Source Business Standard
| NBFCs approach RBI, govt over new companies Act |
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Mumbai, 17 April Non- banking finance companies (NBFCs) have approached the Reserve Bank of India ( RBI) and the Ministry of Corporate Affairs to amend regulations under the new companies Act. These companies fear the stiff reserve requirements and norms on investment in government bonds will hit them hard. NBFCs are, however, yet to raise the matter with the ministry in a formal manner. Rules under the new companies Act make it mandatory for NBFCs to create a corpus ( debenture redemption reserve account) to meet repayment obligations for debentures maturing within a year. Also, they have to invest 15 per cent of their resources in government bonds. While building buffers for repayment is good for financial discipline, the provisioning would eat into the funds to be deployed into business. And, this will be a huge burden on the already stretched balance sheets of NBFCs, say executives at such companies. Under the old companies Act (of 1956), financial companies were exempted from such a corpus. Mahesh Thakkar, director- general of Finance Industry Development Council, said the new Act could make the situation acute. The entity will take up the matter with the ministry and RBI, the regulator for financial companies. Thakkar said the new Act could make fund- raising through debentures unviable. The effect of the norms on financial companies will vary according to degree of their dependence on debentures — while those using bank lines to source funds won't see much impact, companies using mediumterm (two- three- year) debentures will be under pressure to keep a substantial portion of their funds in the redemption reserve. Sanjay Agarwal, managing director of Au Financiers, said an exemption was allowed in the old companies Act, adding perhaps, it was left out in the new Act due to oversight. NBFCs have already urged the government to reintroduce the exemption. For AU Financers, the share of bonds/ debentures in the total funds raised is about 20 per cent, and this might deal a 10- basis- point impact on costs. Vibha Batra, senior vice- president (financial sector rating), Icra, said now, the cost of business would rise. Fewer funds will be available for deployment and amounts kept in reserves will have a ' negative carry', she said, adding this would, however, not impact the ratings of the instruments floated by NBFCs. Many well- run companies already maintained liquidity buffers to meet redemption obligations; these could be in the form of bank credit lines, she said. |
Source Business Line
Top 100 companies told to set up risk management committees
OUR BUREAU
MUMBAI, APRIL 17:
The Securities and Exchange Board of India has said that the top 100 companies must constitute risk management committees immediately, in line with its revised corporate governance norms.
Risk management committees identify, evaluate and mitigate all risks associated with business, interest rates, currencies and other challenges companies face.
A SEBI circular on Thursday said the boards of these companies have to define the roles and responsibilities of the committee and may delegate monitoring and reviewing of the risk management plan to the panel.
All other companies have to implement the revised corporate governance norms by October 1. The norms will be implemented through stock exchanges under Clause 49 of the listing agreement.
The amended norms will apply to all prospective related-party transactions. For existing material related-party contracts or arrangements that are likely to continue after FY15, companies are required to seek shareholder approval at the first annual general meeting after October 1, 2014. They are also free to seek the shareholder nod prior to the meeting.
A related-party transaction is a transfer of resources or obligations between related parties, regardless of whether a price is charged. Parties are considered to be related if at any time during the reporting period one party has the ability to control the other or exercise significant influence over the other party in making financial and operating decisions.
SEBI clarified that the norms would be applicable to banks, financial institutions and insurers only to the extent that it does not violate any norms of their primary regulator — RBI /IRDA. This is not applicable to mutual funds, SEBI said.
Listed companies also have to compulsorily provide an e-voting facility to shareholders for all resolutions. For shareholders without access to e-voting, companies have to seek assent or dissent in writing through a postal ballot.
The monitoring cells of stock exchanges have been mandated to track compliance on disclosures. They must report to SEBI within 60 days of the end of each quarter.
NFRA, databank for independent directors to become reality this fiscal
OUR BUREAU
NCLT process may take more than a year post apex court's final decision
NEW DELHI, APRIL 17:
If you thought the National Financial Reporting Authority (NFRA) had gone off the radar of the Union Government, think again.
Setting up the NFRA very much forms part of the Corporate Affairs Ministry's key agenda for the current fiscal, a top official said.
Under the new company law, NFRA has been proposed as a quasi judicial body to oversee the quality of financial reporting and also act as a disciplinary authority for chartered accountants.
The auditing fraternity's excitement that NFRA provision in the new company law had not been implemented although nearly 283 sections of the new law had come into force may be short-lived.
"During 2014-15, the Ministry intends to set up several new bodies envisaged under the new company law such as NFRA, Investor Education & Protection Fund, registered valuers as well as notifying an appropriate agency to create and maintain a databank for independent directors. An early decision will be taken by the Ministry on all these issues," MJ Joseph, Additional Secretary in the Corporate Affairs Ministry, said at a national conference on corporate governance, organised by PHD Chamber of Commerce and Industry here on Thursday.
The setting up of NFRA would be a body-blow to the CA Institute which faces the prospect of losing regulatory hold over its members.
Also, the new quasi-judicial body would take over the role of recommending auditing standards, which are currently the preserve of the CA Institute.
NCLT delayed
The important matter of national company law tribunal (NCLT) and its appellate body National Company Law Appellate Tribunal (NCLAT) is currently before the Supreme Court due to a legal challenge, Joseph said.
"After a final decision is pronounced, the Ministry would take necessary action to establish the required numbers of Benches at different locations of the country. This process may take more than a year for its completion," he said.
NCLT is a significant component of the new company law framework.
Most of the remaining 187 sections that are to be notified in the new company law are linked to the functioning of NCLT, say company law experts.
As many as 283 Sections out of the total 470 Sections in the new company law have come into force from April 1.
(This article was published on April 17, 2014)
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