Introduction

Edition 12/20-21

Week – October 5^th to October 9^th

Quote for the week:

“Success is not final, failure is not fatal, it is the courage to continue that counts.”

- Sir Winston Churchill.

We welcome you to our weekly newsletter!

The ‘Swift e-Bulletin’ - weekly newsletter, covers all regulatory updates and critical judgements passed during the week. We hope that you liked our previous editions and found it to be of great value in its content. We want this newsletter to be valuable for you so, please share your feedback and suggestions to help us improve.

In the wake of COVID-19, we all are witnessing many relaxations, exemptions and amendments to the various legislations by regulatory authorities to ease out the operations during this time of crisis.

Further, various regulatory authorities have been proactive in bringing significant regulatory changes in recent challenging times. This week’s newsletter covers various circulars/notifications issued by certain regulatory authorities as mentioned below:

• Securities and Exchange Board of India (“SEBI”) circulars on the following:
  • Standardization of timelines for listing of securities on Private placement basis;
  • Review of Dividend option(s)/Plan(s) in case of Mutual Fund schemes;
  • Product labelling of Mutual fund schemes- Risk-o-meter;
  • Issuance, listing and trading of Perpetual Non-Cumulative Preference Shares (PNCPS) and Innovative Perpetual Debt Instruments (IPDIs)/ Perpetual Debt Instruments (PDIs) (commonly referred to as Additional Tier 1 (AT 1) instruments);
  • Extension of facility for conducting extraordinary meeting(s) of unit holders of InvITs and REITs through Video Conferencing or Other Audio-Visual Means (VC/OAVM);
  • Guidelines on Inter Scheme Transfers of Securities;
  • Amendments to Securities Contract (Regulation) (Stock exchanges and Clearing Corporations) Regulations, 2018;
  • Amendments to Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
  • Amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
  • Amendments to Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993; and
  • Revised FAQ’s on Prohibition of Insider Trading Regulations (PIT), 2015.

• Ministry of Home Affairs (“MHA”) Notification on the following:
  • Amendment to Section 17(1) of Foreign Contribution Regulation Act.

• Reserve Bank of India (“RBI”) Press release on the following:
  • Statement on Developmental and Regulatory Policies

and critical judgements and orders passed by the National Company Law Tribunal (“NCLT”), the National Company Law Appellate Tribunal (“NCLAT”), SEBI, Supreme Court and High Court.

• National Company Law Tribunal (NCLT)
  • NCLT Mumbai bench initiates Liquidation of Ashapura Intimates Fashion Limited

• National Company Law Appellate Tribunal (NCLAT)
  • NCLAT directs the NCLT New Delhi to take up the Pending Appeal within One Week and Dispose of the Same and Pass Orders on Merits In Accordance With Law Within A Period Of Three Weeks

• Securities Exchange Board of India (SEBI)
  • Final order in respect of Sumana Ghosh Roy in the matter of PDS Agro Industries Limited

• High Court
  • Writ Petition disposed of with a direction to respondent to decide the petitioner’s revision application
  • Writ Petition filed under Article 226 of the Constitution of India was withdrawn by the Petitioner.
  • Writ Petition filed was disposed of on recording the statement given by the respondents on instructions of the Assessing Officer and also held the respondent bound by the same.
  • Suit filed for permanent injunction against the defendant from infringing its trade marks, stands dismissed.
  • Writ Petition filed under Articles 226 & 227 of the Constitution of India, was favored in part.
  • Appeal filed for seeking interference of the Court in respect of the Stay Order passed by Delhi VAT Appellate Tribunal was allowed.

• Supreme Court
  • Special Leave Petition stands dismissed, filed against the Division Bench judgement of the Kerala High Court.

We have prepared a comprehensive summary for quick reference of the aforesaid updates and Judgements / orders issued during the week of October 05, 2020 to October 09, 2020.

Thank you,

Swift Team

Table of Contents

REGULATORY UPDATES

SEBI UPDATES

1. SEBI issues clarification on standardization of timelines for listing of securities issued on a private placement basis vide Circular dated October 05, 2020:

• SEBI, upon receiving requests from various market participants for clarification on the time period within which securities issued on private placement basis under SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (“SEBI ILDS”), SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 (“SEBI NCPRS”), SEBI (Public Offer and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 (“SEBI SDI”) and SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 (“SEBI ILDM”) Regulations need to be listed after completion of allotment.
• After discussions and taking feedback from market participants, SEBI has decided to stipulate the following timelines:

• Depositories shall activate the International Securities Identification Number (“ISINs”) of debt securities issued on private placement basis only after the Stock Exchange(s) have accorded approval for listing of such securities. Further, in order to facilitate re-issuances of new debt securities in an existing ISIN, Depositories are advised to allot such new debt securities under a new temporary ISIN which shall be kept frozen. Upon receipt of listing approval from Stock Exchange(s) for such new debt securities, the debt securities credited in the new temporary ISIN shall be debited and the same shall be credited in the pre-existing ISIN of the existing debt securities, before they become available for trading. Stock Exchange(s) are advised to inform the listing approval details to the Depositories whenever listing permission is given to debt securities issued on private placement basis.

• In case there is a delay in listing of securities issued on private placement basis beyond the timelines mentioned above in the table the issuer shall:
  • Pay penal interest of 1% p.a. over the coupon rate for the period of delay to the investor (i.e. from date of allotment to the date of listing);
  • Be permitted to utilise the issue proceeds of its subsequent two privately placed issuances of securities only after receiving final listing approval from Stock Exchanges.
• Clause 4(a) (ii) of the SEBI Circular No. SEBI/HO/MIRSD/DOS3/CIR/P/2019/68 dated May 27, 2019 states that in case of delay in listing of debt securities beyond 20 days from the deemed date of allotment, the Company shall pay penal interest of at least @ 1% p.a. over the coupon rate from the expiry of 30 days from the deemed date of allotment till the listing of such debt securities to the investor. The said clause stands deleted.

To read the Circular in detail, please click here.

2. SEBI reviews Dividend option(s) / Plan(s) in case of Mutual Fund Schemes vide Circular dated October 05, 2020:

• Schedule Nine and Eleven of SEBI (Mutual Funds) Regulations, 1996 and SEBI dated March 15, 2010, provide the accounting policies to be followed for determining distributable surplus and accounting the sale and repurchase of units in the books of the Mutual Fund.
• The aforesaid regulatory requirements, inter-alia, mandates that when units are sold, and sale price Net Asset Value (“NAV”) is higher than face value of the unit, a portion of sale price that represents realized gains shall be credited to an Equalization Reserve Account and which can be used to pay dividend. There is a need to clearly communicate to the investor that, under dividend option of a Mutual Fund Scheme, certain portion of his capital (Equalization Reserve) can be distributed as dividend.
• Based on the recommendations of Mutual Funds Advisory Committee (“MFAC”), SEBI has decided that:
  • All the existing and proposed Schemes of Mutual Funds shall name / rename the Dividend option(s) in the following manner:

• Offer documents shall clearly disclose that the amounts can be distributed out of investors capital (Equalization Reserve), which is part of sale price that represents realized gains. Further, Asset Management Companies (“AMCs”) shall ensure that the said disclosure is made to investors at the time of subscription of such options/plans
• AMCs shall ensure that whenever distributable surplus is distributed, a clear segregation between income distribution (appreciation on NAV) and capital distribution (Equalization Reserve) shall be suitably disclosed in the Consolidated Account Statement provided to investors as required under Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996 and SEBI Circular No. CIR/MRD/ DP/ 31/2014 dated November 12, 2014.

• The aforesaid changes shall not be treated as Fundamental Attribute Change in terms of Regulation 18 (15A) of SEBI (Mutual Funds) Regulations, 1996. All other conditions specified in this regard shall remain unchanged and the provisions mentioned under Point 4 shall be effective from April 01, 2021.

To read the Circular in detail, please click here.