Vinod Kothari & Company –April, 2012
Touches...
Vinod Kothari & Company Vinod Kothari Consultants P Ltd Academy of Financial
Services P Ltd 1012 Krishna 224 AJC Bose Road Kolkata – 700017 91-33-22817715/ 1276/ 3742 Also at: 222, Ashoka Shopping Centre 2nd Floor, LT Road Near GT Hospital Mumbai- 400 001 91-22-22675600
In this Issue:
Editorial
Our Articles Published
What’s happening at VKC and VK & Co.
Contact Us
April, 2012
Vinod Kothari & Company –April, 2012
Highlights of April, 2012:
VKC grabs IFC project on Affordable Housing Finance
Securitisation Summit, 2012
Tata Steel limited in our client list now.
Articles published in moneylife Vinod Kothari’s article on RBI Monetary Policy Article on the New FDI Policy co-authored by Soma Bagaria and Nidhi
Ladha
Article on New Securitisation Guidelines co-authored by Vinod Kothari and Nidhi Bothra published in Microfinance focus
Article on Substance vs. Form Conflict in True Sale by Soma Bagaria published in Indian Corporate Law blog.
Articles published in Taxmann Nidhi Jain’s article on Collective Investment Schemes for Real Estate
Investments in India. Aditi Jhunjhunwala’s Article on Maintaining Companies in India
Articles published in Asset Finance International Vinod Kothari’s article on the state of the Indian Leasing Industry. Abhijit Nagee’s article on China’s Second Pilot Securitization Programme.
Nivedita Shankar’s article on Cost Auditor Appointment published in Corporate Law Adviser.
Editorial This April has brought with it some dynamic changes that will have significant and tremendous impact on the economy as a whole. Zooming in, our organisation grabbed the IFC’s prestigious project on Affordable Housing Finance. Taking a lead, VKC is organising Securitization Summit in Mumbai the next month in anticipation of the expected Securitisation Guidelines. Read these and more in this latest edition of “touches..” Hope to stay in touch as always.
Sikha Bansal [email protected]
Vinod Kothari & Company –April, 2012
What’s Happening at VKC
VKC grabs IFC project on
Housing Finance
International Finance Corporation (IFC) is the commercial arm of the World Bank. Vinod Kothari Consultants P Ltd. (VKC) has been awarded an IFC project for development of Housing Microfinance Toolkit. VKC shall be co-working on this mandate with Habitat for Humanity, an NGO which has been active on the affordable housing side. Under the prestigious project, VKC would be required to develop a toolkit, which would be used by several companies entering or existing in microhousing domain and shall be providing training to the various stakeholders in the industry.
Vinod Kothari & Company –April, 2012
What’s Happening at VKC
The Securitisation Guidelines which have been in the waiting for nearly 2 years have been finalised by RBI. We expect that these guidelines will curb the direct assignment market, and pave way for rated securitization transactions once again. Vinod Kothari Consultants P Ltd is organizing “Securitization Summit, 2012”, in Mumbai, on 25-26 May, 2012, where we strive to bring in the stakeholders of the industry, to discuss the motivations of securitization post such guidelines and also look at the way forward for the markets, picking up cues from past and international experiences. The brochure is available here.
Securitization Summit, 2012
Vinod Kothari & Company –April, 2012
What’s Happening at VKC
Tata Steel Limited-a new jewel in the crown of VKC
Tata Steel Limited is setting-up a magnanimous steel plant project of Rs. 60,000 crore in the state of Odisha. VKC have been roped in by the Company to provide advisory services in the field of leasing, taxation, and accounting issues as well. Having a titan like Tata Steel on our client list is a matter of great delight. No doubt, it is a precious feather to our cap.
Vinod Kothari & Company –April, 2012
Our Articles Published
RBI Monetary Policy: Here is the trailer,
wait for the movie to hit the screens
-by Vinod Kothari published in moneylife
The market looks for signals towards policy making by the RBI. However, but for the reduction in policy rates by 50 basis points (bps), on most of the significant issues where banks would like to see direction of policy by the RBI, the policy says—“to be announced”. Significant issues are: Priority sector: The Nair Committee’s far-reaching recommendations about priority sector treatment- The policy says that the report has been placed on website of the RBI for comments, and that the RBI will take an action after examining feedback Abolition of pre-payment penalty on floating rate home loans: Most home loans in India are on a floating rate basis and it is surprising to many that Indian home lenders continued to charge pre-payment penalties on home loans over the years. Pursuant to the Damodaran Committee recommendations, the policy now declares that in case of floating rate loans, there will not be any pre-payment penalties. Basel III implementation: Basel III makes several significant modifications over the present approach of Basel II. Basel III introduces liquidity requirements too—both on short run as well as medium run. In addition, Basel III introduces a counter-cyclicity buffer as also redefines Tier 1 capital. Measures pertaining to NBFCs: New regulatory framework for NBFCs, Gold loan companies (Recent guidelines limited the LTV (loan-to-value) ratio for these companies to 60%. The present policy makes some significant promulgation for gold loan companies: It sets a limit of exposure of a bank on a single gold loan company to 7.5% of the bank’s capital funds) and Committee for lending against gold. Securitisation guidelines: The policy talks about finalization of the guidelines soon. Vinod Kothari, in this article talks about these significant policy issues in detail. All that we have in the policy are datelines for policies to be announced by the RBI. There is more in the offing than we have in the policy, reducing the much-awaited policy to be trailer for a movie to hit the screens. Click here to read the article.
Vinod Kothari & Company –April, 2012
Our Articles Published
The New FDI policy: Mix of relief and burden of additional compliances and limitations:
-by Soma Bagaria and Nidhi Ladha published in moneylife
The Department of Industrial Policy and Promotion (DIPP) recently issued the revised Consolidated Policy for Foreign Direct Investment (FDI) into India. After the Budget 2012-13 disappointments, foreign investors are expected to be relieved by some of the steps taken by the government to relax the FDI norms. The article by Soma Bagaria and Nidhi Ladha focuses on some of the key changes made in the new FDI policy. The government has clarified that one of the 18 permitted activities of a non-banking finance company (NBFC), viz. leasing and finance, in which FDI is permitted under automatic route, pertains only to financial leases and not operating leases. This makes it clear that an NBFC classification will only be required if a company is undertaking financial leasing and not when it is undertaking operating leasing.
A new sector limitation has been added under the new FDI policy for the pharmaceutical sector. Earlier, 100% FDI was permitted under the automatic route with no classification or differentiation based on greenfield or brownfield investment. Now, though the government has retained that 100% FDI in pharmaceutical sector is permissible, it has restricted investment under the automatic route only to the greenfield investments. Foreign Venture Capital Investors (FVCIs) were permitted to undertake secondary purchases, which earlier was not permissible and FVCIs could only make primary purchases in accordance with the Securities and Exchange Board of India (FVCI) Regulations, 2000. Earlier, investment under the government route in single brand retailing was permissible to the extent of 51% only, now it has enhanced the sector limit to 100%. A new type of a foreign investor called a Qualified Financial Investors (QFI) who would meet SEBI requirements for making investment into India have been permitted to make primary as well as secondary investments of listed companies (i.e. invest in equity shares of listed Indian companies as well as in equity shares of Indian companies which are offered to public in India). Overall, the changes brought in by the government are to balance the interest of the foreign investors to bring them in line with the economic goals of the government. See the article here.
Vinod Kothari & Company –April, 2012
Our Articles Published
Expectations of New Securitisation Guidelines, to be published
-by Vinod Kothari and Nidhi Bothra published in microfinance focus
The first draft of the Securitization Guidelines was published in April 2010 and the next revised draft was released in September, 2011. Reserve Bank of India is due to formalize the much awaited securitization guidelines soon. It is expected that the final guidelines will clear the ambiguity, provide no room for direct assignments making them completely impossible In case of direct assignments, banks will not allow offering credit enhancements and liquidity facilities. This would mean there would be no continuing support offered by banks in case of direct assignments, making the transactions arm’s length and strangulating direct assignments completely. On another note, if the Nair Committee recommendations get accepted and are included in the final guidelines, demand for securitization may be capped, but the markets would be guided to initiate securitization transactions on pure economic reasons. We are hoping that after much wait and speculation; with the expected final securitization guidelines, motivations for securitization that have been under leash will be removed, See the full article here.
Vinod Kothari & Company –April, 2012
In every assignment transaction, there has been a constant conflict of whether the substance or form shall dominate while determining the nature of a transaction. There are two schools of thought on this: one which gives dominance to substance over form and the other which prefers the dominance of intention that is expressed rather than that not expressed, i.e. prefers the form over substance. Generally speaking, when the nature of a transaction goes for determination, while respecting the intention of the parties set out in the documents, it shall be preferable to probe into the substance of the transaction rather than the plain label and language used so as to decipher what actually the transaction is all about. As has been said by many, language as an indicator is good but cannot be a determinant. Recently, the Hong Kong High Court in the case of Hallmark Cards Incorporated v. Yun Choy Limited and the Standard Chartered Bank (Hong Kong) Limited (an insolvency law matter), where the document in question was the Receivables Purchase Agreement (“RPA”), has given supremacy to the form over substance and held a transaction as a sale even though, as discussed hereunder, the elements of a sale were absent.
Substance vs. Form Conflict in True Sale/Hong Kong Court Goes by the Language used by the Parties- an article by Soma Bagaria throws light on the above-mentioned case.
See the article here.
Click here to view the article.
Our Articles Published
Substance vs. Form Conflict in True Sale-Hong Kong Court Goes by the Language Used by the Parties:
by Soma Bagaria published in Indian Corporate Law.
Vinod Kothari & Company –April, 2012
Our Articles Published
Collective Investment Schemes for real estate investments in India:
-by Nidhi Jain published in Taxmann Journal
Real estate sector in India is growing and is becoming attractive to various investors. The growth in real estate market is seen in both commercial as well as residential fields. The attractiveness of the Indian real estate sector is also through a report 'Emerging trends in Real Estate in Asia Pacific 2011' published by PriceWaterhouseCoopers and Urban Land Institute. According to this report, India leads the pack of top real estate investment markets in Asia for 2010. The ideal way to launch any scheme for real estate business would have been a real estate investment trust (REIT). A REIT is a fund that holds real estate or mortgage using capital pooled from investors. It is a tax transparent, collective investment device to channelize investments into income-producing real estate. REITs could be listed on stock markets or could be unlisted but have to be regulated through a regulatory board. No such legislation exists in India. The article discusses in detail the constraints and applicable laws within which a real estate scheme has to operate within, the possible forms/structures for the real estate business such as Collective Investment Schemes, Alternative Investment Fund, Limited Liability partnership, Issue of Redeemable Bonds linked with performance, and Real Estate Mutual Fund Schemes. Finally, the author has made a comparative analysis to analyze the most tax transparent structure among the various options discussed in the article.
Vinod Kothari & Company –April, 2012
Our Articles Published Maintaining Companies in India
How do Foreign Subsidiaries hold meetings? by Aditi Jhunjhunwala published in Taxmann Journal
The world is becoming a global village. It has become a
common norm to find shareholders of a listed company
scattered in various corners of the country/world. This of
course brought in its own share of troubles for shareholders
finding it difficult to physically attend meetings. Postal
Ballot was one of the initial ways devised by the Kumar
Mangalam Birla Committee on Corporate Governance to
make it convenient for the shareholders to take part in
certain decision making process without having to
physically attend meetings. To give effect to the same,
section 192A, was inserted by the Companies (Amendment)
Act, 2000, also making it mandatory for certain resolutions
to be passed by way of postal ballot to ensure voting by 100
per cent members.
With the advancement in technologies and globalization,
these days, in case of Board meetings as well it has now
become common to have foreign directors on the Board or
for a Company to be set-up in India with all the directors
and shareholders residing abroad. In such cases there are
many options for a company to hold the board/general
meetings to ensure that all statutory compliances are done?
Today, with the advent of technology we can't even imagine
how these issues have become simpler leading to timely
decisions, inexpensive modes and efficient use of resources.
This article deals with all such related issues and the
possible remedies.
Vinod Kothari & Company –April, 2012
Our Articles Published
The state of the Indian Leasing Industry: Review of Development in FY 2011-12 and outlook for 2012-13:
by Vinod Kothari published in Asset Finance International
Leasing may not be a hot subject in international finance, but off-balance sheet assets and risks are a bigger issue in finance today than ever before. While work is continuing on accounting standards on lease transactions internationally, the fair value reporting scenario continues to get more complex. Vinod Kothari casts an eye over equipment leasing in India in this write-up.
Refer the link to read the write-up.
Vinod Kothari & Company –April, 2012
Our Articles Published
China’s Second Pilot Securitization Programme:
Article by Abhijit Nagee published on Asset Finance International
China has been deferring its securitization programs since 2005, even though the administration measures for securitization of credit assets on a Pilot basis were promulgated by The People’s Bank of China and China Banking Regulatory Commission in 2005. After a long hibernation, PBOC has announced plans to launch a pilot program in 2012 which would allow some commercial lenders to securitize assets. Refer the link to read the article.
Vinod Kothari & Company –April, 2012
Our Articles Published
Cost auditor appointment –
Is your company required to appoint one? Article by Nivedita Shankar published in
Corporate Law Adviser
Cost audit is a tool in the hands of the management of a company to control costs and also to identify probable wastes and inefficiencies. The Ministry of Corporate Affairs has come up with recent developments and commendable steps to make companies more accountable in the case of cost audits. With the orders, circulars and rules recently issued by the Ministry of Corporate Affairs, the role of a Practising Cost Accountant in the corporate sector has increased manifold. In this article, Nivedita Shankar has analysed threadbare these orders, circulars and rules to present complete picture of cost audit. The author has also made a detailed comparison as to the previous scenario and the present scenario pertaining to Cost Audit. You can read the article in the journal Corporate Law Adviser, Volume 107 Part 3.
Vinod Kothari & Company –April, 2012
What’s Happening at VK & Co.
EDP and SIP Sessions conducted by Nidhi Bothra
The Institute of Company Secretaries of India is organizing various Executive Development Programmes (EDP) and Student Induction Programmes (SIP) to help the students acquire necessary skills before proceeding further. Nidhi Bothra conducted interactive sessions of the programmes on 10th April and 24th April (SIP); and 9th April and 16th April (EDP) on the topic “Regulatory Insight, Capital Markets and Opportunities”.
NEW ENTRANTS
We whole-heartedly welcome Vishal Dhona to our family. Vishal has successfully cleared his CS Professional programme as well his Graduation from Calcutta University. He has a broad knowledge and expertise in the field of Information Technology. He is a creative guy and has an edge over various designing software. He also likes to play cricket & basketball and represents a club for the same.
Vinod Kothari & Company –April, 2012
1012 Krishna 224 AJC Bose Road Kolkata – 700017, India Ph: 91-33-22817715/ 1276/ 3742 Mumbai office: 222, Ashoka Shopping Centre 2nd Floor, LT Road Near GT Hospital Mumbai- 400 001 022-22675600
Mail to: [email protected]; [email protected] Our Websites: www.vinodkothari.com www.india-financing.com
