| NBFCs demand recovery powers, tax benefits like banks |
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Mumbai, 5 February Non- banking financial companies (NBFCs) have demanded income tax benefit on provisioning, like banks. In a representation to the finance ministry recently, the Finance Industry Development Council ( FIDC), an umbrella body of NBFCs, demanded that NBFCs be covered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities ( Sarfaesi) Act to be able to recover their loans like banks. The NBFC representatives met Finance Minister P Chidambaram during the pre- Budget meetings. Sarfaesi Act is a stringent recovery law that allows banks to take over assets of the defaulters and auction them, without any kind of court intervention. In its draft norms for NBFCs released last month, the Reserve Bank of India ( RBI) had asked NBFCs to classify loans as nonperforming assets if borrowers default for 90 days, instead of the current practice of 180 days. FIDC wants the guidelines implemented over a period of three years, instead of two years as proposed in the draft norms. The industry body has had several meetings with RBI in this regard. Among the other demands by NBFCs are maintaining tier- I capital requirement at 7.5 per cent instead of 10 per cent as proposed in RBI's draft norms. According to NBFCs, if the tierIrequirement has to be raised, then risk weightage of productive assets such as commercial vehicles and construction equipment should be reduced. They have also requested RBI to allow them to tap external commercial borrowings. RBI had constituted a working group under former deputy governor Usha Thorat to look into the issues and concern of the NBFC sector. The group had submitted its report to RBI in August 2011. Based on the committee's report, RBI came out with draft guidelines for the sector in January 2013. |
| Sebi cracks down on ' scheming' promoters |
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New Delhi, 5 February The Securities and Exchange Board of India (Sebi) has cracked down on mergers and schemes of arrangement by listed companies. The regulator has drawn out a framework of rules and regulations to cover such transactions. Court- approved mergers and schemes of arrangements were exempt from the provisions of the takeover code. Therefore, many companies used this route to surreptitiously increase promoters' stakes and other such actions that affect minority investor interest. In the recent past, governance groups have raised concerns and recommended institutional investors to vote against such proposals in court- convened shareholders' meetings. Recently, restructuring activities by paintmaker Akzo Nobel, Escorts and Elecon Engineering were under shareholder scrutiny. According to the scheme of reconstruction or amalgamation being sanctioned by the high court under certain sections of the Companies Act, the listed companies desirous of getting their equity shares listed after merger/ demerger/ amalgamation, etc are required to seek an exemption from Sebi under certain provisions of the Securities Contracts (Regulation) Rules ( SCRR). In the recent past, Sebi has received applications, seeking exemption, from certain entities containing, inter alia, ( a) inadequate disclosures, ( b) convoluted schemes of arrangement and ( c) exaggerated valuations. Sebi is of the view that granting listing permission or exemption from the requirements of Rule 19( 2)( b) of SCRR, 1957 based on such applications may not be in the interest of minority shareholders. "At the same time, if listing permission or such an exemption is delayed or denied, it would add to the uncertainty and would deprive shareholders of an exit opportunity. In order to avoid such situations, the existing requirements are being revised," Sebi said in a circular. The new rules will improve the process, but may lead to delays, said experts. " Sebi has drastically tightened the norms relating to approval of schemes of merger/ demerger involving listed companies. Now, every scheme would require clearance of Sebi, besides stock exchanges. Approval of shareholders would also be through postal ballot and e- voting. Good moves towards wider participation and transparency. Only concern may be delay in the approval process," said Manoj Kumar, assistant vice- president, Corporate Professionals, acorporate services provider. Listed companies planning for a scheme of arrangement has to place a valuation report obtained from an independent chartered accountant before its audit committee. " The audit committee shall furnish a report recommending the draft scheme, taking into consideration, inter alia, the aforementioned valuation report," the Sebi circular said. After receiving the draft scheme, the concerned bourse should forward the same to Sebi within three working days. Exchanges have to process the draft scheme — including seeking clarifications from company and/ or opinion from an independent chartered accountant — and forward their 'objection/ no- objection' letter to the market regulator. Upon receipt of the letter, Sebi will provide its comments on the draft scheme to the stock exchanges. Sebi would endeavour to provide its comments on the draft scheme to the stock exchanges within 30 days, subject to certain conditions. According to existing norms, alisted company should file any scheme/ petition, proposed to be filed before any court or tribunal with the stock exchange for approval, at least a month before it is presented to the court or tribunal. Companies are also required to include the ' complaints report' in the notice sent to the shareholders, while seeking their approval of the scheme. The report should be given by the stock exchanges to Sebi before the market regulator communicates its comments on the draft scheme. Elaborate disclosure norms and scrutiny by exchanges for schemes of arrangements MINORITY STRIKES Shareholders voting againstmanagement/ promoter moves: In Feb 2012, 44.9 per cent of public shareholders voted against a merger proposal by Akzo Nobel In Oct 2012, 18.4 per cent of the equity shareholders by value or about a third of public shareholders in Elecon Engineering voted against a restructuring proposal In Jan 2013, some SpiceJet shareholders voted against promoters plan to hike stake Source: BSE filings, proxy firms |
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