The weekly messenger | Edition 23.19

Regulatory News

Companies (Incorporation) Sixth Amendment Rules, 2019 – 7 June 2019

The Central Government has amended the Companies (Incorporation) Rules, 2014 with the Companies (Incorporation) Sixth Amendment Rules, 2019, wherein it has made the following major amendments:

• In sub-rule (1) of Rule 19 ‘License Under Section 8 for New Companies With Charitable Objects etc.’, which states that a person or an association of persons desirous of incorporating a company under section 8 shall make an application in Form No. INC.12, the words, letters and figures ‘Form No. INC. 12’ has been substituted with the words, letters and figures ‘Form INC-32 (SPICe)’;
• Further, in sub-rule (3) of the aforesaid Rule which talks about the documents to be attached with the application being made by the aforesaid companies, the words ‘the draft memorandum’ has been replaced by the words ‘the memorandum’;
• Form No. INC 12 has been substituted by a new form etc.

These rules shall come into force w.e.f. 15 August 2019.
 
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SEBI signs MOU with MCA – 7 June 2019

The Securities and Exchange Board of India (SEBI) in the wake of increasing need for surveillance in the context of Corporate Frauds affecting important sectors of the economy has signed a Memorandum of Understanding (MOU) with the Ministry of Corporate Affairs (MCA) for the purpose of date exchange between the two regulatory organisations. In addition to regular exchange of data, SEBI and MCA will also exchange with each other, on request, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.
 
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RBI releases Prudential Framework for Resolution of Stressed Assets – 7 June 2019 

The Reserve Bank of India (RBI) has released the ‘Prudential Framework for Resolution of Stressed Assets by banks’. The fundamental principles underlying the regulatory approach for resolution of stressed assets are as under:

• Early recognition and reporting of default in respect of large borrowers by banks, financial institutions (FIs) and Non - Banking Financial Companies (NBFCs);
• Complete discretion to lenders with regard to design and implementation of resolution plans, in supersession of earlier resolution schemes (S4A, SDR, 5/25 etc.), subject to the specified timeline and independent credit evaluation;
• A system of disincentives in the form of additional provisioning for delay in implementation of resolution plan or initiation of insolvency proceedings;
• Withdrawal of asset classification dispensations on restructuring. Future upgrades to be contingent on a meaningful demonstration of satisfactory performance for a reasonable period;
• For the purpose of restructuring, the definition of ‘financial difficulty’ to be aligned with the guidelines issued by the Basel Committee on Banking Supervision; and
• Signing of inter-creditor agreement (ICA) by all lenders to be mandatory, which will provide for a majority decision making criteria.

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