Important updates of MCA, SEBI, Stock Exchange(s) and RBI on Corporate Sector Edition – October, 2021

The corporate sector is undergoing tremendous changes. We are addressing amendments by regulatory authorities on daily basis. This edition gives an information of all regulatory updates by regulatory bodies introduced during the month of October, 2021.

Ministry of Corporate Affairs (MCA)

1. Relaxations in paying additional fees in case of delay in filing of LLP Form 8 (the Statement of Account and Solvency)

(MCA General Circular No. 16/2021 dated 26th October, 2021)

Allow LLPs to file form Form 8 (the Statement of Account and Solvency) for the Financial Year 2020-2021 without paying additional fees upto 30th December, 2021. (Earlier, the original due date for filing Form 8 was 30th October, 2021).

Important updates of MCA, SEBI, BSE, NSE & RBI - October, 2021

2. Relaxation on levy of additional fees in filing of e-forms AOC-4 and MGT-7

(MCA General Circular No. 17 /2021 dated 29th October, 2021)

Allow Companies to file e-forms AOC-4, AOC-4 (CFS), AOC-4 XBRL, AOC-4 Non-XBRL and MGT-7/ MGT-7A for the financial year ended on 31.03.2021 without paying additional fees upto 31st December, 2021.

3. Extension of last date of filing of Cost Audit Report

(MCA General Circular No. 18/2021 dated 29th October, 2021 r/w General Circular No. 15 /2021 dated 27th September, 2021)

MCA prescribed that if cost audit report for the financial year 2020-21 by the cost auditor to the Board of Directors of the companies is submitted by 30th November, 2021 then the same would not be viewed as violation of Rule 6(5) of Companies (Cost Records and Audit) Rules, 2014. Consequently, the cost audit report for the financial year ended on 31st March, 2021 shall be filed in e-form CRA-4 within 30 days from the date of receipt of the copy of the cost audit report by the Company. However, in case a company has got extension of time for holding Annual General Meeting under section 96(1) of the Act then e-form CRA-4 may be filed within the timeline provided under the proviso to rule 6(6) of the companies (Cost Records and Audit) Rules, 2014.

Securities and Exchange Board of India (SEBI)

4. Relaxations relating to procedural matters –Issues and Listing

(SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2021/633 dated 01st October, 2021) r/w SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/136 dated July 24, 2020, SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2021/13 dated January 19, 2021 and SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/552 dated April 22, 2021

To ease and facilitate investors, the relaxation mentioned in point (iv)* of SEBI Circular dated May 6, 2020, is further extended and shall be applicable for Rights Issues opening upto March 31, 2022, provided that the issuer along with the Lead Manager(s) shall continue to comply with point (v)** of the said SEBI Circular dated May 06, 2020. (Earlier, the relaxation was applicable for Rights Issues opening upto March 31, 2021)

* Point (iv) of SEBI Circular dated May 6, 2020

“In terms of Regulation 76 of the ICDR Regulations, an application for a rights issue shall be made only through ASBA facility. In view of the difficulties faced due to COVID-19 pandemic and the lockdown measures, and in order to ensure that all eligible shareholders are able to apply to rights issue during such times, the issuer shall along with lead manager(s) to the issue, the registrar, and other recognized intermediaries [as deemed fit by issuer and lead manager(s)]institute an optional mechanism (non-cash mode only) to accept the applications of the shareholders subject to ensuring that no third party payments shall be allowed in respect of any application.”

**Point (v) of SEBI Circular dated May 6, 2020

“In respect of mechanisms at point (iii) and (iv) above, the issuer along with Lead Manager(s) shall ensure the following: (a) The mechanism(s) shall only be an additional option and not a replacement of the existing process. As far as possible, attempts will be made to adhere to the existing prescribed framework. (b) The mechanism(s) shall be transparent, robust and have adequate checks and balances. It should aim at facilitating subscription in an efficient manner without imposing any additional costs on investors. The issuer along with lead manager(s), and registrar shall satisfy themselves about the transparency, fairness and integrity of such mechanism.(c)An FAQ, online dedicated investor helpdesk, and helpline shall be created by the issuer company along with lead manager(s) to guide investors in gaining familiarity with the application process and resolve difficulties faced by investors on priority basis. (d) The issuer along with lead manager(s), registrar, and other recognized intermediaries (as incorporated in the mechanism) shall be responsible for all investor complaints.”

With respect to mechanism and compliance requirements at point (iv) and (v) of the said SEBI Circular dated May 6, 2020, and para 5^ of SEBI Circular dated April 22, 2021, the issuer along with Lead Manager(s), Registrar, and other recognized intermediaries (as incorporated in the mechanism) shall also ensure the following:

a) Issuer Company shall conduct a Vulnerability Test for optional mechanism (non-cash mode only) provided to accept the applications in Rights Issue (facility provided by RTA), from an independent IT Auditor, and submit the report to Stock Exchange(s).

^ “In respect to mechanism and compliance requirements at point (iv) and (v) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020, the issuer along with Lead Manager(s), Registrar, and other recognized intermediaries (as incorporated in the mechanism) shall also ensure the following: a. Refund for un-allotted/ partial allotted application shall be completed on or before T+1 day (T: Basis of allotment day). b. Registrar to the issue, shall ensure that all data with respect to refund instructions is error free to avoid any technical rejections. Further, in case of any technical rejection of refund instruction, same shall be addressed promptly.”

Link to the circular:

CIRCULAR No. SEBI/HO/CFD/DIL2/CIR/P/2021/633 Dated: Oct 01, 2021

5. Revised Formats for filing financial information for issuers of non-convertible securities

(SEBI circular no. SEBI/HO/DDHS/CIR/2021/0000000637 dated 5th October, 2021)

Vide notification dated September 07, 2021, Regulation 52 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 (‘Listing Regulations’) were amended, inter-alia, mandating entities that have listed non-convertible securities to disclose financial results on a quarterly basis, including assets & liabilities and cash flows as well as requiring certain changes in the line items in the financial results. Accordingly, this circular provides the revised formats for reporting of financial information

Formats for filing financial information:

A. Formats for Standalone financial results on a quarterly basis and Standalone and consolidated financial results on an annual basis (to be submitted to Stock Exchanges and placed on listed entity’s website (Regulations 52(1) and (2) of the Listing Regulations).

Contents of format: Financial results shall contain the items mentioned in the Statement of Profit and Loss (excluding notes and detailed sub-classification) as prescribed in Schedule III of the Companies Act, 2013 and the extent and nature of security created and maintained in case of secured non-convertible debt securities, details of which are required as per regulation 54(3) of Listing Regulations.

B. Format for Statement of assets and liabilities on half yearly basis (to be submitted to Stock Exchanges and placed on listed entity’s website (Regulations 52(2)(f) of the Listing Regulations).

Contents of format: Statement of assets and liabilities shall contain the items mentioned in the format of Balance sheet (excluding notes and detailed sub-classification) as prescribed in Schedule III of the Companies Act, 2013.

C. Format for Statement of cash flows on half yearly basis (to be submitted to Stock Exchanges and placed on listed entity’s website (Regulation 52(2)(f) of the Listing Regulations).

Contents of format: The Statement of Cash Flows shall be prepared under the indirect method as prescribed in Accounting Standard-3/ Indian Accounting Standard 7, mandated under Section 133 of the Companies Act, 2013 read with relevant rules framed thereunder or by the Institute of Chartered Accountants of India, whichever is applicable.

Note: Banking Companies and Insurance Companies shall disclose financial information as per the formats prescribed under the respective Acts/ Regulations as specified by their Regulators.

D. Format for financial results in newspapers in terms of Regulation 52 (8) of the Listing Regulations.

Note: Apart from the information to be mentioned in prescribed format, the impact on net profit/ loss, total comprehensive income or any other relevant financial item(s) due to change(s) in accounting policies shall be disclosed by means of a footnote.

E. Reasons for delay in disclosure of financial results (to be submitted to Stock Exchanges and placed on listed entity’s website)

a. In case of non-submission/ delayed submission of financial results within the timelines prescribed under regulation 52 of the Listing Regulations, the listed entity shall disclose detailed reasons for such non-submission/ delay to the stock exchanges within one working day of the due date of submission of the financial results.

b. In case the decision to delay the results was taken by the listed entity prior to the due date, the listed entity shall disclose detailed reasons for such delay to the stock exchanges within one working day of such decision.

Link to the circular:

CIRCULAR NO. SEBI/HO/DDHS/CIR/2021/0000000637  Dated: October 5, 2021

6. Revised Formats for Limited Review/ Audit Report for issuers of non-convertible securities

(SEBI circular no. SEBI/HO/DDHS/CIR/2021/000000063 dated 5th October, 2021)

Vide notification dated September 07, 2021, Regulation 52 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 (‘Listing Regulations’) were amended, inter-alia, mandating entities that have listed non-convertible securities to disclose financial results on a quarterly basis, including assets & liabilities and cash flows as well as requiring certain changes in the line items in the financial results. Accordingly, the said circular dated 14th October, 2021 provides the revised formats for limited review report / audit report.

Note: Insurance companies shall disclose limited review/audit reports as per the formats specified by IRDAI.

Link to the circular: CIRCULAR No. SEBI/HO/DDHS/CIR/2021/0000000638 Dated: October 14, 2021

7. Streamlining issuance of SCORES Authentication for companies intending to list their securities on SEBI recognized stock exchanges

(SEBI Circular no. SEBI/HO/OIAE/IGRD/CIR/P/2021/642 dated 14th October, 2021)

i. Kindly refer to SEBI Circular No. CIR/OIAE/1/2014 dated December 18, 2014, where-in SEBI had directed all listed companies and SEBI registered intermediaries (excluding Stock Brokers and Depository Participants) to send their details as per Form-A and Form-B respectively, annexed to the said Circular, to SEBI in hard copy and by email to [email protected] in order to obtain SCORES user id and password for redressing investor grievances on SCORES.

ii. In partial modification to the above circular, a circular dated August 02, 2019 was issued, automating the generation of SCORES credentials for all new SEBI registered intermediaries (except brokers and depositories) and there by dispensing with the requirement of sending Form-B to SEBI.

iii. It has now been decided by SEBI to introduce an online mechanism for obtaining SCORES credentials for all “companies intending to list their securities on SEBI recognized stock exchanges”. The online form can be accessed on the SCORES website www.scores.gov.in. This has been done as part of SEBI’s green initiative and to streamline the redressal of investor grievances against companies before listing.

iv. Companies shall attach a declaration, with the online form, on the letter head of the company signed by the Compliance Officer, as under:

a. Companies intending to list on Main Board: A Declaration that the DRHP has been submitted with SEBI.

b. Companies intending to list on SME/ Debt Platform of stock exchange: A Declaration that an application to list its securities has been submitted with the stock exchange/ in-principal approval to list its securities has been obtained from the stock exchange.

v. The SCORES credentials shall be sent to the e-mail id of the Compliance Officer/ Dealing Officer as provided in the online form.

vi. In view of the same, companies are no longer required to submit physical copy of Form-A or e-mail the same to SEBI, as provided in Circular No. CIR/OIAE/1/2014 dated December 18, 2014.

vii. An Instruction document has been provided with the Online Form. Companies are encouraged to go through the Instruction document before filling up and submitting the online form.

Link to the circular: CIRCULAR NO. SEBI/HO/OIAE/IG RD/CI R/P/2021/642 October 14, 2021

8. Transmission of Securities to joint Holder(s)

(SEBI circular no. SEBI/ HO/ MIRSD/ MIRSD_RTAMB/ P/CIR/2021/644 dated 18th October, 2021)

i. The norms pertaining to transmission of securities to joint holders(s) are provided in clause 23 of Table F in schedule 1 read with Section 56(2) & 56(4)(c) of the Companies Act 2013.

ii. It has been observed by SEBI in some cases that due to counterclaim / dispute from the legal representative of one of the deceased holder, the RTAs have not effected transmission to the surviving joint holder(s).

iii. In this regard, RTAs are hereby advised by SEBI to comply with the aforesaid provisions of the Companies Act 2013 and transmit securities in favour of surviving Joint holder(s), in the event of demise of one or more joint holder(s), provided that there is nothing contrary to the same in the Article of Association of the Company.

Link to the circular: SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/644 Dated: October 18, 2021

Stock Exchange(s) (BSE/NSE)

9. Formats specifying disclosure of Corporate Governance by High value debt listed entities

(BSE circular no. 20211001-3 dated 01st October, 2021)

SEBI (Listing and Obligations and disclosure Requirements), Regulations 2015 (“Listing Regulations”) was amended vide notification dated September 07, 2021, providing for the applicability of Regulations 15 to 27, relating to corporate governance on high value debt listed entities on comply or explain basis until March 31, 2023.

In this regard, the following formats and requirements for disclosures of corporate governance requirements shall be applicable for the purpose of compliance:

a. SEBI circular No. CIR/CFD/1/27/2019 dated February 08, 2019 on the Annual Secretarial Audit Report and Secretarial Compliance report.

b. Annexure 1 of SEBI circular No SEBI/HO/CFD/CMD-2/P/CIR/2021/567 dated May 31, 2021 on the quarterly format for reporting on Corporate Governance compliances.

c. Part C (disclosures in corporate governance report as part of annual report), D (Declaration by CEO on compliance of the management and directors with the code of conduct) and E (Compliance certificate by auditors or Practising Company Secretary of corporate governance compliance) of schedule V of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015.

The Listed Companies are required to submit the same in pdf form through BSE listing centre for the quarter ended September 30, 2021.

Link to the circular:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20211001-3

10. XBRL based filing of Related Party Transactions for Listed Companies at BSE/NSE (BSE circular no. 20211001-25 and NSE circular no. NSE/CML/2021/42) dated 19th October, 2021

With reference to BSE circular number 20210906-31 dated September 6, 2021 and NSE circular number NSE/CML/2021/34 dated September 6, 2021 on XBRL based filing of Related Party Transactions for Listed Companies at BSE/NSE which requires all the listed companies to submit Related Party Transactions [Regulation 23 (9)] in XBRL mode only.

In this regard, the Exchange would like to bring to the notice of Listed Banking Companies that the XBRL submission shall not be applicable for the half year ended September 30, 2021 and such companies are requested to continue filing the Related Party Transactions in PDF format for the said period.

Link to the circular:

https://static.nseindia.com//s3fs-public/inline-files/NSE_Circular_19102021_1.pdf

Reserve Bank of India (“RBI”)

11. Data Format for Furnishing of Credit Information to Credit Information Companies (RBI circular no. DoR.FIN.REC.59/20.16.056/2021-22 dated October 14, 2021)
[Applicable to:

  • All Non-Banking Financial Companies (including Housing Finance Companies)
  • All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)
  •  All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks
  •  All-India Financial Institutions (Exim Bank, NABARD, NHB and SIDBI)
  •  All Credit Information Companies]

I. Please refer to RBI circular DBOD.No.CID.BC.127/20.16.056/2013-14 dated June 27, 2014, inter alia setting out a Uniform Credit Reporting Format for reporting credit information to the Credit Information Companies (CICs). The Uniform Credit Reporting Format has two Annexes, Annex-I contains two formats for credit reporting, viz., Consumer Bureau and Commercial Bureau, whereas Annex-II contains credit reporting format for Micro Finance Institution (MFI) segment.

II. The Relationship Segment (RS) in the Commercial Bureau format inter alia captures information on relationship fields of the corporates, viz., business category and type of relationship (i.e. contains information on directors, shareholders, proprietors, partners, trustees, holding companies, subsidiary companies and associated companies related to the borrower). It is observed by RBI that there is a low level of RS details in the databases of CICs.

III. The RS details are very important in establishing cross-linkages across the three modules, viz., Consumer, Commercial and MFI Bureaus, while providing comprehensive credit information of a borrower to Credit Institutions (CIs) by CICs. Accordingly, it has now been decided that the reporting of RS data by CIs to CICs would henceforth be mandatory. In order to ensure implementation in a non-disruptive manner, the reporting requirement may be staggered in the manner indicated below.

i. The reporting would be mandatory in respect of new loan accounts opened after July 1, 2022.

ii. A phased approach shall be followed for reporting of legacy data as detailed below:

a) The accounts opened during the period (July 1, 2021 to June 30, 2022) have to be updated by January 1, 2023.

b) The accounts opened in past three years (July 1, 2018 to June 30, 2021) have to be updated by July 1, 2023.

c) A timeline for reporting of the remainder legacy data would be reviewed by the Technical Working Group and the CIs would be advised in due course.

IV. The CIs are advised to commence reporting the aforesaid information as per the prescribed timelines to CICs.

12. Revised framework for Scale Based Regulation (SBR) for Non-Banking Financial Companies

(RBI Circular no. DOR.CRE.REC.No.60/03.10.001/2021-22 dated October 22, 2021)

Pursuant to the announcement made in the Statement on Developmental and Regulatory Policies dated December 04, 2020, a discussion paper titled ‘Revised Regulatory Framework for NBFCs – A Scale-based Approach’ was issued for public comments on January 22, 2021. Based on the inputs received, it has now been decided by RBI to put in place a revised regulatory framework for NBFCs.

As the SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc., it has been decided to first issue an integrated regulatory framework for NBFCs under SBR providing a holistic view of the SBR structure, set of fresh regulations being introduced and respective timelines.

Detailed guidelines as delineated in the Annex of this circular, will be issued subsequently.

These guidelines shall be effective from October 01, 2022. The instructions relating to ceiling on IPO funding given vide para 3.1(d) of the Annex of this circular shall come into effect from April 01, 2022.

Link to the circular: RBI/2021-22/112 DOR.CRE.REC.No.60/03.10.001/2021-22 October 22, 2021

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