278 / 2022
Quote of the day
“A great building must begin with the unmeasurable, must go through measurable means when it is being designed and in the end must be unmeasurable." said the famous Architect, Louis Kahn. With due apologies to him, I would like to add that it is not the mere physical structure that makes it unmeasurable and outstanding. It is the people behind it. The building may or may not be the best in architecture, the biggest in size or amazing in its interiors. It is the legacy that it carries, the values that it stands for, the knowledge that it spreads and the people that it serves. On all these counts the well-known Gokhale Institute of Public Affairs (GIPA) in Bangalore stands apart (http://www.gipa-bng.org/).
I had the privilege of moderating a session here on the 162nd Income Tax Day (24th July, 2022) which was a conversation with the Commissioner of Income Tax, Dr. Sibichen Mathew himself. While he patiently explained the genesis of taxation in India, the contours of evolution of the system over the years, the current filing system, the nitty-gritties of calculating made-easy, the upcoming faceless assessment system etc., what was endearing was his compliments to the Institute known for its quality of public engagement, immaculate time management and its enlightened audience. It was heartening to see general public across ages, across occupations intelligently interacting with the speaker – there was a young member in his 20s and there was also a not-so-young gentleman in his 90s. Both of them sat through the entire session with the Author, Researcher and Taxman, Dr. Sibichen. My role was to engage him in a conversation. Must say it was very enjoyable and informative (https://youtu.be/wbRS0yLDaeM).
Did you know that GIPA prides itself of conducting a session every single day since its inception in 1945 – yes that makes it 77 years in a row including during pandemic when it turned online. The calendar of events spanning education, economics, spirituality, epics, music, literature, history, science, mathematics et al is printed 6 months in advance ! With a variety of topics and a galaxy of speakers gracing the venue, the audience has a bonanza throughout the year, all free of cost. As someone said "Knowledge is discovered collectively, wisdom is rediscovered individually."
“Ele mare kaayiagi baalabeku” my mom used to say (in Kannada), meaning “live like a seed that is hidden by a leaf”. Be modest. This is how I would describe GIPA and more so its audience who look very simple but are extremely knowledgeable. In an age and time when anyone and everyone is on social media brandishing their so-called achievements, the Institute is truly living by its founding members’ vision and values. Inspired by none other than the famous freedom fighter and thinker Gopal Krishna Gokhale and started by the philosopher & Kannada literary giant, Dr. D V Gundappa, GIPA is a hallowed place. The benign grace and blessings flowing from the portraits of the various freedom fighters, litterateurs, philosophers, thinkers, spiritual gurus weighed heavily on me as I started the session but the serenity of the place, simplicity of the audience and cheerful articulation by the speaker (of a dry topic like Taxes), put me at ease. Like I said, people define organisations and not the infrastructure alone !
“5.82cr is end of the day score”, declared Dr. Sibichen Mathew, Commissioner of Income Tax, CPC. That was the number of returns filed as of 31st July, 2022, the last day for filing tax returns by individuals and other non-audit tax assesses. The number of messages of appreciation and gratitude pouring in from the public, not only for the ease of filing on the income tax website (a few exceptions for glitches of course) but also the prompt helping hand lent by its officers is testimony again to the people that make organisations outstanding. Technology alone cannot deliver. It requires robust processes, committed people and a dynamic leader to achieve success. Only then what Manusmriti and Chanakyaniti stated aeons ago can become a reality “The king should arrange the collection of taxes in such a manner that the subjects should not feel the pinch of paying taxes. Tax must be collected just like a honey bee sucks nectar from the flower without crushing the flower itself.”
Can the MCA take a cue from the IT website’s functioning and make its people accountable for better performance of the LLP V3 version ? Last issue I vented out my ire in as gentlewomanly manner as possible but they have miles to go before they WAKE UP & ACT !!
This issue contains some lessons in grammar by N Balaji, the language expert. He focuses on best practices in writing and in speaking. Don’t miss the 5 minute video conversation between a bunch of kids and a 100+ year old lady !
Not to be missed is the profound article (on section 186) by our veteran Company Secretary CS Ramaswami Kalidas, a rare-breed professional who bravely offers a critique on the Companies Act, 2013, substantiated by virgin interpretation, case laws and contrasting with the earlier law of 1956. This 278th issue of Samhita also provides a platform for a budding Trainee CS (Amritha Puranik) under the guidance of her senior (CS Rajeswari Pai) to share her understanding about “Preservation of Documents”. It is an attempt to tabulate what kind of documents need to be preserved under the Act and for how long. Relevant not only for students and professionals but also for those who run companies. Other regulatory updates from MCA, SEBI, RBI, IBC & GST issued during July, 2022 are all compiled here.
For any previous issues of Samhita and the readers’ feedback, please visit http://www.sharadasc.com/resource-center/.
Section 186 of the Companies Act, 2013 - Some food for thought
CS. Ramaswami Kalidas, an eminent Company Secretary has analysed the provisions of Section 186 of Companies Act, 2013 in comparison to and drawing contrasts from the erstwhile Companies Act, 1956 with respect to Loans, Investments and Guarantees. The Article is rich with case laws, critical analysis and interpretations. The Article does justice to its title and leaves you with a lot to ponder upon beyond its reading time of 11 minutes!
Preservation and Retention of Documents under Companies Act, 2013
Ms. Amritha Vittal Puranik and CS Rajeswari J Pai from team SC Sharada & Associates have analysed and compiled the requirements and provisions under Companies Act, 2013 and the Secretarial Standards – 1 (on Board Meeting) regarding the preservation of documents in an Article titled “Preservation and Retention of Documents under Companies Act, 2013”. The Article contains an exhaustive list of documents, papers and records required to be maintained by Companies along with period of maintenance in a simple tabular format.
6 minutes of your time is all it takes to read the article!
MCA21-V3 for Companies Forms
It was announced on the MCA website that similar to the migration of LLP forms from MCA21 V2 to MCA21 V3 where the forms were made web based, forms to be filed by Companies are in the process of being made web-based forms.
The 1st set of 9 web-based forms (DIR3-KYC Web, DIR3-KYC Form, DPT-3, DPT-4, CHG-1, CHG-4, CHG-6, CHG-8 & CHG-9) shall be launched on 31 August 2022 at 12:00 A.M.
To facilitate this migration e-filing of the abovementioned forms on MCA21 V2 shall be disabled from 15 August 2022 and the pay later option shall be disabled for these forms.
Like every other systems migration the V2 to V3 migration for LLP Forms was besieged with many technical glitches, which are still not plugged! Can stakeholders expect a smoother transition for Companies Forms, is for us to wait and find out!
Contribution to “Har Ghar Tiranga” campaign – eligible CSR activity
MCA vide circular dated 26 July 2022 has clarified that any contributions made by Companies towards the “Har Ghar Tiranga” campaign (a campaign under the Aazadi Ka Mahotsav initiative) such as mass scale production and supply of the National Flag, outreach and amplification efforts and other related activities, are eligible CSR activities.
Liberalisation of Forex flows
RBI has liberalised the Forex norms in an attempt to boost forex inflow into the country. This move seems to be a result of INR depreciating against the Dollar. The norms have been liberalised as follows:
ECB limit under automatic route doubled and all-in-cost ceiling increased:
Earlier eligible borrowers were allowed to borrow upto 750 million USD under automatic route without having to approach RBI for approval subject to adherence to prudential norms, all-in-cost ceiling limits etc. This limit has now been increased to 1.5 billion USD. The all-in-cost ceiling has been increased by 100 basis points. The increased limits shall be available to borrowers till 31 December 2022.
FPI investment in government and corporate debt – exempted from short term limit:
Currently FPI investment in government and corporate debt is restricted to 30% each in government securities and corporate bonds having a residual maturity of less than 1 year. Investments by FPIs in government securities and corporate debt made till 31 October 2022 have been exempted from this short term limit.
Other relaxations of Foreign Currency Non-Resident Bank (FCRN(B)) Deposits and NRE deposits, exemption from Cash Reserve Ratio and Statutory Liquidity Ratio on Incremental FCNR(B) and NRE were also notified vide Press Release dtd.6 July 2022.
Social Stock Exchange – new chapter inserted in ICDR Regulations
SEBI vide notification dated 25 July 2022 has notified the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022. Vide the Amendment Regulations Chapter X-A on Social Stock Exchanges has been inserted in the ICDR Regulation, 2018.
Highlights of Chapter X-A:
Words “Social Enterprise”, “Social Audit”, “Social Auditor”, “Social Stock Exchange (SSE)” have been defined among others.
Applicability – The chapter shall be applicable to:
Not for profit organisations seeking to only get registered on the SSE
Not for profit organisations seeking to get registered and raise funds on the SSE
For profit organisations seeking to be recognised as a Social Enterprise
Non Profit Organisation (NPO) has been defined to include the various types of not-for-profit structures such as Trusts, Society, Sec. 8 companies
For Profit Social Enterprise (FPSE) means a for profit company or a body corporate which is a Social Enterprise but does not include a Sec. 8 company.
Eligibility conditions for being identified as a Social Enterprise have been detailed
NPOs may raise money through the SSE by issuance of Zero Coupon and Zero Principal Bonds (ZCZPB), donations from MF Schemes and in any other manner as may be decided by the Board.
FPSEs can raise money in a conventional manner and list on the Main Board, SME Exchange or IGP with a specific FPSE tag attached to the scrip.
Eligibility and procedure for issuance of Zero Coupon Zero Principal Instruments
Please refer to the Amendment Regulations for details.
New chapter in LODR Regulations for Social Enterprises
SEBI has notified the SEBI (LODR) (Fifth Amendment) Regulations, 2022 vide notification dated 25 July 2022. Broadly, the amendments are as follows:
Definition of “designated securities” amended to include Zero Coupon Zero Principal Instruments
Chapter IX-A – Obligations of Social Enterprises (SEs) inserted.
The ICDR Amendment Regulations, 2022 has defined Social Enterprises as either a Not-for-Profit- Organization or a For-Profit-Social Enterprise that meets the eligibility criteria specified in Chapter X-A of the Regulations.
Highlights of Chapter IX-A:
Applicable to “for profit social enterprises” and “not for profit organisations” having it’s designated securities listed on stock exchange
Disclosures applicable to listed entities having specified securities listed on the Main Board or Investor Growth Platform, as the case may be, shall be applicable vis-à-vis to “for profit social enterprises”
“Not for profit organisations” to make disclosure to Social Stock Exchange on matters specified by SEBI within 60 days
Social Enterprises to frame a policy for determination of materiality and intimate the Social Stock Exchange / Stock Exchange as the case may be of the same
Social Enterprises to submit an Annual Impact Report audited by a Social Audit Firm employing Social Auditor to Social Stock Exchange / Stock Exchange as the case may be
Listed “not for profit organisations” to submit statement of utilization of funds to Social Stock Exchange on quarterly basis
Look forward to our understanding of Social Stock Exchange and Social Enterprises in an article in our upcoming issue Samhitha 279!
Extension of timeline
NSE vide its Circular dtd.15 July 2022 has extended the timeline for listed entities to provide the URLs of the information uploaded in its website as required under the Regulations 46 and 62 of LODR Regulations to 31 August 2022 as against the earlier due date of 18 July 2022.
Levy of GST on fees payable to SEBI
Vide circular dated 18 July 2022, SEBI has notified that all fees and charges payable by Market Infrastructure Institutions, Companies who have listed / are intending to list their securities, other intermediaries and persons who are dealing in the securities market shall be subject to 18% GST with immediate effect. The levy is in view of the GST Council withdrawing the exemption given earlier.
IPs to disclose their fiduciary relationship
IBBI has notified the IBBI (Insolvency Professionals) (Amendment) Regulations, 2022 vide notification dtd. 4 July 2022. Through this Amendment, Clauses 8B and 8C have been inserted in the First Schedule (Code of Conduct) pursuant to which an Insolvency Professional (IP) is required to disclose any fiduciary “relationship” with the Corporate debtor, Registered valuers / accountants/ legal professionals/ other professionals appointed by him, financial creditors, Interim finance providers, prospective resolution applicants and if relationship with any of the above, comes to notice or arises subsequently, to the Insolvency Professional Agency of which he is a member within the period specified.
An Explanation has been inserted in 8C which defines “relationship”.
CA. R Krishnamurthy has compiled the GST updates for the month of July 2022 in an Article. Highlights of the updates covered are:
GST registered persons who have rented premises for residential purposes shall be liable to pay GST on RCM
Registered persons having aggregate turnover upto 2 crores in FY 21-22 have been exempted from filing the Annual Return
The due date for filing CMP 08 has been extended till 31 July 2022
CBIC notification dated 5 July 2022 has been explained in detail
Clarification on various issues pertaining to GST vide circular dated 6 July 2022 has been summarised
Please refer to the notifications and circular links in the article for further details.