Export of Goods and Software - Realization and Repatriation of Export Proceeds
The Reserve Bank of India ("RBI") vide A.P. (DIR) Series Circular No. 40 dated November 1, 2011 had enhanced the period from six months to twelve months for the realization and repatriation to India of the full value of the export proceeds in respect of the goods or software exported. The aforementioned relaxation was valid till September 30, 2012.
The RBI vide A.P. (DIR) Circular No. 52 dated November 20, 2012 has now extended the aforementioned relaxation period till March 31, 2013. The said relaxation comes into effect from October 1, 2012.
Provisions relating to period of realization and repatriation to India of the full value of goods or software exported by a unit situated in Special Economic Zone, as well as the exports made to warehouses established outside India, remain unchanged.
Liaison Office / Branch Office in India by Foreign Entities - Reporting Requirement to Income Tax Authorities
The RBI vide A.P. (DIR Series) Circular No. 55 dated November 26, 2012 has clarified that Liaison Offices and Branch Offices are required to furnish copies of the Annual Activity Certificates ("AAC") to the Director General of Income Tax (International Taxation) ("DGIT (International Taxation)"). The AACs so submitted should be accompanied by audited financial statements.
The RBI has further provided that at the time of renewal of permission of Liaison Offices by Authorised Dealer Category - I banks, they may endorse a copy of each such renewal to the office of the DGIT (International Taxation).
Overseas Investment by Core Investment Companies
The RBI vide Notification No. DNBS. (PD) 252/CGM (US)-2012 dated December 6, 2012 has notified the Core Investment Companies - Overseas Investment (Reserve Bank) Directions, 2012 ("Overseas Investment by CICs Directions").
The Overseas Investment by CICs Directions come into force with immediate effect and is in addition to the regulations/directions that have been framed by the Foreign Exchange Department for overseas investment.
The Overseas Investment by CICs Directions will be applicable to all Core Investment Companies ("CICs") whether registered with RBI or exempt from registration with RBI.
In terms of the said directions, CICs that propose to invest in the financial sector overseas will need to hold a certificate of registration issued by RBI and will need to comply with all the regulations that are applicable to registered CICs.
Further, CICs will require prior RBI approval for making investment in the financial sector overseas. With respect to investment in the non-financial sector overseas, CICs will not need registration with the RBI and will also not require the prior approval of the Department of Non-Banking Supervision ("DNBS") for such investment overseas. However, CICs will be required to report the investment with the Regional Office of DNBS where it is registered within 30 days of such investment in the stipulated format of quarterly return and also continue to submit the return quarterly.
The Overseas Investment by CICs Directions interalia set out the following conditions for investments overseas:
(a) Direct investment in activities that are prohibited under Foreign Exchange Management Act, 1999 ("FEMA") will not be permitted;
(b) The total overseas investment should not exceed 400% of the owned funds of the CIC;
(c) The total overseas investment in the financial sector should not exceed 200% of the owned funds of the CIC;
(d) Investment in the financial sector will only be in regulated entities abroad.
(e) Entities that are set up abroad or acquired abroad shall be treated as wholly owned subsidiaries (as defined under the applicable FEMA regulations) / joint ventures (as defined under the applicable FEMA regulations) abroad;
(f) Overseas investments by a CIC in the financial /non-financial sector would be restricted to its financial commitment (as defined under the applicable FEMA regulations). With regard to issuing guarantees / Letter of Comfort, the conditions stipulated under the Overseas Investment by CICs Directions will need to be taken into consideration.
(g) With respect to opening branches overseas, since CICs are non-operating entities, they will not, in the normal course, be allowed to open branches overseas. CICs which have already set up branch(es) abroad for undertaking investment business are required to approach RBI within 3 months from the date of the said directions for RBI's review.
(h) For setting up wholly owned subsidiaries / joint ventures abroad, CICs will need to satisfy the conditions set out in the Overseas Investment by CICs Directions.
(i) CICs will need prior approval from the DNBS, RBI for opening representative offices abroad. The representative offices can be set up abroad for the purpose of liaison work, undertaking market study and research but not for undertaking any activity which involves outlay of funds. The representative offices shall also comply with regulations, if any, in this regard stipulated by a regulator in the host country.
Further, since it is not envisaged that such representative offices would be carrying on any activity other than liaison work, no line of credit should be extended. The parent CICs need to obtain periodical reports about the business undertaken by the representative offices abroad. If the representative offices have not undertaken any activity or such reports are not forthcoming, RBI may direct the parent CIC to wind up the representative office.
(j) Violation of the said directions will attract penal action under the provisions of Reserve Bank of India Act, 1934.
Petition Filed by a Shareholder against a Company Ceases along with its Shareholding in the Company
A Single Judge Bench of the High Court of Calcutta in its recent judgment in the case of ABA Builders Ltd. vs. Smt. Anjula Nagpal discussed whether a shareholder has any rights against a company upon such person ceasing to be a shareholder of such company.
In the instant case, the appellants were the concerned company and other persons in control of the company. The respondents were shareholders of the said company. The respondents had approached the Company Law Board (CLB) claiming to be oppressed under sections 397 and 398 of the Companies Act, 1956. During pendency of the proceedings, the respondents transferred their shareholding in the company to the appellants. Therefore, the appellants approached the CLB to dismiss the petition pending before it which had alleged oppression and mismanagement. The respondents however alleged that the respondents were not given adequate consideration by the appellant group for the transfer of shareholding. The CLB ordered assessment for the fair valuation of shares and the appellants filed the instant application seeking dismissal of the petition before the High Court of Calcutta.
The High Court of Calcutta dismissed the petition filed before the CLB on the following grounds:
(a) Share qualification is a requirement for the maintenance of a petition under Sections 397 and 398 of the Companies Act, 1956;
(b) Upon the execution of the share transfer forms and handing over of the share certificates, and the subsequent registration of the transfer thereof, the character of the party as a member of the company was lost and hence the respondents were no longer capable of maintaining an application before the CLB for oppression and mismanagement; and
(c) Adequacy of consideration for share transfer is material and it should be verified prior to the transfer of shares.
Companies (Cost Audit Report) Amendment Rules, 2012
The Ministry of Corporate Affairs ("MCA") vide Notification G.S.R. 861 (E) dated November 30, 2012 has amended the Companies (Cost Audit Report) Rules, 2011 to bring into effect the reforms for reporting in the Extensible Business Reporting Language ("XBRL").
Companies (Cost Accounting Records) Amendment Rules, 2012
The MCA vide Notification G.S.R. 862 (E) dated November 30, 2012 has amended the Companies (Cost Accounting Records) Rules, 2011 to bring into effect the reforms for reporting in XBRL format.
Amendment to Cost Accounting Records Rules
The MCA vide notifications dated November 30, 2012 has amended the following rules to include provisions in relation to reporting in XBRL format:
(a) Cost Accounting Records (Pharmaceutical Industry) Rules, 2011;
(b) Cost Accounting Records (Fertilizer Industry) Rules, 2011;
(c) Cost Accounting Records (Sugar Industry) Rules, 2011;
(d) Cost Accounting Records (Electricity Industry) Rules, 2011;
(e) Cost Accounting Records (Petroleum Industry) Rules, 2011.
This article was first published on December 6, 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.