The weekly messenger | Edition 38.20

ACCOUNTING NEWS

Indian Accounting Standards (Ind AS): An Overview (Revised 2020) – 6 October 2020
 
The Institute of Chartered Accountants of India (ICAI) has issued the fifth edition of its publication ‘Indian Accounting Standards: An Overview (Revised 2020)’, comprising of all amendments to Ind AS, which are applicable for the accounting year beginning on or after 1 April 2020. The publication provides a glance on the basic aspects of applicable Ind AS in a summarized manner; differences between Ind AS and AS and Ind AS and IFRS.
 
For more information, click here.

AUDITING NEWS

Further extensions regarding the validity of Peer Review Certificate in the wake of COVID -19 spurt across the country - Modifications in Part C of the Announcement hosted on 29 May 2020 – 16 October 2020
 
As per the ICAI’s erstwhile announcement, if the validity of the Certificate of the ‘Practice Units already holding a valid Peer Review Certificate but the Peer Review process needs to be initiated’ was expiring after Lockdown till 30 September 2020, then in that case, the effective date of validity of Peer Review Certificate was extended till 31 March 2021 and in these cases the Practice units were required to get their peer review completed and submit the final clean report to the Board before 31 March 2021. 
 
Now, as per the new announcement, the ICAI has clarified that if the Peer Review Process needs to be initiated and the validity of the Certificate is expiring after Lockdown till 28 February 2021, then in that case, the effective date of validity of Peer Review Certificate has been extended to 31 March 2021 and in these cases the Practice units have to get their peer review completed and submit the final clean report to the Board before 31 March 2021.
 
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REGULATORY NEWS

Companies (Prospectus and Allotment of Securities) Amendment Rules 2020 – 16 October 2020
 
The Ministry of Corporate Affairs has issued the Companies (Prospectus and Allotment of Securities) Amendment Rules 2020, wherein in sub-rule (1) of Rule 14 ‘Private Placement’, after third proviso, the following proviso has been inserted:
 
“Provided also that in case of offer or invitation of any securities to qualified institutional buyers, it shall be sufficient if the company passes a previous special resolution only once in a year for all the allotments to such buyers during the year.”
 
These Rules shall come into force w.e.f. 16 October 2020.
 
For more information, click here.
 
SEBI (LODR) (Third Amendment) Regulations, 2020 – 8 October 2020
 
The Securities and Exchange Board of India (SEBI) has issued the SEBI (Listing Obligations and Disclosure Requirements (LODR)) (Third Amendment) Regulations, 2020, wherein the following changes have been made:

• In Regulation 54(1), now the listed companies have been given a choice to maintain asset cover in respect of its listed non-convertible debt securities at 100% or as per the terms of the offer document/ Information Memorandum and/ or Debenture Trust Deed, sufficient to discharge the principal amount at all times for the non-convertible debt securities issued, as against the earlier requirement of maintaining the same at 100%.
• Regulation 54(3), which used to exempt regulated financial sector entities issuing unsecured debt securities for meeting capital requirements as specified by their respective regulators has been omitted.
• Under Regulation 56 (1)(c), a new intimation has been inserted, which is to be provided by the listed entity to the debenture trustee i.e. “All covenants of the issue (including side letters, accelerated payment clause, etc.)”
• Under Regulation 56 (1)(d), earlier the listed companies were required to submit a half-yearly certificate to the debenture trustee regarding maintenance of hundred percent asset cover in respect of listed non - convertible debt securities, by either a practicing company secretary or a practicing chartered accountant, along with the half yearly financial results. Now, in line with the change made under Regulation 54(1) w.r.t. maintenance of asset cover, similar change has been made in this sub-regulation as well. Further, now this certificate is to be provided by the statutory auditor of the company as against the earlier requirement, where the same was to be provided either by a practicing chartered accountant or a practicing company secretary.
• In Schedule III, in Part A, under Clause A, after sub-clause 16, a new sub-clause has been inserted i.e. ‘17. Initiation of Forensic Audit’, as per which, in case of initiation of forensic audit by whatever name called, certain disclosures would be required to be provided by the listed entities to the stock exchange.

These Regulations shall come into force w.e.f. 9 October 2020.

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SEBI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2020 – 8 October 2020
 
The SEBI has issued the SEBI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2020, wherein various amendments have been made in the said Regulations, which inter-alia includes:

• The erstwhile Regulation 2(1)(h) which provides the definition of ‘Private Placement’ has been substituted with a new definition i.e. “Private placement means an offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application, which satisfies the conditions specified in section 42 of the Companies Act, 2013.”   
• A new Regulation 21B ‘Creation of Security’ has been inserted, which states that “The issuer shall give an undertaking in the Information Memorandum that the assets on which charge is created are free from any encumbrances and in cases where the assets are already charged to secure a debt, the permission or consent to create a second or pari-passu charge on the assets of the issuer has been obtained from the earlier creditor.”  
• In various Regulations, the words “Companies Act 1956” have been replaced by the words “Companies Act 2013”.

These Regulations shall come into force w.e.f. 9 October 2020.
 
For more information, click here.
 
Revised FAQs on SEBI (Prohibition of Insider Trading) Regulations, 2015 - 8 October 2020
 
The SEBI has issued the revised set of Frequently Asked Questions (FAQs) on SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), which inter-alia includes:

• Whether requirement of pre- clearance is applicable for exercise of employee stock options?
• Whether trading in American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) by employees of Indian companies who are foreign nationals is covered under provisions of PIT Regulations on code of conduct?
• What information should a listed Company maintain in its structured digital database under Regulation 3(5), in case the designated person is a fiduciary or intermediary?
• In case a designated person resigns, what information should be collected by the company/ intermediary/ fiduciary under PIT Regulations?

For more information, click here.

Standardisation of procedure to be followed by Debenture Trustee(s) in case of ‘Default’ by Issuers of listed debt securities – 13 October 2020
 
The SEBI has issued a Circular, which prescribes the procedures to be followed by the Debenture Trustee(s) in case of default by issuers of listed debt securities which includes seeking consent from the investors for enforcement of security and/or entering into an Inter-Creditor Agreement.
 
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FAQs on Resolution Framework for COVID-19 related stress – 13 October 2020
 
The Reserve Bank of India has issued the FAQs on Resolution Framework for COVID-19 related stress, which inter-alia includes:

• Is the Resolution Framework applicable to all exposures, including investment exposures that are credit substitutes like corporate bonds, commercial papers etc.?
• Are the various additional provisions prescribed in the Resolution Framework applicable to Non-Banking Financial Companies (NBFCs) who are following Ind AS?
• Can lending institutions implement resolution plans involving deferment of date of commencement of commercial operations (DCCO) in respect of projects under implementation under the Resolution Framework?
• If a loan account was more than 30 Days Past Due (DPD) on 1 March 2020, but subsequently got regularised through receipt of overdue, will such accounts be eligible for resolution plan under this framework?

For more information, click here.