When there’s a single thief, it’s robbery. When there are a thousand thieves, its taxation.
Hello All,Hip, hop or skip or even pray to the universally popular Lord Ganesha, the remover of all obstacles
– hurdles are bound to come in our way when we attempt something new, be it a new idea, new entity, new project or even a new legislation for that matter. It is therefore imperative that we deliberate and debate over the possible hurdles, pitfalls, objections, conflicts etc.
– not with a view to stall the initiative but rather to anticipate and pre-empt such eventualities with a view to minimising the risks involved.
In case of a new entity, entering into a shareholders’ agreement by the co-founders of the start up helps pre-empt and legally surmount any possible objections in the future. This is true even in the case of investment by a third party in an existing entity. Shareholders agreement enables this by providing for restrictions, rights and obligations relating to the management and administration of the Company.
Read more about this in this 19th issue of Lexspeak as also a few regulatory updates during the last fortnight.
Know Your Customer (KYC) guidelines – accounts of proprietary concerns
For opening a bank account in the name of a proprietary concern, banks may also accept any registration/licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority/Department. Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account.
IEC may be useful for opening a second bank account because for issuing the IEC itself DGFT insists on Bank Certificate.
Dishonour / Return of Cheques – Need to Mention the ‘Date of Return’ in the Cheque Return Memo
RBI has directed all the banks to mandatorily mention the ‘Date of Return’ in the Cheque Return Memo in case of dishonor of Cheques. This date becomes relevant for issuing a notice to the payer of the cheque within a period of 30 days of dishonor.
Uniformity in penal interest payable by banks for delays in credit/ return of NEFT / NECS / ECS transactions
RBI has notified some procedural changes w.r.t. penal interest payable by banks for delays in credit
/ return of NEFT / NECS / ECS transactions. Intention is to bring in uniformity in penal provisions across the retail payment products as part of accountability and better customer service.
Amendments to certain Export Oriented Schemes
Customs has notified certain amendments to imports under SFIS, VGKUY and Annual Advance Authorisation Schemes in line with the announcements made under Union Budget 2010-11 and Foreign Trade Policy 2009-14.
HC seal on right of first refusal to benefit PEs
A Divisional Bench of Hon’ble High Court of Bombay has upheld the validity of agreements relating to right of first refusal between promoters of unlisted companies and strategic investors which is a big relief for both companies and private equity funds which invest in these firms. Such agreements will not be treated as violative of Section 111A of Companies Act, 1956.
Attention is also drawn to a summary of the judgement passed on 15th February, 2010 by the Hon’ble High Court of Mumbai in Western Development Corporation Limited (WDC) Vs. Bajaj Auto Limited (BAL) (Arbitration Petition No. 174 of 2006) wherein the Honorable High Court held that the right of first refusal exercised by shareholders of Public Limited Companies is violative of section 111A and 9 of the Companies Act, 1956. (Volume 2 Issue No.6/2010 of Lexspeak)
It is critical for incorporating the relevant terms and conditions of the Shareholders Agreement in the Articles of Association of the company to ensure enforceability of the same.
Ms. Jayashri Murali, Advocate and co-founder of Lex Valorem, shares her thoughts in this article.
Note: The contents
of this News Letter are only a summary and has not dealt with
any issue in detail. Any action taken or proposed to be taken
must be in consultation with professionals and not merely based
on the articles / news updates. Lex Valorem disclaims all
liability on action taken without professional advice