Regulatory

COMPLIANCES UNDER SEBI (LODR) REGULATIONS, 2015 FOR LISTED COMPANIES

Listed Entity is a company which has any of its securities listed on any recognized stock exchange and is obliged to comply with the various SEBI Regulations along with the Companies Act, 2013.The SEBI (LODR) Regulations, 2015 was introduced with the objective to line up the clauses of the listing agreement with the Companies Act, 2013 and to consolidate the conditions under different securities listing agreements in one single regulation.

COMMON OBLIGATION FOR LISTED ENTITY:
 General obligation of compliance (Regulation 5)
 Appointment of obligations of Compliance Officer (Regulation 6)
 Appointment of Share Transfer Agent (Regulation 7)
 Co-operation with intermediaries registered with SEBI (Regulation 8)
 Preservation of documents (Regulation 9)
 E-Filing of information (Regulation 10)
 Scheme of Arrangement (Regulation 11)
 Payment of dividend or interest or redemption or repayment (Regulation 12)
 Grievance Redressal Mechanism (Regulation 13)
 Fees and other charges to be paid to the recognized stock exchanges (Regulation 14)

External Commercial Borrowing (ECB) is a mechanism that allows companies to borrow funds from foreign sources in order to finance their business operations or investments in India. ECBs can be denominated in any freely convertible foreign currency and can be used for a variety of purposes, including working capital, capital expenditure, refinancing of existing loans, and acquisitions. ECBs can be raised through a variety of instruments, including bank loans, buyer's credit, supplier's credit, and commercial papers. The Reserve Bank of India (RBI) regulates the ECB framework and sets the policy and regulatory guidelines for ECBs.

The specific documents required for External Commercial Borrowing (ECB) will depend on the type and purpose of the borrowing, the lender, and the prevailing regulatory requirements. However, the following are some of the commonly required documents for ECB:
 Loan application: This is a formal request made by the borrower to the lender, providing details such as the purpose of the loan, amount required, repayment terms, etc.
 Board resolution: This is a document that authorizes the company to borrow funds from foreign sources, and specifies the terms and conditions of the borrowing.
 Loan agreement: This is a legally binding agreement between the borrower and the lender, which outlines the terms and conditions of the loan, including the interest rate, repayment schedule, security arrangements, and other relevant details.
 Financial statements: This includes the audited financial statements of the borrower, such as balance sheet, profit and loss statement, and cash flow statement.
 Project report: This is a detailed report that outlines the purpose of the borrowing, the project plan, and the expected financial returns and risks associated with the project.
 Security documents: This includes documents related to the security or collateral provided by the borrower, such as pledge agreements, mortgage deeds, and guarantees.
 KYC documents: This includes documents that establish the identity and address of the borrower and its directors, such as passport copies, PAN card, and proof of address.
 Tax-related documents: This includes documents related to the payment of taxes, such as tax returns, tax clearance certificates, and withholding tax certificates.
 Compliance certificates: This includes certificates that demonstrate compliance with relevant laws and regulations, such as environmental, labor, and safety regulations.
 It's important to note that the specific documents required may vary depending on the nature and purpose of the ECB, and borrowers should work closely with their bankers and advisors to ensure that all relevant documents are provided in a timely and accurate manner.

A party located in one nation makes an investment in a firm or business that operates in another country through a process known as Foreign Direct Investment (FDI). One may say that FDI intends to seize possession of a company that is situated in another nation. The foreign company will benefit from FDI by being able to participate directly in the everyday operations of the foreign-based company.

FDI Policy: Sectors Where FDI Is Prohibited
 Nidhi corporation
 The purchases of chit funds
 Atomic energy production, gaming, or a related industry
 Lottery
 Housing and real estate (doesn't include townships and commercial projects)
 Cigarettes and other tobacco-related industries.
 Transferable Development Rights (TDR)
 Farming and husbandry

Documents for FDI in India
 The names, addresses, and IDs of all the company's international partners
 Both the Investee and Investor companies must submit the following documents
 Certificate of company Incorporation
 Memorandum of Association (MOA)
 A decision made during a board meeting
 The previous financial year's audited financial statements
 Article of Association (AOA)
 The investee company's shareholding structure both before and after the investment
 If there are existing JV's, a copy of the JV agreement should also be provided
 Apart from this shareholder agreement, trademark assignment, brand assignment agreement should be provided
 An affidavit certifying that the information submitted online and in physical copy is same and accurate
 A copy of the notification downstream
 A copy of any prior FIPB, SIA, or RBI permissions that are applicable to the recent request
 Foreign Inward Remittance Certificates (FIRCs) must be provided if the foreign entity has already made the investment
 Credential of share valuation marked by a Chartered Accountant.

Housing Finance Company is a sort of NBFC that is principally indulged in the business of constructing houses and financing acquisition that includes the improving of plots from the building of new houses. It is compulsory for a Housing Finance Company to have a housing finance business or a business of offering housing finance as its primary objective in the Memorandum of Association (MOA). Further, it shall be noted that only the National Housing Bank (NHB) has the utmost authority to grant Housing Finance Company Registration.

Documents required for obtaining Housing Finance Company Registration:
 Furnish a copy of the Article of Association (AOA) and Memorandum of Association (MOA) of the said company;
 Details about the Company’s profile;
 Demand Draft of Rs 10,000/- for National Housing Bank, New Delhi;
 Furnish a Board Resolution (BR) mentioning that the Company’s aim and approval to record registration application before the National Housing Bank;
 Comprehensive Business Plan stating the next three years goals and objectives of the Company;
 Acquiesce a certificate issued by any professional stating that the said company has duly met the conditions of minimum NOF (Net Owned Fund) of Rs 20 crores;
 Business profile of CEO (Chief Executive Officer) or Directors or MD (Managing Director), etc.;
 Details of all the companies to which the directors are related;
 Financial Audit of the last three years;

Mandatory Compliances for Housing Finance Company:
 It is necessary for every Housing Finance Company to file its annual return, half yearly return, and quarterly return in regard of prudential norms, maintenance of the liquid assets correspondingly;
 Annual submission of the Certificate given by the Auditor, certifying the said Housing Finance Company has the capability to repay deposits;
 A copy of the audited financial statements;
 A copy of the audited annual report;
 Timely filing of return in respect of the change of the registered office;
 Timely filing of return in respect of the change in directors etc.;
 Furnishing a copy of the advertisement soliciting regarding public deposits or a statement in lieu thereof;
 Housing Finance Companies have to comply with the all the provisions relating to IND-AS;

Insurance Brokers are companies and individuals that represent insurance companies. Insurance brokers provide policies to customers on behalf of companies. For insurance and reinsurance business to smoothly function properly, there are requirements to follow rules and procedures under insurance brokering licensing. Brokers must be registered with the Insurance Regulatory and Development Authority (IRDAI). These brokers need to submit periodic returns. The IRDAI would require insurance brokers to acquire an Insurance Broker Licence.

Why Insurance Broker Licence is Required?
 To ensure that a significant number of insurance products are sold on behalf of the Insurance Business.
 To ensure that there is compliance with relevant laws and regulations related to insurance products.
 To monitor activities and conduct market research on insurance-related products.
 To act on behalf of clients to negotiate for insurance-related products.
 To ensure that a nodal authority regulates the insurance business.
 Insurance broker licence would also assure clients regarding the genuinely of the broker.
 To negotiate policies and premiums on behalf of clients.

DOCUMENTS REQUIRED FOR INSURANCE BROKER LICENCE:
 Submission of relevant information as required in the Schedule I – Form B.
 Copy of the Memorandum of Association and Articles of Association should be according to the requirements of the Companies Act 2013.
 Remittance of the Fee for the particular category of Insurance broker licence.
 Training for the employees starting an insurance broker business
 Schedule-I Form F should have the relevant data of the principal officer.
 Fit and Proper certification, which is required as per Schedule-I Form G.
 Declaration submitted by a key management executive, principal officer, director of the company that they are not having any form of disqualification under the Act.
 Details of Directors/ Partners, Promoter and Key Management Personnel are to be provided in the Form.
 Schedule I- Form F- List of qualified persons responsible for managing and procuring brokerage business along with their qualifications.
 Details of statutory auditors and Principal Bankers along with the Bank Account Number of the applicant.
 Details of infrastructure, including IT infrastructure along with supporting evidence thereof like ownership or lease agreement evidencing that sufficient space is present for managing the brokering business.

In order to sell insurance products, one must first obtain an insurance company license from the insurance commissioner of that particular state. The introduction of the Insurance Regulatory Development Authority of India (IRDAI) has brought about significant changes to the insurance sector overall. Moreover, it is the IRDAI that grants the permit for different classes of insurance businesses, including life insurance, fire insurance, and marine insurance. If the selling of insurance business is on an interstate basis, a license is required in every state where the business is carried out.

Eligibility Criteria for Insurance Company License:
• Any company among the prescribed class of companies

a. Any company that is recognised by the IRDAI.
b. Any LLP registered under the LLP Act, 2008.
c. Any company that was an insurance provider before the commencement of the Act, provided only a maximum of 26% of the paid-up capital is allowed to be held by a foreign company.
• In terms of the incorporation of LLPs, the registered name should contain the words “insurance marketing firm”.

DOCUMENTS REQUIRED:
a. The certificate of incorporation of the company (Companies Act 2013).
b. Certified copies of the charter documents (Memorandum of Association and Articles of Association).
c. A five-year business plan that has been duly approved by the Board of Directors.
d. Details of all the directors, including their names, addresses and occupation-related details duly verified.
e. Certified copy of the document containing the shareholding agreement between Indian promoters and foreign investors.
f. Certified copy of the Annual Report of the Indian promoters and foreign investors for the preceding five years.

Non-Banking Financial Company (NBFC) is financial institution that does not have a banking license but can offer financial products and services to customers. NBFC Registration is primarily concerned with loans and advances, acquisition of shares, hire-purchase, finance leasing, chit fund, etc. An NBFC must be different from a bank in ways like an NBFC cannot accept savings and current account deposits, cannot issue cheques drawn on itself, and its depositors do not get a deposit insurance and credit guarantee coverage.

NBFCs in India are categorized in 10 Forms as mentioned below:
 Asset Finance Company (AFC)
 Loan Company (LC)
 Infrastructure Finance Company (IFC)
 Investment Company (IC)
 Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC)
 Systemically Important Core Investment Company (CIC-ND-SI)
 Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI)
 Non-Banking Financial Company – Factors (NBFC-Factors)
 Mortgage Guarantee Companies (MGC)
 Non-Operative Financial Holding Company (NOFHC)

Documents Required NBFC Registration:
 Certificate of Company Incorporation
 Detailed information about management along with a brochure of the company
 A copy of PAN or Corporate Identity Number (CIN) of the company
 Documents related to the office location/address
 Certified copy of the Articles of Association (AOA) and Memorandum of Association (MOA)
 List of Directors’ profile must be duly signed by each director must be attached
 CIBIL or credit reports of the Directors of the Company are required
 A copy of a board resolution which certifies that a company has not carried out or stopped NBFC activity and will not carry until the registration from RBI is granted
 A board resolution on ‘Fair Practices Code’ is to be passed, and the certified copy of a same is to be submitted.
 Certificate issued by the statutory auditor stating that the company is not holding the public deposit and does not accept it as well.
 Certificate specifying owned funds as on the date of an application from the Statutory Auditor is required.
 Information regarding the bank account, loans, balances, credits, etc. is to be furnished.
 If applicable, an audited balance sheet and profit and loss statement along with the directors and auditor’s reports of the preceding three years have to be submitted.
 A self-certified copy of a bank statement and Income Tax Returns are required.
 Information detailing a company’s future plan, generally for the next three years, and the projection of balance sheets, cash flow statements, and income statements.

NBFC takeover is a process of acquiring a functioning RBI registered NBFC and not going for the NBFC registration process from the initial stage. NBFC takeover is a suitable but complex process. This process is suitable for individuals or corporates who want to opt for a speedy and confirmed functioning of their financial business.

Financial services that NBFC offers are asset financing, acquisition of shares, debentures, securities, bonds, and stocks, granting loans as well as advances, and investing in various commercial securities. NBFC is not only limited to previously mentioned points but also extends to providing credit facilities and working capital loans.

How NBFC Takeover works?
The Non-Banking Financial Company Takeover Revolves Around Two Entities:
• Target Company
An acquirer company is keeping its eyes on a 'to be acquired' company known as the Target Company.

• Acquirer Company
A company that has got the ability to acquire the target company is renowned as Acquirer Company.

The target company is acquired by the acquirer company, and shares of the existing shareholders are transferred to the proposed shareholders or entity after following the due procedure. The acquiring company enjoys the pre-existing RBI registration of the target company along with its market standing.

RBI Approval
RBI approval is required in the following case:
As the governance and control of NBFC lie in the hands of RBI, its consent matters the most and is necessary to get the approval in these cases mentioned below.
 At the onset of Takeover of NBFC procedure, approval becomes mandatory.
 In those circumstances when management changes and thereby, leading to a change of 30% of the total number of directors.
 When shareholding pattern witnesses a change by becoming responsible for the transfer of 26% or more of the paid-up capital of the corporation to others.

An exception to the RBI approval requirement:
 RBI has nothing to do with the decline in capital or buyback of the shares as a competent court exists to deal with them.
 Change in management in case of rotation of board members inclusive of independent directors.

The documents required for NBFC registration are:
 MOA of the Company
 Registration certificate
 Income test certificate
 Net worth certificate
 Clean banker report
 Education proof’
 Credit report of directors and shareholders
 Experience certificate of directors and shareholders
 Organization matrix
 Various policies

OVERSEAS DIRECT INVESTMENT Overseas Direct Investment (ODI) refers to a business strategy in which a company invests its own capital in a foreign country in order to establish or acquire a subsidiary or other form of business presence. ODI can take many forms, including setting up a new production facility, acquiring an existing business, or investing in a joint venture with a local company.

ODI typically involves a significant investment of financial, legal, and operational resources, as well as a commitment to cultural adaptation, risk management, and compliance with local laws and regulations. However, the potential benefits of ODI can be significant, including access to new markets, resources, and talent, as well as the potential for increased profitability and long-term growth.

The specific documents required for overseas direct investment will depend on the nature of the investment and the country in which the investment is being made. However, some common documents that may be required include:
 Business Plan: A business plan outlining the investment opportunity, including market research, investment structuring, and projected financial returns.
 Incorporation Documents: If the investment involves setting up a new subsidiary or joint venture, incorporation documents will be required, including articles of incorporation, shareholder agreements, and board resolutions.
 Due Diligence Reports: Reports outlining the results of due diligence conducted on the investment opportunity, including financial, legal, and operational risks.
 Financing Documents: Documents outlining the financing arrangements for the investment, including loan agreements, equity investment agreements, and other financing documents.
 Regulatory Filings: Regulatory filings required by the local government, including applications for licenses and permits, tax registrations, and other regulatory filings.
 Employment Contracts: Contracts outlining the terms and conditions of employment for local employees, including salaries, benefits, and termination provisions.
 Intellectual Property Documents: Documents outlining the ownership and protection of intellectual property associated with the investment, including trademarks, patents, and copyrights.
 Import and Export Documents: If the investment involves the import or export of goods, import and export documents will be required, including shipping documents, customs declarations, and import/export licenses.
 Joint Venture or Partnership Agreements: Agreements outlining the terms and conditions of the joint venture or partnership, including the rights and obligations of each party.
 Government Approvals: Depending on the country and the nature of the investment, government approvals may be required, such as approvals for foreign investment, environmental impact assessments, or other regulatory approvals.
 Overall, the documentation requirements for overseas direct investment can be complex and vary widely depending on the specific investment opportunity and the local regulatory environment. Companies should work closely with legal and financial advisors to ensure that all necessary documentation is in place to support the investment.

In many countries, foreign companies that want to conduct business activities may need to establish a presence by registering a Project Office, Liaison Office, or Branch Office. Here's a brief overview of what each of these terms mean: Project Office: A Project Office is typically set up by foreign companies to undertake specific projects in the country where they are operating. These offices are usually temporary and can only operate for the duration of the project. A Project Office does not have a separate legal entity from the parent company.

Liaison Office: A Liaison Office is established to act as a communication channel between the parent company and the potential or existing customers in the host country. This type of office cannot undertake any commercial activities or generate income. The activities of a Liaison Office are limited to market research, promoting the company's products or services, and facilitating technical or financial collaborations between the parent company and the local entities. Branch Office: A Branch Office is established by a foreign company to carry out business activities similar to the parent company. A Branch Office has a separate legal entity from the parent company, which means that it can enter into contracts, hold assets, and undertake commercial activities. A Branch Office is required to register with the local regulatory authority and comply with local laws and regulations.

(a) Application to be submitted

 Form FNC
A person resident outside India desiring to establish an LO, BO or a PO or any other place of business in India shall submit an application in Form FNC (Annex B) to an Authorised Dealer Category-I bank.

 Other documents to be submitted with an application:
(a) Copy of the Certificate of Incorporation/Registration; Memorandum of Association and Articles of Association attested by the Notary Public in the country of registration. [If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country].
(b) Audited Balance sheet of the applicant company for the last three/five years in case of branch office/liaison office respectively. [If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted].
(c) Bankers’ Report from the applicant’s banker in the host country/country of registration showing the number of years the applicant has had banking relations with that bank.
(d) Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC.
(e) Declaration by the applicant company.
(f) Letter of comfort, where applicable, stating that the parent company undertakes to provide the necessary financial support for its subsidiary/group company’s operations as a branch/liaison office in India and that any liability that may arise due to the functioning of the branch/liaison office in India will be met by the parent company/group company, in case of inability on part of the branch/liaison office to do so.

case of inability on part of the branch/liaison office to do so.

(b) Onward submission of Form FNC to RBI by AD Bank: In case of automatic route, the approval may be given by AD Bank and in case of approval route, the approval is given by the RBI. An application under approval route is forwarded to RBI seeking for grant of approval.
Although in automatic route the approval is given by AD bank yet a copy of the Form FNC along with the other details of the approval proposed to be granted is also submitted by AD Category–I bank to RBI for allotment of Unique Identification Number (UIN) to each LO. The UIN allotted by RBI can be accessed at the following link http://rbidocs.rbi.org.in/rdocs/Content/docs/UIN100001.xls
 Onward submission of Form FNC to RBI by AD Bank

(c) Approval Letter:
After receipt of the UIN from the Reserve Bank, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing LO/BO in India.
Due diligence to be exercised by AD Bank: The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing LO/BO, antecedents of the promoter, nature and location of activity of the applicant, sources of funds, etc. and compliance with the extant KYC norms grant approval to the foreign entity for establishing LO in India.
Activity to start within six months of the approval: The approval granted by the AD Category I bank should include a proviso to the effect that in case the BO/LO/PO for which approval has been granted is not opened within six months from the date of the approval letter, the approval shall lapse.
Extension of time: In cases where the non-resident entity is not able to open the office within the stipulated time frame due to reasons beyond its control, the AD Category-I bank may consider granting extension of time for a further period of six months for setting up the office. Any further extension of time shall require the prior approval of the Reserve Bank of India in this regard.