Tax implications on INVITs, REITs and its Unitholders under Finance Act 2020

As you are aware, the Finance Minister, Ms. Nirmala Sitharaman, presented the Union Budget 2020-2021 on February 1, 2020 and consequently, introduced the Finance Bill, 2020 (“Bill”) in the Lok Sabha. The Bill comprised the financial proposals, including taxation related proposals, to amend the provisions of the Income-tax Act, 1961 (“Income-tax Act”) for the financial year 2021. Subsequently, the Finance Minister and her team had several discussions with various stakeholders, who we understand made many representations, seeking changes in some of the proposals. Pursuant to this, amendments to the Bill were presented and the Bill, incorporating the amendments was passed by the parliament on March 26, 2020 and received the assent of the President of India on March 27, 2020. It has now been enacted as the Finance Act, 2020 (“Finance Act”).
Continue Reading UPDATE:  Tax implications on INVITs, REITs and its Unitholders under Finance Act 2020

Coronavirus - COVID19- Faqs

The World Health Organisation (WHO) declared COVID-19 as a “pandemic” on March 11, 2020.

The outbreak and the rapid spread of COVID-19 has sent shock waves across global markets. It has disrupted supply chains, leading to the closure of several manufacturing facilities globally; serious disruption of air and sea traffic and closure of vital air routes, like the one between the US and Europe. This is turn has led to the collapse of stock markets around the world, leading to the loss of billions of dollars, which got wiped out in a matter of days. A combination of all these factors has led to a decline in the overall volume of global economic activity, forcing the world economy towards a possible recession. It is forcing Boards across the globe to confront a host of difficult questions on how business should be conducted during a global public health crisis.
Continue Reading COVID-19 : OFFICIALLY A PANDEMIC

Mutual Funds and Alternative Investments - Stewardship Code

Introduction

On December 24, 2019, Securities and Exchange Board of India (“SEBI”) released a circular setting up a stewardship code for Asset Management Companies (“AMCs”), Mutual Funds (“MFs”) and all the categories of Alternative Investment Funds (“AIFs”) investing in listed Indian companies (“Stewardship Code” or “Code”). In keeping with global trends, SEBI has made it necessary for the power wielding cash-rich institutional investors, to act in accordance with the responsibilities that invariably accompany and behoove such powers and formulate a policy adopting the principles enshrined in the Code.

The Stewardship Code prescribes certain principles which, aim at enhancing the responsibilities of the AMCs/ AIFs to protect the interests of their investors/beneficiaries. The requirements pertaining to the Stewardship Code shall come into effect on April 1, 2020.
Continue Reading Being Responsible Corporate Citizens – How Mutual Funds and Alternative Investment Funds will Rise Up to the Stewardship code

THE ROAD TO RESOLUTION OF FINANCIAL SERVICE PROVIDERS - IBC

 

The Imperative for a distinct framework for the resolution of financial firms

The financial sector is facing a combination of liquidity, governance and business issues, on account of which certain Non Banking Financial Companies (“NBFCs”) are facing solvency concerns.

The severe liquidity crunch for NBFCs was caused  as banks and other financial institutions have curtailed refinancing the loans of NBFCs on account of which several NBFCs and other financial institutions faced debt servicing and solvency issues. These have sought to be resolved through the Stressed Asset Directions issued by the Reserve Bank of India (“RBI”) on June 7, 2019. This was fraught with complexities given the diverse sets creditor, including market borrowings  each of whom were governed by different financial regulators.
Continue Reading The Road to Resolution of Financial Service Providers: A Firm First Step

Depository Receipts - SEBI Framework SMM

The Securities and Exchange Board of India (SEBI) has introduced a framework for issuance of depository receipts (DRs) by companies listed or to be listed in India ( DR Framework), by its circular dated October 10, 2019.

In the early years of liberalisation and up to the time SEBI permitted qualified institutions placement (QIPs) in 2006, DR issuances formed a significant and important part of foreign investment into the Indian equity markets. However, in the past five years, there have been very few DR issuances, for a variety of reasons including due to regulatory uncertainty around operational guidelines for DRs and concerns in relation to compliance with rules under the anti-money laundering legislation.
Continue Reading SEBI Introduces Framework for Issuance of Depository Receipts

 

P2P lending in India Rules and Regulations

Fintech has massively transformed money flow and settlement transactions among millennials. Out of numerous existing fintech models, one is peer to peer (P2P) lending. P2P lending platforms play the role of an intermediary between two individuals, the lender and the borrower. With the upscaling growth rate of such platforms it has become a target for regulatory attention and the Reserve Bank of India (RBI) came up with regulation on October 4, 2017, vide the master direction bearing number DNBR(PD) 090/0.10.124/2017-18 (Master Direction) on non-banking financial peer-to-peer lending platforms.[1]

The Master Direction covers all prospective and existing P2P platforms (NBFC-P2P), which perform as P2P lending platforms on the fulfilment of certain conditions (one of which includes holding a net-owned fund of INR 2 crore). These registered P2P lending platforms would appear on the RBI list of registered NBFC-P2Ps as and when granted the certificate of registration. As per the last updated list[2], there are 11 NBFC- P2Ps registered while more than 50 still exist and are awaiting clearance from the RBI, Department of Non-Banking Regulation, Mumbai.
Continue Reading Peer to Peer Lending in India: A Chinese Lesson Well Learnt!

SEBI’s Framework for Innovation Sandbox - Fintech

Amidst the fast-paced growth of the fintech industry in India, financial regulators in the country have been swift to recognise each such development and keep pace with the market. One particularly interesting development is the global adoption of regulatory sandboxes.

From 2016, a range of committees constituted by different financial regulators began to advocate adoption of regulatory sandboxes, drawing from success stories in other jurisdictions.[1] But 2019 marks a significant moment, as three of India’s prominent financial regulators have rolled-out either draft or final frameworks on regulatory sandboxes for fintech.[2]

The frameworks seek to spur fintech innovation in India and have been welcomed by all stakeholders alike. The framework released by the Securities and Exchange Board of India (SEBI) adopts a particularly holistic approach towards regulation of many different aspects of a sandbox. In this post, we seek to critique the ‘Framework for Innovation Sandbox’, released by SEBI on May 20, 2019 (Sandbox Framework).
Continue Reading Innovation in the Sands of Time: A Critique of SEBI’s Framework for Innovation Sandbox

Foreign Portfolio Investor - Corporate Debt - Voluntary Retention Route

As the Indian economy has grown over the years, so have the means of raising foreign debt by Indian companies. What began with limited investment channels for foreign banks and certain qualified institutional investors, has now flourished into a robust foreign debt investment market. Based on the commercial considerations driving a deal, Indian corporates can now raise ECBs under multiple tracks, issue various kinds of rupee denominated bonds, or avail of monies through fund structures such as alternative investment funds (AIFs) and real estate investment trusts (REITs).

Added to this mix is the foreign portfolio investment (FPI) route. What sets FPI apart is the degree of commercial flexibility it accords to investors and companies. For example, end-use and pricing norms applicable to FPI investments are relatively relaxed. Because of this, FPI is often the preferred option for raising debt, particularly short-term debt and working capital funding requirements.[1]
Continue Reading Investment through the Voluntary Retention Route: Fresh Push for FPI in Corporate Debt?

stamp Act amendments 2019

The key amendments that the Finance Act, 2019 proposes to the Indian Stamp Act, 1899 have been examined in Decoding the Amendment to the Indian Stamp Act, 1899 for Debentures – Part I. The impact of the amendments on debentures have also been analysed against the prevailing stamping arrangement for debentures.

This second part deals with the interplay between the definitions of ‘debentures’ and ‘securities’ under the Amendment, and issues relating to the implementation of the Centralised Collection Mechanism (CCM).
Continue Reading Decoding the Amendments to the Indian Stamp Act, 1899, for Debentures – Part II

Amendments to the Indian Stamp Act, 1899 for Debentures

The Finance Act, 2019[1] (Amendment) proposes to make some significant amendments to the Indian Stamp Act, 1899 (Act). The primary objective of the Amendment is to set up a zero-evasion centralised collection mechanism under which stamp duty is collected through one agency, at one place and on one instrument for securities market transactions.

It also seeks to standardise the stamp duty payable on issuance, sale and transfer of securities market instruments. It does so by removing multiple instances of stamp duty, waiving stamp duty on certain instruments, and removing the ability of the State Governments to determine rates or levy stamp duty in addition to the Act[2].
Continue Reading Decoding the Amendments to Indian Stamp Act, 1899, for Debentures – Part I