)
  4. Form 34E (Form of application by a person falling within such class or category of persons as notified by Central Government in exercise of powers conferred for obtaining an advance ruling under section 245Q (1) of the Income-tax Act, 1961)
  5. Form 34EA (Form of application for obtaining an advance ruling under section 245Q (1) of the Income-tax Act, 1961)
Open Notification No. G.S.R. 339(E) dtd 05.05.2022