Addition to conditions for E-Commerce Activity

In order to tighten control on activities conducted by entities under E-commerce activities, Department of Industrial Policy and Promotion vide Press note 2 (2018 Series) dated 26 December 2018 has altered point 5.2.15.2 of Consolidated Policy Circular 2017 i.e E-commerce Activities by adding the following to existing conditions :

1. Ownership and control over the inventory defined: Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.
2. Equity participation or control on inventory by e-commerce marketplace entity or its group companies: An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.
3. E-Commerce marketplace entity to perform on fair and non-discriminatory manner: Services should be provided by e-commerce marketplace entity or other entities in which e-commerce entity has direct or indirect equity participation or control, to vendors on the platform at arm’s length and in a fair and non- discriminatory manner.
4.  E-Commerce marketplace entity cannot mandate the sale of any product exclusively on its platform.
5.  Annual Compliance Certificate: Companies carrying E-Commerce activities have to annually furnish certificate along with report confirming compliance of e-commerce guidelines by statutory auditor. The said certificate is to be filed by 30 September for the preceding financial year.

The amendment is effective from 1 February 2019.

Amendment in Rules

Ministry of Corporate Affairs (MCA) vide notifications dated 18^th December 2018 has amended the following rules:

1. Companies (Incorporation) Rules, 2014
2. Companies (Registration of Charges) Rules, 2014

Highlights of the amendment are as follows:

• Declaration for Commencement of Business u/s10A is to be filed in e-form INC-20A. Further, in case of a company pursuing objects requiring registration or approval from any sectoral regulators, the approval is also required to be obtained and attached with the form
• The Procedure is prescribed for taking the approval from the Regional Director
• Conversion of Public Company into Private Company
• Change in Financial year  
• In case if no order for approval or re-submission or rejection has been explicitly made by the Regional Director within the stipulated time, an application shall stands approved and an approval order shall be automatically issued to the applicant.
• E-form CHG-4 has been changed and has been aligned with the amendment of Companies (Amendment) Act, 2017 [E-form CHG-4 for Satisfaction of Charge can now be filed within 300 days with additional fees as applicable without Condonation of delay]

Detailed Guidelines on Creation of segregated portfolio or side-pocketing for debt and money market instruments  is soon to be issued by SEBI 

SEBI has  allowed debt mutual funds to have a “side pocket” that will allow fund managers to segregate their holdings .

A mutual  fund side pocketing helps separate risky assets from other investments and cash holdings. It ensures that the money invested in a mutual fund liquid scheme, which is linked to stressed assets, gets locked, until the fund recovers the money from the company. Investors can redeem the rest of their money.

Side Pocketing stops redemption pressure and prevent fund managers from selling the liquid assets at distress price .

Help that mutual fund side-pocketing will provide to  retail investors 

Once the affected papers—the ones facing a default—are segregated from the rest of the holdings, there will be two sets of net asset values for the mutual fund scheme. 

On segregation ,investments in the toxic asset will be closed for subscription, while investors can continue to subscribe to or redeem part of their investment in healthy assets. 

In the absence of segregation in a crisis situation institutional investors have  the first right to redemptions and retail investors are stuck with toxic assets, the segregation will help avoid such a situation .

Uniform valuation methodology for pricing of corporate bonds which shall be followed uniformly across all the mutual funds will soon been released by SEBI

CS Makarand Joshi

https://www.financialexpress.com/market/detailed-sebi-guidelines-on-side-pocketing-soon/1417974/

Insolvency Bids Defaulting Winners May Land in Jail

There have been many instances in the past where winning bidders have failed to pay up for the stressed firms they proposed to acquire for various reasons, including the inability to raise money to fund such acquisitions. the most prominent one being that of UK-based Liberty House in the Amtek Auto case .

The Government is proposing to invoke a stringent provision in the Code, that provides for a jail term, to deal with such wilful defaulters among winning bidders. Delhi-based Amtek Auto’s insolvency resolution process was initiated on Corporation Bank’s plea. Amtek’s total dues to lenders at the time when the company was admitted by the Chandigarh bench of NCLT was `12,603 crore. Liberty’s House bid was approved by the lenders on April 4, 2018, by a 94.2% vote.NCLT on July 25 approved Liberty’s plan that sought to pay financial creditors Rs 3,225 crore upfront and make a fresh infusion of Rs. 500 crores into the company for improving operations. However, the UK-based firm could not make the promised upfront payment in time, the lenders last week decided to move the NCLT, seeking directions on the way forward

Srinivas FE Corporate Affairs has stated to the media that the government might look at including dishonoring of an NCLT-approved plan as one of the disqualification criteria under Section 29A (which bars wilful corporate defaulters from submitting bids under IBC process). “Regulations could be tweaked to include earnest money deposit as a certain percentage of bid value or liquidation value, which can be forfeited” if an approved resolution plan is not implemented by the bidder.

https://www.financialexpress.com/industry/insolvency-winners-default-stern-steps-soon-jail-term-provision-may-be-involved/1403773/