The weekly messenger | Edition 21.20

Regulatory News

ATQs raised during the Live Webcast on CSR Rules, Accounting and Taxation held on 29 April 2020 – 9 June 2020

The Corporate Social Responsibility (CSR) Committee of the ICAI has issued the answers to the questions (ATQs), which were raised during the webcast on ‘CSR Rules, Accounting and Taxation’ on 29 April 2020, which inter-alia includes:

• Is provision of CSR expenses mandatory during the F.Y 2019-20? Or only note of CSR expenses is sufficient if expenses are not provided?
• Whether CSR expenditure is an operating expenditure or an appropriation of profits?
• Is contribution to the Chief Minister Relief Fund towards Covid-19 an acceptable CSR expenditure?
• Will the excess spend in one year be considered to offset any shortages in the following year?
• Can CSR be used for beautification of a prime junction in Mumbai?

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Companies (Share Capital and Debentures) Amendment Rules, 2020 – 5 June 2020

The Central Government has amended the Companies (Share Capital and Debentures) Rules, 2014 with the Companies (Share Capital and Debentures) Amendment Rules, 2020, wherein the following changes have been made:

• In second proviso to Rule 8(4), which deals with the issuance of sweat equity shares by a start-up company, the reference of the notification providing the definition of a start-up company has been changed from ‘GSR 180(E), dated 17th February, 2016 issued by the Department of Industrial Policy and Promotion’ to ‘G.S.R. 127(E), dated the 19th February, 2019 issued by the Department for Promotion of Industry and Internal Trade’.
• Also, the time period up to which a start-up company may issue sweat equity shares has been increased from ‘five years’ to ‘ten years’ from the date of its incorporation or registration.
• Further, Rule 18(7)(b)(v), which deals with debentures, has been substituted with the following sub-clause:
  “(v) In case a company is covered in item (A) of sub-clause (iii) of clause (b) or item (B) of sub-clause (iv) of clause (b), it shall on or before the 30th day of April in each year, in respect of debentures issued by such a company, invest or deposit, as the case may be, a sum which shall not be less than fifteen percent., of the amount of its debentures maturing during the year, ending on the 31st day of March of the next year in any one or more methods of investments or deposits as provided in sub-clause (vi):
  Provided that the amount remaining invested or deposited, as the case may be, shall not any time fall below fifteen percent. of the amount of the debentures maturing during the year ending on 31st day of March of that year”.

These Rules shall come into force w.e.f. 12 June 2020.
 
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Relaxation from compliance with certain provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 and certain SEBI Circulars due to the COVID-19 virus pandemic – 8 June 2020

The Securities and Exchange Board of India (SEBI) vide its Circular dated 23 March 2020, has issued specified guidelines for relaxation from compliance with certain provisions of the SEBI (LODR) Regulations and other SEBI Circulars due to the COVID -19 virus pandemic. Now, the SEBI has decided to extend the relaxation provided in the said Circular for issuers who intend/propose to list their Non-Convertible Debentures (NCDs)/Non-Convertible Redeemable Preference Shares (NCRPS)/Commercial Papers (CPs) for disclosure of financial results for another one month.
 
Accordingly, clause 5 of the Circular dated 23 March 2020 stands modified as under:
 

 
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Relaxation from certain provisions of ICDR Regulations in respect of Further Public Offer – 9 June 2020

The SEBI, vide its Circular dated 21 April 2020, has issued certain temporary relaxation in eligibility conditions related to Fast Track Rights Issue.
 
Now, the SEBI has again decided to provide similar relaxations in the eligibility conditions related to Fast Track Further Public Offer (FPO) as contained in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).
 
These relaxations are applicable for FPOs that open on or before 31 March 2021. However, the relaxations are not applicable for issuance of warrants.
 
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Disclosure of Financial Information in Private Placement Memorandum for Issuance of Debt Securities – 10 June 2020

The Bombay Stock Exchange (BSE) has issued a notice with reference to the ‘disclosure of latest financial information in Private Placement Memorandum’, wherein the BSE has advised the issuers of Debt Securities who intend to list their Debentures/Bonds with the Exchange to ensure that the financial disclosures in the Private Placement Memorandum confirm to the below mentioned SEBI guideline:
 
“Issuers proposing to issue and list NCDs in case of private placement are required to disclose audited financials or limited-review financials, as applicable, in the placement memorandum. It is clarified that Audited Financials or Un-audited Financials with Limited Review, including for Stub Period, shall not be more than 6 months old from the date of Private Placement Memorandum.”
 
For more information, click here.