SEBI (Investment Advisers) Regulations, 2013
The Securities and Exchange Board of India (“SEBI”) issued the SEBI (Investment Advisers) Regulations, 2013 vide notification dated 21 January, 2013. It is applicable on
- Every person providing investment advice to any person for consideration (including non-cash benefit) would be required to obtain registration under the Regulation.
- Investment advice inter-alia includes advice relating to investing in, purchasing, selling, financial planning or otherwise dealing in securities or investment products, through any means of communication (including oral) for the benefit of the client.
The exempted person from registration includes any fund manager, by whatever name called of a mutual fund, alternative investment fund or any other intermediary or entity registered with the Board.Companies Bill, 2012
The Companies Bill, 2011 was laid before the Parliament in December 2011 and was then referred to the Parliament Standing Committee on Finance headed by Mr. Yashwant Sinha (‘the Committee’). Based on the recommendations of the Committee, the Companies Bill, 2011 was amended and introduced as the Companies Bill, 2012. The Companies Bill, 2012 was passed in the Lok Sabha on December 18, 2012. The Bill has 470 clauses and divided into 29 chapters.
It includes changes such as –
- Concept of “One person company” introduced [Clause 2(62)]
- One of the directors of the Company shall be a person stayed in India for 182 days or more [Clause 149]
- The maximum number of members in case of private company is increased from the existing 50 to 200.
- Concept of “Corporate Social Responsibility” introduced [Clause 135]
- Specific provisions for conversion of LLP into Company [Clause 366]
- Provisions for further issue of capital now applicable to both, private as well as public companies [Clause 62]. Accordingly, any shares will have to be offered to all shareholders on pro-rata basis (except in case of preferential issue through special resolution)
- Definition of listed company provided to mean a company which has any of its securities listed on any recognized stock exchange [Clause 2(52)].
- Indian company can be merged with foreign Company or vice-versa with prior approval of RBI [Clause 234]
- Concept of fast track merger introduced to facilitate merger of 2 or more “small companies” or between holding company and its wholly owned subsidiary [Clause 233]
- Majority shareholders may offer to purchase remaining shares from minority shareholders at a price determined by registered valuer in accordance with rules as may be prescribed (alternatively, minority shareholders may offer to sell) [Clause 236]
- Shares of public company are freely transferable. However, contract or arrangement between two or more persons in respect of transfer of securities (such as pre-emption rights and put / call options shall be an enforceable contract [Clause 58]
Income Tax
The Finance Bill 2013 (“the Bill”) was introduced as part of the Union Budget 2013 on February 28, 2013. The Bill received the assent of the President of India on 13 May 2013.
The key amendments to the Act by the Finance Act 2013, which would be relevant to the Fund and its investors are given below:
- Tax Residency Certificate (TRC) requirement – Section 90A of the Act has been amended to provide that a non-resident assessee, to whom a relevant treaty applies, can obtain the treaty benefits by furnishing the TRC issued by the respective foreign tax authorities.
- Pass through status granted to Category I Alternate Investment Funds (AIF) – The Finance Act, 2013 has extended the pass through status under section 10(23FB) to a Venture Capital Fund (VCF) or a Venture Capital Company (VCC) registered with SEBI as a sub-category of Category I AIF under the SEBI AIF Regulations.
- Distribution tax on buyback of shares by unlisted companies – A distribution tax on the buyback of shares by unlisted companies has been introduced effective from June 1, 2013.
- General Anti-avoidance Rule (GAAR) – GAAR to come in force from 1 April 2016 i.e. FY2015 – 16, AY 2016-17.
Other key announcement from the speech of the Finance Minister include
- Angel investors bring both experience and capital to new ventures. SEBI will prescribe requirements for angel investor pools by which they can be recognised as Category I AIF venture capital funds.
- Incubators play an important role in mentoring new businesses, which start as a small or medium business. The new Companies Bill obliges companies to spend 2 percent of average net profits under Corporate Social Responsibility (CSR). It was announced that the Ministry of Corporate Affairs will notify that funds provided to technology incubators located within academic institutions and approved by the Ministry of Science and Technology or Ministry of MSME will qualify as CSR expenditure.
- Expending support to MSMEs through SIDBI and privileges for 3-years beyond scaling up shall enable MSMEs to prosper.
- Listing of MSMEs without IPO for informed investors shall create a market for the risk-capital starved sector.