SEBI tightens norms on independent directors
On June 29, 2021, Securities Exchange Board of India (SEBI) made several crucial decisions regarding independent directors on boards of listed companies.
An independent director being a non-executive director aids the company in revamping the governance standards and corporate credibility. The concept of independent directors was added in The Companies Act, 2013 (Act) after the need was felt of having an autonomous voice to speak on behalf of minority shareholders. Section 149 of the Act (to be read along with Rule 4 and Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014), showcases the provisions for appointment of directors, including the code of conduct to be adhered by them. The provision of the Act mandates the requirement of one- third of the total directors to be independent in all the listed public companies.
A consultation paper (Consultation Paper on Review of Regulatory Provisions related to Independent Directors) was released by SEBI on March 1, 2021, to review the provisions with respect to the independent directors. Considering the same, major amendments have been done in the rules governing the appointment, removal, re-appointment, resignation of the independent directors.
Key amendments announced by SEBI
- Appointment of directors: Applicable for all entities, a special resolution with 75% of votes in support must be passed for the appointment, reappointment, and removal of the independent directors. Furthermore, instead of the existing requirement of a majority, there will be a Nomination Committee and a Remuneration Committee having 2/3rd independent directors. The selection of the candidate as an independent director will be done by this committee only, which shall also disclose the skillset of the candidate, thereby justifying the selection.
- Cooling-off period: Key managerial personnel and their relatives or the promoter group's employees will have to necessarily undergo a three-year cooling off period before getting appointed as an independent director. Similarly, an independent director transitioning into a full-time director in the same company/subsidiary/any company that belongs to the promoter group, will have to observe a cooling period of one year.
- Resignation of independent directors: If an independent director resigns from the board, the company must disclose the complete resignation letter, including a list of his/her present membership and directorship in the board committees.
- Audit Committee: The Audit Committee should have 2/3rd members as independent directors. It is further stipulated that approval regarding every related party transaction must be given by the independent directors on the Audit Committee.
Independent directors play a crucial role in taking an unambiguous and independent stand to check and balance the minority shareholders and thereby reduce the exposure of unwanted risks. The regulator has defined the role and responsibilities of an independent director quite elaborately, including the requirement that the person, apart from receiving director's remuneration should not have any pecuniary or financial relations of any kind with the company for two preceding financial years. The changes, which will be applicable from January 1, 2022, will certainly boost the independence of independent directors and ensure transparency on a more holistic level. The changes shall.
E-RUPI: A new digital payment solution
Prime Minister Narendra Modi on August 2, 2021 launched E-RUPI, a digital payment system for India. The system is developed by National Payments Corporation of India (NPCI) in collaboration with the Department of Financial services, Ministry of Health & Family Welfare and National Health Authority. NPCI is the brains behind the Unified Payments Interface (UPI) which was launched in 2016 and has since gained significant traction in India's digital payment ecosystem – the platform crossed 3 billion transactions mark recently with transactions worth INR 6.06 lakh crore in July 2021.
E-RUPI is a person and purpose specific voucher-based system, wherein the transaction will be done electronically directly to the beneficiary's mobile phone number. The platform does not require the beneficiary to have a bank account. Since it is purpose specific, it ensures that the QR code or the SMS-based e-voucher will be used for that purpose only. This will ensure a leak-proof transfer of money and incentives without the interference of the middleman, thereby minimizing transaction costs traditionally associated with such transfers.
Currently, the E-RUPI platform has partnered with two banks - Punjab National Bank and Bank of Baroda. There are 11 banks enlisted with the NPCI and more client banks will be added to the platform to gain access to the E-RUPI features.
This platform is expected to play a pivotal role in strengthening the Direct Bank Transfer (DBT) scheme announced by Ministry of Finance in 2013 with the aim of brining transparency in the distribution of welfare funds and benefits from the Central government. In the first iteration, E-RUPI will be extensively used in the healthcare welfare for the purpose of providing drugs and nutritional support under the women and child welfare schemes, TB eradication programs, amongst others.
Maharashtra State Electric Vehicle Policy 2021 – Key highlights
The Government of Maharashtra announced a revised draft Electric Vehicle (EV) Policy on July 13, 2021, with an outlay of INR 930 crore. The policy will be valid till March 31, 2025 from the date of its notification. Maharashtra was one of the first states in the country to design and notify an EV policy in February 2018.
Key objectives of the draft policy
- Accelerate the adoption of battery-powered electric vehicle (BEVs) so that they contribute 10% of new vehicle registrations by 2025
- Aim for 25% electrification of the state public transport and last-mile delivery fleet in 6 urban centres: Mumbai, Pune, Nagpur, Aurangabad, Amravati, and Nashik
- Set up 2,500 charging stations in urban areas and highways
- Target of at least 10% of two-wheelers, 20% of three-wheelers and 5% of four-wheelers to be electric vehicles by 2025
- Make the State of Maharashtra the top BEV producer in India, in terms of annual production capacity
- 15% of Maharashtra State Road Transport Corporation's bus fleet to be electric
- Exemption: EVs will be exempted from road tax and registration charges.
- Incentive for EV buyers: Incentives will be given to buyers of
- The policy will subsidize the first 100,000 electric two-wheelers, which will be eligible to receive an incentive of INR 5,000 per kWh of battery capacity up to INR 10,000
- The maximum threshold of the incentives has been increased from INR 5,000: for e2Ws with a 3 KWh battery pack bought this year by December 31, 2021, there is an early bird incentive of up to INR 15,000; three-wheelers will have an incentive of INR 30,000; four-wheelers will have an incentive of INR 1,50,000 and for e-buses, this will be INR 20 lakh
- Demand incentives for non-battery vehicles: Vehicles sold without battery will be eligible for 50% of the demand incentive, while the remaining incentive amount will be given to the energy operator. The incentives disbursement system will be made digital.
- Timeline: Starting April 2022, all new government vehicles (owned/ leased) operating in the major cities will be electric.
- Industry benefits: The policy offers industries all the benefits under the 'D+' category of mega projects (this category denotes industries in the least developed parts of the State) irrespective of the location of the manufacturing unit in the State.
- State EV Fund: Aims to create a 'State EV Fund' which will be used to promote EV adoption including providing incentives for EVs and EV infrastructure.
- Property tax rebates: Urban local bodies will be encouraged to provide property tax rebates to residential owners for installing private charging infrastructure within their premises.
- Budgetary provision: Maximum budgetary provision for 'demand side' and 'charging infra' incentives is INR 930 crore for four years. The policy implementation can be funded through a green tax levied on re-registration of old vehicles and fuel cess.
- Usage of batteries: The policy emphasises the requirement of batteries for EVs and aims to set up at least one Gigafactory for manufacturing advanced chemistry cell batteries in the State.
- R&D: It will also allocate money for promoting research and development, innovation, and skill development in the State's electric vehicle ecosystem.
SEBI initiates guidelines on valuation of securities with multiple put options
On July 9, 2021, SEBI announced a new set of regulations for valuation of securities with multiple put options, held by mutual funds. The circular will come into effect from October 1, 2021.
- Valuation of securities: In respect of valuation of securities
with multiple put options present ab initio, wherein put option is
factored into valuation of the security by the valuation agency,
the following will be decided based on the recommendation of Mutual
Fund Advisory Committee:
- If the put option is not exercised by a Mutual Fund, while exercising the put option would have been in favour of the scheme, a justification for not exercising the put option shall be provided by the Mutual Fund to the Valuation Agencies, Board of AMC and Trustees on or before the last date of the notice period.
- The Valuation Agencies shall not consider the remaining put options for the purpose of valuation of the security.
- Yield of valuation: The put option shall be considered as 'in favor of the scheme' if the yield of the valuation price, ignoring the put option under evaluation, is more than the contractual yield/coupon rate by 30 basis points.
- Protection of investor interest: This Circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of investors in securities and to promote the development of the securities market.
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