Regulations
3 FAQs but still no clarity in SEBI’s Listing Regulations
SEBI came out with FAQs on its Listing Regulations three times in January alone. However, the FAQs continue to create more ambiguity instead of clarity 
 
On three different dates, market regulator Securities And Exchange Board Of India (SEBI) has come out with twenty one (21) frequently asked questions (FAQs) on the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations). In this month alone, SEBI has issued FAQs on 8th, 19th and 21 January 2016. In addition to the same, more FAQs, are expected to come. It is however left far from bringing clarity as was expected; rather it creates more and more ambiguity in a clear sense. 
 
Before the inception of the Listing Regulations 2015, various workshops have been conducted in the major cities of the country in order to enable the market participants to implement the new Listing Regulations and seeking the pros and cons, comments and difficulties on such implementation. Various issues have also been discussed and answered thereon and some queries were told to be clarified later by way of clarifications or FAQs. It is felt that even on completion of almost two months from the inception of the aforesaid Regulations; many issues have been left unattended or ambiguous. One of such ambiguities lies in Regulation 24 of the aforesaid Regulations which pertains to corporate governance requirements with respect to subsidiary (ies) of the listed holding entity which corresponds to earlier Clause 49 (V) of the equity listing agreement. 
 
Regulation 24(4) - significant transactions or arrangements by unlisted subsidiary
 
The provisions under Regulation 24(4) and Clause 49 (V) (C) have been kept unchanged, which requires the management of an unlisted subsidiary to bring to the notice of the Board of Directors of the listed holding entity on a periodic basis, a statement with respect to all significant transactions or arrangements entered into by such an unlisted subsidiary. Although, similar requirements were there in the listing agreement earlier, there were however, no such representations or ambiguities discussed or brought to the notice of SEBI; the probable reason of which may be the absence of any statutory recognition of the listing agreement. However, considering the fact that the replacement of the erstwhile listing agreement with the new Listing Regulations gives statutory recognition to the listing norms as were existing earlier, it is felt necessary to retract the ambivalence so that the listed entities are able to implement the new Listing Regulations, follow its obligations and make disclosures thereunder in letter and spirit as required by the said Regulations.
 
The ambiguity under Regulation 24(4)
 
The ambiguity under Regulation 24(4) appears from the explanation provided below the said Regulation and such ambiguity would not have been appeared so. Interpretation of the said Regulation would not have been so difficult, if SEBI would not have come up with the FAQs. SEBI vide its FAQs has clarified that for the purpose of Regulation 24, wherever the terms ‘unlisted material subsidiary’ or ‘unlisted subsidiary’ have been distinctly mentioned, the provisions shall be applicable to such ‘unlisted material subsidiary’ or ‘unlisted subsidiary’ as the case may be. Further, the said FAQs also provide that the Regulation 24(4) is applicable to all unlisted subsidiaries. However, while the Regulation 24(4) talks about unlisted subsidiary, the explanation given below talks about unlisted material subsidiary. The applicability of the said Regulation arises when there is any significant transaction or arrangement comes into picture with respect to the unlisted subsidiary. However to understand the meaning of such a significant transaction, one has to refer to the explanation, which provides the meaning of such a transaction in respect of an unlisted material subsidiary. At first instance, the intention might have been to include any one of the both i.e. unlisted material subsidiary and unlisted subsidiary; however, the same is an ambiguous and contradictory provision till date which requires more clarity.
 
Even if SEBI clarifies to include either of the two above, the practical situations that may arise in the process of complying with the said provisions may be of much burdensome for a listed entity having a greater number of unlisted subsidiaries or unlisted material subsidiaries. Even the Board of Directors of the listed entity will have to take note of all such information placed before it, since the threshold to become a transaction a significant one is only greater than 10% of total revenues, total expenses, total assets or total liabilities of such single reporting subsidiary, which is much easier to achieve in day-to-day business. 
 
Considering the requirements under Regulation 24(4) as aforesaid, although, the Board of Directors has to concentrate on various other sensitive matters or business decisions, which require more time and evaluation, however, it will still have to waste its valuable time in discussing the information placed by its subsidiaries. Hence, it seems that the aforesaid provisions need a review or revisit so that implementation of the new Listing Regulations becomes easier and the same does not become a burdensome process.
 
(Munmi Phukon works in the Corporate Law Division at Vinod Kothari & Company)

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COMMENTS

Dipakkumar J Shah

1 year ago

SEBI had in 1994 Approved Prospectus of Ratnamani Engineering Limited . Where in Report of Auditors containing a remarks Job Charges for 31.10.1992 were just mere book entry included in Profit . Out of the same profit dividend was declared. This is on their record and many complaints were made to SEBI . No follow up and corrective action!! What is the requirement of such action !!!!!

Only financials remain in sealing Rafale deal: Modi
New Delhi : Prime Minister Narendra Modi said on Monday only the financial details need to be worked out in finalising the much-awaited purchase of Rafale fighter aircraft from France, adding that it would be concluded soon.
 
Modi had, during his visit to Paris last year, announced India's intention to purchase 36 Rafale medium multi-role combat aircraft built by the French aerospace major Dassault. The deal is valued at around Rs.60,000 crore (almost $9 billion).
 
"Only financial aspects of the Rafale deal is left. The inter-governmental agreement has been finalised. It will be done soon," the prime minister told reporters after delegation-level talks with French President Francois Hollande here. 
 
On his part, Hollande said: "We signed an inter-governmental agreement (IGA) on Rafale deal. It is a decisive step for India to purchase the fighter jets and also for France to make them available to a great country like India."
 
Referring to the financial aspects of the deal, Hollande said: "That will be sorted out soon."
 
"Dassault Aviation is very pleased with this progress, and is actively supporting French authorities in their efforts to finalize a complete agreement within the next four weeks," the company said in a statement from Saint Cloud in France. 
 
The Indian Air Force (IAF) had shortlisted Rafale for induction into its frontline combat fleet, replacing the ageing Soviet-era MiG-21 squadron but the deal did not materialise for long.
 
The original deal, at an estimated cost of $20 billion, was for delivery of 126 fighters, including 18 off-the-shelf by Dassault, and 108 to be manufactured in India under licensed production by the state-run Hindustan Aeronautics Ltd (HAL) over time, with 50 percent offset obligations to benefit the domestic aerospace industry.
 
The IAF opted for the twin-engined Rafale in January 2012 over Eurofighter Typhoon of the European consortium EADS Cassidian after outsmarting F-16 of American Lockheed Martin, F/A-18 of Boeing, MiG-35 of Russian United Aircraft Corp and Swedish SAAB's Gripen in a global competitive bid floated in August 2007.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Pune's tea-vendor CA becomes Maharashtra brand ambassador
Pune (Maharashtra) : A humble tea-vendor from Pune Somnath Giram, who has cleared this year's Chartered Accountancy examination, has been named as the 'brand ambassador' for Maharashtra's "Earn & Learn Scheme".
 
Education Minister Vinod Tawde made the announcement here on Sunday at a function while a prominent Pune realtor, DSK Group's CMD offered Giram a job to audit his company's account books.
 
Hailing from a small village in Karmala in Solapur district, the 28-year-old Giram, born to a marginal farmer, has come a long way after cycling 40 km daily to attend school.
 
Owing to a poor financial background, Giram considered dropping out of school after the State Secondary Certificate Examination (SSCE) of Class 10 like his elder brother and sister, as he could ill-afford to buy textbooks and notebooks.
 
Undetterred, he took up manual labour jobs in fields and collected money to continue his studies and pay for his fees as well as books and other study material to complete higher secondary in his hometown.
 
Noticing his skills with financial figures, a sympathetic teacher advised him to go to Pune and pursue his B.Com. which he completed in 2009, followed by his M.Com. in 2012.
 
Simultaneously, he started studying for his CA course, but was bogged down by the heavy fees and expensive books, coaching class fees and other expenses.
 
Not losing hope, he set up a small teashop in Pune's Sadashiv Peth's Perugate Square in 2013, which soon grew in popularity and he had a roaring business which helped finance his CA studies.
 
After managing the teashop for nearly 12 hours, he would put in 5-7 more hours for studies, often working late into the night.
 
His efforts and dedication finally paid off and he cleared this year's CA exams with 55 percent marks, coming among the only around eight percent of the total candidates declared successful.
 
"I was inspired by the humble beginnings of Prime Minister Narendra Modi and I resolved not to get disheartened by an obstacles in life," Giram told media persons.
 
Though he has not planned to shut down his teashop, he hopes to launch his own CA firm and serve the country in some capacity in future.
 
Impressed by Giram's struggles and success, minister Tawde named him the new brand ambassador for the state-sponsored 'Earn & Learn Scheme' to inspire lakhs of other struggling youths like him.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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