RegulatoryGLOBAL

UPDATE

4NATIONAL UPDATE

ARTICLESGLOBAL UPDATE 11Inside

September 2013, Volume 3, Issue 10

1141616

Confederation of Indian Industry

DISCLAIMER CLAUSE This Regulatory Update has been compiled with a view to update readers and CII membership of changes on the covered topics in the Corporate Governance & Regulatory Affairs domain in the international as well as the domestic front. The compilation must not be taken as an exhaustive coverage of announcements and news nor should it be used as professional advice. Although, every endeavour has been made to provide exhaustive information, no claim would be entertained in the event any information/data/details/text is found to be inaccurate, incomplete, at variance with official data/information/details released through other sources prior or subsequent to release of the issue. This is only a compilation and not a reproduction of announcements / articles / items. CII does not subscribe to the views expressed in the items. These reflect the author’s personal views and in the event of any violation of IPR by the subscribers, CII would not be held responsible in any manner. Further, no part of this Update may be reproduced, copied or used without the prior permission of CII.

1

DISCLAIMER CLAUSE This Regulatory Update has been compiled with a view to update readers and CII membership of changes on the covered topics in the Corporate Governance & Regulatory Affairs domain in the international as well as the domestic front. The compilation must not be taken as an exhaustive coverage of announcements and news nor should it be used as professional advice. Although, every endeavour has been made to provide exhaustive information, no claim would be entertained in the event any information/data/details/text is found to be inaccurate, incomplete, at variance with official data/information/details released through other sources prior or subsequent to release of the issue. This is only a compilation and not a reproduction of announcements / articles / items. CII does not subscribe to the views expressed in the items. These reflect the author’s personal views and in the event of any violation of IPR by the subscribers, CII would not be held responsible in any manner. Further, no part of this Update may be reproduced, copied or used without the prior permission of CII.

1

3

DOMESTIC UPDATES

National Updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Appointments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

GLOBAL UPDATES

International Updates . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLES

Competition Law Update. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

CII's Recent Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

REPORTING AND COMPLIANCE

Hedging the financials from. . . . . . . . . . . . . . . . . . . . . . . . . 16

foreign exchange fluctuations

Contents

3

DOMESTIC UPDATES

National Updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Appointments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

GLOBAL UPDATES

International Updates . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLES

Competition Law Update. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

CII's Recent Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

REPORTING AND COMPLIANCE

Hedging the financials from. . . . . . . . . . . . . . . . . . . . . . . . . 16

foreign exchange fluctuations

Contents

5

GLOBAL REGULATORY UPDATE

4

Rules for 24 chapters and posted them

on the Ministry's website for

comments from stakeholders. The

first tranche of Rules cover the

following 16 chapters:

Chapter I - Preliminary

Chapter II - Incorporation of Company

and Matters Incidental Thereto

Chapter VI - Registration of Charges

Chapter VIII - Declaration and

Payment of Dividend

Chapter IX - Accounts of Companies

Chapter X - Audit and Auditors

Chapter XI - Appointment and

Qualification of Directors

Chapter XII - Meeting of Board and its

Powers

C h a p t e r X V I - P r e v e n t i o n o f

Oppression and Mismanagement

Chapter XVIII - Removal of Name of

Companies from the Register of

Companies

C h a p t e r X I X - R e v i v a l a n d

Rehabilitation of Sick Companies

C h a p t e r X X I I - C o m p a n i e s

Incorporated Outside India

C h a p t e r X X I I I - G o v e r n m e n t

Companies

Chapter XXIV - Registration Offices

and Fees

Chapter XXVI - Nidhi

Chapter XXIX - Miscellaneous

The Ministry has provided a 30 day

window till 8 October 2013 for industry

and other stakeholders to respond to

the draft rules.

The second tranche covers 9 chapters

which were hosted on 20 September

2013. A similar 30 day window has also

been provided for these Rules for

industry and other stakeholders to

submit their views.

Chapter III - Prospectus And Allotment

Of Securities

Chapter IV - Share Capital And

Debentures

Chapter VII - Management and

Administration

Chapter XIII - Appointment And

R e m u n e r a t i o n O f M a n a g e r i a l

Personnel

C h a p t e r X V - C o m p r o m i s e s ,

Arrangement And Amalgamations

Chapter XVII - Registered Valuers

Chapter XXI - PART I. - Companies

authorized to register under this Act

Chapter XXVIII: (Rules in respect of

C l a u s e 4 4 2 : M e d i a t i o n A n d

Conciliation Panel)

National Company Law Appellate

Tribunal Rules, 2013.

The remaining rules are slated to be

placed for public consultation at the

end of this month.

DOMESTIC UPDATES

NATIONAL

By :

Notification of selective

sections of the Companies Act

2013

The Companies Act 2013 received

Presidential assent on 29 August 2013.

While the entire law comprising 29

chapters - containing 470 sections and

VII Schedules - has been enacted,

currently 99 sections have been

notified. Section 1 (Short title, extent,

commencement and application) of

the Act was notified on 30 August 2013

while 98 sections were notified on

12th September, 2013.

Some of the important ones include

(i) Definition of subsidiary 2(87)

(ii) Loans to directors (185)

(iii) Prohibition of insider trading

(iv) Sections for Constitution of

National Company Law Tribunal

(v) Offences to be non-cognizable

(vi) Punishment for fraud

(vii) Power to remove difficulty

During the CII National Conference on

Companies Act, 2013, CII had brought

up that while the sections of the new

A c t h a d b e e n n o t i f i e d , t h e

corresponding sections of the old Act

were yet to be repealed.

To clear this discrepancy, MCA has

vide Circular No.16 dated 18-09-2013,

clarified that with effect from 12-09-

2013, the relevant provisions of the

C o m p a n i e s A c t , 1 9 5 6 , w h i c h

correspond to provisions of 98

Sections of the Companies Act, 2013

brought into force on 12.09.2013,

Clarification on applicability of

notified sections vis-à-vis old

Companies Act

cease to have effect from that date

(12-09-2013).

MCA has also issued Companies

(Removal of Difficulties) Order, 2013

dated 20th September, 2013

[F.No. l/l 5/20 I 3-CL-V] to clarify that

matters, proceedings or cases before

the Company Law Board shall

continue with the Board until transfer

to the Tribunal u/s 434.

The Companies Act, 2013 relies heavily

on subordinate legislation for the

implementation of various provisions

of the Act. Currently, the Ministry of

Corporate Affairs has developed draft

Companies (Removal of

Difficulties) Order, 2013

MCA hosts draft Rules under

the Companies Act 2013 for

public consultation

CII is in the process of building

up industry's viewpoints on the

draft Rules . Based on a

considered and consensual

view emerging out of various

deliberations, CII would be

submitting its detailed inputs on

the drafts with an objective of

making the process conducive

to business environment.

Members are requested to

write in with their views on the

d r a f t R u l e s u r g e n t l y t o

chitra.mittal@cii.in

Committee for Reforming the

Regulatory Environment for

Doing Business in India submits

its report

The Committee for Reforming the

Regulatory Environment for Doing

Business in India submitted its report

to the Ministry of Corporate Affairs in

September 2013. The Committee was

set up in August 2012. The proximate

cause of the establishment of the

Committee was the Word Bank's

Doing Business Report which ranked

India amongst the countries ranked at

the bottom of various sub-indices. The

Committee was tasked to look into

various parameters which affect the

regulatory environment for doing

b u s i n e s s i n I n d i a a n d m a k e

appropriate recommendations.

The Report of the Committee has

been crystallized in six thematic

chapters covering the dispute

resolution, architecture of the

regulatory space, measures to boost

efficacy of regulatory process,

improving business environment for

micro, small and medium enterprises,

addressing issues at the state level

and revisiting the report of the World

Bank Review Panel on Doing Business

Report.

5

GLOBAL REGULATORY UPDATE

4

Rules for 24 chapters and posted them

on the Ministry's website for

comments from stakeholders. The

first tranche of Rules cover the

following 16 chapters:

Chapter I - Preliminary

Chapter II - Incorporation of Company

and Matters Incidental Thereto

Chapter VI - Registration of Charges

Chapter VIII - Declaration and

Payment of Dividend

Chapter IX - Accounts of Companies

Chapter X - Audit and Auditors

Chapter XI - Appointment and

Qualification of Directors

Chapter XII - Meeting of Board and its

Powers

C h a p t e r X V I - P r e v e n t i o n o f

Oppression and Mismanagement

Chapter XVIII - Removal of Name of

Companies from the Register of

Companies

C h a p t e r X I X - R e v i v a l a n d

Rehabilitation of Sick Companies

C h a p t e r X X I I - C o m p a n i e s

Incorporated Outside India

C h a p t e r X X I I I - G o v e r n m e n t

Companies

Chapter XXIV - Registration Offices

and Fees

Chapter XXVI - Nidhi

Chapter XXIX - Miscellaneous

The Ministry has provided a 30 day

window till 8 October 2013 for industry

and other stakeholders to respond to

the draft rules.

The second tranche covers 9 chapters

which were hosted on 20 September

2013. A similar 30 day window has also

been provided for these Rules for

industry and other stakeholders to

submit their views.

Chapter III - Prospectus And Allotment

Of Securities

Chapter IV - Share Capital And

Debentures

Chapter VII - Management and

Administration

Chapter XIII - Appointment And

R e m u n e r a t i o n O f M a n a g e r i a l

Personnel

C h a p t e r X V - C o m p r o m i s e s ,

Arrangement And Amalgamations

Chapter XVII - Registered Valuers

Chapter XXI - PART I. - Companies

authorized to register under this Act

Chapter XXVIII: (Rules in respect of

C l a u s e 4 4 2 : M e d i a t i o n A n d

Conciliation Panel)

National Company Law Appellate

Tribunal Rules, 2013.

The remaining rules are slated to be

placed for public consultation at the

end of this month.

DOMESTIC UPDATES

NATIONAL

By :

Notification of selective

sections of the Companies Act

2013

The Companies Act 2013 received

Presidential assent on 29 August 2013.

While the entire law comprising 29

chapters - containing 470 sections and

VII Schedules - has been enacted,

currently 99 sections have been

notified. Section 1 (Short title, extent,

commencement and application) of

the Act was notified on 30 August 2013

while 98 sections were notified on

12th September, 2013.

Some of the important ones include

(i) Definition of subsidiary 2(87)

(ii) Loans to directors (185)

(iii) Prohibition of insider trading

(iv) Sections for Constitution of

National Company Law Tribunal

(v) Offences to be non-cognizable

(vi) Punishment for fraud

(vii) Power to remove difficulty

During the CII National Conference on

Companies Act, 2013, CII had brought

up that while the sections of the new

A c t h a d b e e n n o t i f i e d , t h e

corresponding sections of the old Act

were yet to be repealed.

To clear this discrepancy, MCA has

vide Circular No.16 dated 18-09-2013,

clarified that with effect from 12-09-

2013, the relevant provisions of the

C o m p a n i e s A c t , 1 9 5 6 , w h i c h

correspond to provisions of 98

Sections of the Companies Act, 2013

brought into force on 12.09.2013,

Clarification on applicability of

notified sections vis-à-vis old

Companies Act

cease to have effect from that date

(12-09-2013).

MCA has also issued Companies

(Removal of Difficulties) Order, 2013

dated 20th September, 2013

[F.No. l/l 5/20 I 3-CL-V] to clarify that

matters, proceedings or cases before

the Company Law Board shall

continue with the Board until transfer

to the Tribunal u/s 434.

The Companies Act, 2013 relies heavily

on subordinate legislation for the

implementation of various provisions

of the Act. Currently, the Ministry of

Corporate Affairs has developed draft

Companies (Removal of

Difficulties) Order, 2013

MCA hosts draft Rules under

the Companies Act 2013 for

public consultation

CII is in the process of building

up industry's viewpoints on the

draft Rules . Based on a

considered and consensual

view emerging out of various

deliberations, CII would be

submitting its detailed inputs on

the drafts with an objective of

making the process conducive

to business environment.

Members are requested to

write in with their views on the

d r a f t R u l e s u r g e n t l y t o

chitra.mittal@cii.in

Committee for Reforming the

Regulatory Environment for

Doing Business in India submits

its report

The Committee for Reforming the

Regulatory Environment for Doing

Business in India submitted its report

to the Ministry of Corporate Affairs in

September 2013. The Committee was

set up in August 2012. The proximate

cause of the establishment of the

Committee was the Word Bank's

Doing Business Report which ranked

India amongst the countries ranked at

the bottom of various sub-indices. The

Committee was tasked to look into

various parameters which affect the

regulatory environment for doing

b u s i n e s s i n I n d i a a n d m a k e

appropriate recommendations.

The Report of the Committee has

been crystallized in six thematic

chapters covering the dispute

resolution, architecture of the

regulatory space, measures to boost

efficacy of regulatory process,

improving business environment for

micro, small and medium enterprises,

addressing issues at the state level

and revisiting the report of the World

Bank Review Panel on Doing Business

Report.

GLOBAL REGULATORY UPDATE

76

The Recommendations are classified

in various headings, namely, (a) legal

reforms (b) regulatory architecture

(c) boosting efficacy of regulatory

process (d) enabling MSMEs, and (e)

addressing state level issues. They

include:

Legal Reforms

1) Review of laws and regulations

2) Encouraging arbitration to resolve

contractual disputes

Regulatory Architecture

3) Carving out clear mandate for a

new regulatory authority

4) Appointments in and supervision

of regulatory authorities

5) A u t o n o m y o f r e g u l a t o r y

authorities

6) Self evaluation by regulatory

organizations

Boosting Efficacy of Regulatory

Process

7) Ensuring effective consultation

through a two-stage process

8) Allocating priority to systemic

issues

9) P u t t i n g i n p l a c e c o n s e n t

mechanism for matters of low

significance

10) Drafting regulation

11) System of advance ruling

12) Setting up regulatory review

authority

13) R e v i e w i n g t h e p r o p o s e d

regulations

14) Regulatory Impact Assessment

(RIA)

Enabling MSMEs

15) Setting up a overarching body to

enable policy and process

coordination for MSMEs

16) Single window mechanism

17) Time bound decision making

Addressing State Level Issues

18) Information facilitation through

nodal point

19) Incentivising regulatory reforms

amongst states

20) Building in appellate process by

design

Indian Institution of Corporate Affairs

(IICA) and BSE Ltd. have signed an

MoU to work collaboratively to

d e v e l o p a C o r p o r a t e S o c i a l

Responsibility (CSR) index, take up

capacity building on CSR, conduct

e d u c a t i o n a n d a w a r e n e s s

programmes, and other activities to

facilitate a more effective corporate

participation in CSR areas. In the new

Companies Act, 2013 it has been

mandated for eligible companies to

spend 2% of their profits on CSR

activities.

The proposed IICA-BSE CSR Index

shall assess impact and performance

of companies listed at BSE in CSR

Indian Institute of Corporate

Affairs Signs MoU with BSE to

Collaborate on Developing

India's First CSR Index

activities. The Index would also look at

the performance of companies in their

mandatory CSR spend as per the new

Companies Act, 2013 as one of the

important and objective criteria. The

information provided in the public

domain on CSR activities by these

listed companies and which is also

assured, shall have more preference in

the various evaluation parameters of

the Index. Performance of the

companies in CSR areas would be

c o m b i n e d w i t h t h e m a r k e t

performance of companies for

selection of companies. The Index

would be sector neutral. Companies

eligible to be included in the Index for

further evaluation shall ensure basic

compliance as per proposed CSR

regulations.

RBI has issued circular dated 13

September 2013 for revising the FDI

policy for definition for control and

sector specific conditions. The

definition of 'control' shall be:

'Control' shall include the right to

appoint a majority of the directors or

to control the management or policy

decisions including by virtue of their

shareholding or management rights

or shareholders agreements or voting

agreements.

The Governments of Himachal

Pradesh and Karnataka have also

given consent to implement the FDI

Notification or revision of FDI

Limits in FEMA

policy on Multi Brand Retail Trading in

Himachal Pradesh and Karnataka

respectively. As such, the list of

States/Union Territories which have

conveyed their concurrence stands

modified. Also in order to bring

u n i f o r m i t y i n t h e s e c t o r a l

classification position for FDI as

notified under the Consolidated FDI

Policy Circular with the FEMA

Regulations, the policy on FDI caps

and routes for various sectors has

since been reviewed. These deal with

change in the definition of control,

notification of MBRT clarifications

dealing with back-end infrastructure,

sourcing from MSMEs and cities in

which retail outlets may be set up and

revision of routes and sectoral caps in

sectors like telecom, courier services,

ARCs, commodity exchanges, CICs,

power exchanges etc.

With a view to having a broad-based

representation of all classes of

shareholders on the Board of

Directors of the Exchange to

strengthen corporate governance,

the Commission has decided the

following:-

(i) The representation of the Anchor

investor on the Board of the

Exchange shall not be more than

t h e p r o p o r t i o n o f t h e i r

shareholding, which will be a

maximum of 26% at the end of the

fifth year of the Exchange's

operation.

Forward Markets Commission

issues Guidelines for

constitution of the Board of

Directors, Nomination of

Independent Directors and

appointment of Chief

Executives at the Nationwide

Multi Commodity Exchanges

(ii) The representation of the class of

Shareholders at 3(b) and 3(c)

above shall not be less than one-

half of the total number of

Shareholder Directors. Further,

any of these shareholders shall

n o t h a v e m o r e t h a n o n e

representative on the Board.

(iii) The representation of other

classes of shareholders on the

Board shall be as per their

eligibility for appointment on the

Board.

The RBI by its circular dated August 19,

2 0 1 3 h a s p e r m i t t e d F o r e i g n

Institutional Investors ('FII') to invest

in Asset Reconstruction Companies

('ARC') and has increased the cap on

foreign direct investment from 49% to

74%.The ARC investment will be

subject to the sponsor'sholding not

exceeding50% and the FII's holding

not exceeding 10%of the total paid-up

capital of the ARC.

The circular has enhanced the FII

investment limits in Security Receipts

('SR')from 49% to 74% of the paid up

value of each tranche of scheme of the

Foreign Investment in Asset

Reconstruction Companies

SR. The earlier individual limit for

investment by a single FII in each

tranche of SR has been removed.

The RBI by its circular dated August 20,

2013 has liberalised the policy for

investment in Portfolio Investment

Scheme ('PIS') for Non-resident

Indians ('NRI') to attract inflow of

fore ign currency. The ear l ier

requirement for banks to maintain a

unique code for each branch, which

made the process cumbersome has

been dispensed with. The designated

branch of the bank is now permitted

to grant a one-time permission to the

NRI applicant for the purchase and

sale of shares or convert ible

debentures of an Indian company. The

said shares or debentures acquired by

the NRI under the scheme cannot be

pledged for giving loan to a third party

without prior permission of the RBI or

invest in the real estate sector.

The RBI with a view to improving

transparency in the securities market

has by its circular dated August 26,

Portfolio Investment Scheme

for NRIs relaxed

Reporting of OTC transactions

in Securitized Debt Instruments

GLOBAL REGULATORY UPDATE

76

The Recommendations are classified

in various headings, namely, (a) legal

reforms (b) regulatory architecture

(c) boosting efficacy of regulatory

process (d) enabling MSMEs, and (e)

addressing state level issues. They

include:

Legal Reforms

1) Review of laws and regulations

2) Encouraging arbitration to resolve

contractual disputes

Regulatory Architecture

3) Carving out clear mandate for a

new regulatory authority

4) Appointments in and supervision

of regulatory authorities

5) A u t o n o m y o f r e g u l a t o r y

authorities

6) Self evaluation by regulatory

organizations

Boosting Efficacy of Regulatory

Process

7) Ensuring effective consultation

through a two-stage process

8) Allocating priority to systemic

issues

9) P u t t i n g i n p l a c e c o n s e n t

mechanism for matters of low

significance

10) Drafting regulation

11) System of advance ruling

12) Setting up regulatory review

authority

13) R e v i e w i n g t h e p r o p o s e d

regulations

14) Regulatory Impact Assessment

(RIA)

Enabling MSMEs

15) Setting up a overarching body to

enable policy and process

coordination for MSMEs

16) Single window mechanism

17) Time bound decision making

Addressing State Level Issues

18) Information facilitation through

nodal point

19) Incentivising regulatory reforms

amongst states

20) Building in appellate process by

design

Indian Institution of Corporate Affairs

(IICA) and BSE Ltd. have signed an

MoU to work collaboratively to

d e v e l o p a C o r p o r a t e S o c i a l

Responsibility (CSR) index, take up

capacity building on CSR, conduct

e d u c a t i o n a n d a w a r e n e s s

programmes, and other activities to

facilitate a more effective corporate

participation in CSR areas. In the new

Companies Act, 2013 it has been

mandated for eligible companies to

spend 2% of their profits on CSR

activities.

The proposed IICA-BSE CSR Index

shall assess impact and performance

of companies listed at BSE in CSR

Indian Institute of Corporate

Affairs Signs MoU with BSE to

Collaborate on Developing

India's First CSR Index

activities. The Index would also look at

the performance of companies in their

mandatory CSR spend as per the new

Companies Act, 2013 as one of the

important and objective criteria. The

information provided in the public

domain on CSR activities by these

listed companies and which is also

assured, shall have more preference in

the various evaluation parameters of

the Index. Performance of the

companies in CSR areas would be

c o m b i n e d w i t h t h e m a r k e t

performance of companies for

selection of companies. The Index

would be sector neutral. Companies

eligible to be included in the Index for

further evaluation shall ensure basic

compliance as per proposed CSR

regulations.

RBI has issued circular dated 13

September 2013 for revising the FDI

policy for definition for control and

sector specific conditions. The

definition of 'control' shall be:

'Control' shall include the right to

appoint a majority of the directors or

to control the management or policy

decisions including by virtue of their

shareholding or management rights

or shareholders agreements or voting

agreements.

The Governments of Himachal

Pradesh and Karnataka have also

given consent to implement the FDI

Notification or revision of FDI

Limits in FEMA

policy on Multi Brand Retail Trading in

Himachal Pradesh and Karnataka

respectively. As such, the list of

States/Union Territories which have

conveyed their concurrence stands

modified. Also in order to bring

u n i f o r m i t y i n t h e s e c t o r a l

classification position for FDI as

notified under the Consolidated FDI

Policy Circular with the FEMA

Regulations, the policy on FDI caps

and routes for various sectors has

since been reviewed. These deal with

change in the definition of control,

notification of MBRT clarifications

dealing with back-end infrastructure,

sourcing from MSMEs and cities in

which retail outlets may be set up and

revision of routes and sectoral caps in

sectors like telecom, courier services,

ARCs, commodity exchanges, CICs,

power exchanges etc.

With a view to having a broad-based

representation of all classes of

shareholders on the Board of

Directors of the Exchange to

strengthen corporate governance,

the Commission has decided the

following:-

(i) The representation of the Anchor

investor on the Board of the

Exchange shall not be more than

t h e p r o p o r t i o n o f t h e i r

shareholding, which will be a

maximum of 26% at the end of the

fifth year of the Exchange's

operation.

Forward Markets Commission

issues Guidelines for

constitution of the Board of

Directors, Nomination of

Independent Directors and

appointment of Chief

Executives at the Nationwide

Multi Commodity Exchanges

(ii) The representation of the class of

Shareholders at 3(b) and 3(c)

above shall not be less than one-

half of the total number of

Shareholder Directors. Further,

any of these shareholders shall

n o t h a v e m o r e t h a n o n e

representative on the Board.

(iii) The representation of other

classes of shareholders on the

Board shall be as per their

eligibility for appointment on the

Board.

The RBI by its circular dated August 19,

2 0 1 3 h a s p e r m i t t e d F o r e i g n

Institutional Investors ('FII') to invest

in Asset Reconstruction Companies

('ARC') and has increased the cap on

foreign direct investment from 49% to

74%.The ARC investment will be

subject to the sponsor'sholding not

exceeding50% and the FII's holding

not exceeding 10%of the total paid-up

capital of the ARC.

The circular has enhanced the FII

investment limits in Security Receipts

('SR')from 49% to 74% of the paid up

value of each tranche of scheme of the

Foreign Investment in Asset

Reconstruction Companies

SR. The earlier individual limit for

investment by a single FII in each

tranche of SR has been removed.

The RBI by its circular dated August 20,

2013 has liberalised the policy for

investment in Portfolio Investment

Scheme ('PIS') for Non-resident

Indians ('NRI') to attract inflow of

fore ign currency. The ear l ier

requirement for banks to maintain a

unique code for each branch, which

made the process cumbersome has

been dispensed with. The designated

branch of the bank is now permitted

to grant a one-time permission to the

NRI applicant for the purchase and

sale of shares or convert ible

debentures of an Indian company. The

said shares or debentures acquired by

the NRI under the scheme cannot be

pledged for giving loan to a third party

without prior permission of the RBI or

invest in the real estate sector.

The RBI with a view to improving

transparency in the securities market

has by its circular dated August 26,

Portfolio Investment Scheme

for NRIs relaxed

Reporting of OTC transactions

in Securitized Debt Instruments

GLOBAL REGULATORY UPDATE

8 9

the stages of construction of the

housing project. These include the

exposure of the banks in case of

disputes between parties, borrowers

being exposed to a lower credit rating

o n d e l a y e d p a y m e n t s b y

developers/builders on behalf of

individual borrowers.

In order to avoid the aforementioned

risks banks have been asked to not

make upfront disbursal in cases of

i n c o m p l e t e / u n d e r -

construction/green field housing

projects.

The RBI by its Circular dated

September 4, 2013 has decided to

increase the permissibil ity for

exporters to cancel and rebook

forward contracts involving Rupee as

one of the currencies, from 25 percent

to 50 percent of the contracts booked

in a financial year for hedging their

contracted export exposures. Also,

the importers which were earlier not

permitted are now allowed to hedge

their current and capital account

transactions to the extent of 25

percent of the contracts booked in a

financial year.

These changes have been made

keeping in mind the evolving market

conditions and with a view to

providing operational flexibility to

exporters and importers to hedge

their foreign exchange risk.

The RBI by its Circular dated

September 10, 2013 modified its earlier

Exporter and Importers

allowed tohedge their foreign

exchange risk

Overseas Direct Investment

Regulation modified-Corporate

Guarantee can be furnished by

entity having indirect holding

circular pertaining to overseas direct

investment. The Indian party issuing a

corporate guarantee on behalf of the

second generation or subsequent

level step down operating subsidiaries

will be considered under the Approval

Route, provided the Indian party

indirectly holds 51 per cent or more

stake in the overseas subsidiary for

which such guarantee is intended to

be issued. The dispensation of the

"direct" holding of 51% now permits

companies to furnish guarantees even

without directly holding a 51% stake in

the company on behalf of which it is

issuing the guarantee.

The RBI has by its circular dated

September 4, 2013 decided to allow

eligible borrowers to avail of external

commercial borrowings ('ECB')from

t h e i r f o r e i g n e q u i t y h o l d e r s

('Lender')to be utilized for general

corporate purposes subject to:

i. the Lender holding directly a

minimum paid-up equity of 25% of

the borrower;

ii. the a vailment of ECB shall be

according to the extant ECB

guidelines;

iii. Repayment of the principal has to

commence only after completion

of at least 7 years. No prepayment

will be allowed before maturity.

The RBI by its Circular dated

September 5, 2013 has decided to

increase the borrowing limit for

authorised dealers from Head Office/

branch or correspondent outside

ECBs can now be utilized for

General Corporate Purposes

Foreign Exchange Management

(Borrowing or Lending in

Foreign Exchange) (Fourth

Amendment) Regulations, 2013

India. This has been increased from

50% to 100% or such other limit as may

be decided by RBI from time to time.

The RBI by its circular dated

September 5, 2013 has decided to

permit AD Category- I bank to issue

bank guarantee on behalf of a non-

r e s i d e n t a c q u i r i n g s h a r e s o r

convertible debentures of an Indian

company through open offers /

delisting/exit offers, provided that the

guarantee is covered by a counter

guarantee given by a bank of an

international repute.

The RBI by its Circular dated

September 6, 2013 has decided to

permit an increase which now allows

any person resident in India to take

outside India or who had previously

gone out of India on a temporary visit,

to bring into India (other than to and

from Nepal and Bhutan) currency

notes upto Rs. 10,000 from the earlier

Rs7,500.

The RBI by its Circular dated

September 6, 2013 has decided to

allow Non-resident Indians to acquire

shares of a listed Indian Company on

the recognised stock exchanges

through a registered broker under the

FDI Scheme provided thatthe non-

resident investor has already acquired

and continues to hold the control in

Issue of Bank Guarantee on

behalf of person resident

outside India for FDI

transactions

Export and Import of Currency

Purchase of shares on the

recognised stock exchanges in

accordance with SEBI

(Substantial Acquisition of

Shares and Takeover)

Regulations

accordance with the SEBI Takeover

Regulations, 2011.

The other conditions that are required

to be complied with include those

relating to pricing, manner of

payment of consideration and

compliance with other aspects of the

FDI policy such as sectoral caps.

With a view to providing greater

flexibility to AD Category - I banks in

seeking access to overseas funds from

its head office, overseas branches or

correspondents, the RBI by its circular

dated September 10, 2013 has

enhanced its borrowing limit to 100%

of its unimpaired Tier I capital as at the

close of the previous quarter or USD

10 million, whichever is higher, subject

to certain compliances including:

(i) The bank having a board

approved policy on overseas

borrowings which shall contain

the risk management practices

that the bank would adhere to

while borrowing abroad in

foreign currency;

(ii) The bank to maintain a CRAR of

12%.

(iii) The borrowings to have a

minimum maturity of 3 years.

Further the borrowing bank may enter

into a swap transaction with RBI in

respect of the borrowings raised in

pursuance of the issuance of the

circular.

SEBI by its circular dated September

13, 2013 has extended the investment

Enhancement of limit for

Overseas Foreign Currency

Borrowings by AD

FIIs/QFIs investment in

Government Debt in line with

Corporate Debt investment

2013 made the reporting of over the

counter ('OTC') transactions in

securitized debt instruments within 15

days of its trade on the Fixed Income

Money Market and Derivatives

Association of India mandatory.

The RBI has by its circular dated 30

August 2013 prohibited Urban Co-

operative Banks ('UCBs') from making

donations to trusts having charitable

or benevolent objects in which the

directors or their relatives of such

UCBs are interested."Interest" has

been defined to mean the director or

his relative is either a trustee or a

beneficiary or is working in a way

which is likely to influence the

independence of the directors.

The RBI by its circular dated

September 3, 2013 has highlighted the

risks involved in the innovative

housingloan schemes (popularly

known as 80:20, 75:25 Schemes)

introduced by certain banks in

association with developers/builders

that provide up front disbursal of

loans without linking the disbursals to

Restriction on donations to

Trusts and Institutions where

Directors, their relatives hold

position or are interested

Innovative Housing Loan

Products risky

principle which is currently in place for

FIIs/QFIs investing in corporate debt

to FIIs investing in government debt

as well. Now FIIs/QFIs can invest

without purchasing debt limits till the

over all investment reaches 90% after

which the auction mechanism shall be

initiated for allocation of there

maining limits.

The SEBI has provided a framework

for registration and regulation of

angel funds provided under Category

I- Venture Capital Funds by notifying

amendments to SEBI (Alternative

Investment Funds) Regulations, 2012

('AIF Regulations') on 16September,

2013.

Angel funds have now been included

in the definition of 'Venture Capital

Funds' ('VCF'). For an individual angel

investor to qualify as a VCF it has to

have at least 10 years of investment or

entrepreneurial or management

experience and net tangible assets of

at least Rs. 2 crore. While, corporate

angel investors are required to have

Rs. 10 crore net worth of a registered

AIF/ VCF.

Amendments to SEBI (Alternative

Investment Funds) Regulations, 2012

GLOBAL REGULATORY UPDATE

8 9

the stages of construction of the

housing project. These include the

exposure of the banks in case of

disputes between parties, borrowers

being exposed to a lower credit rating

o n d e l a y e d p a y m e n t s b y

developers/builders on behalf of

individual borrowers.

In order to avoid the aforementioned

risks banks have been asked to not

make upfront disbursal in cases of

i n c o m p l e t e / u n d e r -

construction/green field housing

projects.

The RBI by its Circular dated

September 4, 2013 has decided to

increase the permissibil ity for

exporters to cancel and rebook

forward contracts involving Rupee as

one of the currencies, from 25 percent

to 50 percent of the contracts booked

in a financial year for hedging their

contracted export exposures. Also,

the importers which were earlier not

permitted are now allowed to hedge

their current and capital account

transactions to the extent of 25

percent of the contracts booked in a

financial year.

These changes have been made

keeping in mind the evolving market

conditions and with a view to

providing operational flexibility to

exporters and importers to hedge

their foreign exchange risk.

The RBI by its Circular dated

September 10, 2013 modified its earlier

Exporter and Importers

allowed tohedge their foreign

exchange risk

Overseas Direct Investment

Regulation modified-Corporate

Guarantee can be furnished by

entity having indirect holding

circular pertaining to overseas direct

investment. The Indian party issuing a

corporate guarantee on behalf of the

second generation or subsequent

level step down operating subsidiaries

will be considered under the Approval

Route, provided the Indian party

indirectly holds 51 per cent or more

stake in the overseas subsidiary for

which such guarantee is intended to

be issued. The dispensation of the

"direct" holding of 51% now permits

companies to furnish guarantees even

without directly holding a 51% stake in

the company on behalf of which it is

issuing the guarantee.

The RBI has by its circular dated

September 4, 2013 decided to allow

eligible borrowers to avail of external

commercial borrowings ('ECB')from

t h e i r f o r e i g n e q u i t y h o l d e r s

('Lender')to be utilized for general

corporate purposes subject to:

i. the Lender holding directly a

minimum paid-up equity of 25% of

the borrower;

ii. the a vailment of ECB shall be

according to the extant ECB

guidelines;

iii. Repayment of the principal has to

commence only after completion

of at least 7 years. No prepayment

will be allowed before maturity.

The RBI by its Circular dated

September 5, 2013 has decided to

increase the borrowing limit for

authorised dealers from Head Office/

branch or correspondent outside

ECBs can now be utilized for

General Corporate Purposes

Foreign Exchange Management

(Borrowing or Lending in

Foreign Exchange) (Fourth

Amendment) Regulations, 2013

India. This has been increased from

50% to 100% or such other limit as may

be decided by RBI from time to time.

The RBI by its circular dated

September 5, 2013 has decided to

permit AD Category- I bank to issue

bank guarantee on behalf of a non-

r e s i d e n t a c q u i r i n g s h a r e s o r

convertible debentures of an Indian

company through open offers /

delisting/exit offers, provided that the

guarantee is covered by a counter

guarantee given by a bank of an

international repute.

The RBI by its Circular dated

September 6, 2013 has decided to

permit an increase which now allows

any person resident in India to take

outside India or who had previously

gone out of India on a temporary visit,

to bring into India (other than to and

from Nepal and Bhutan) currency

notes upto Rs. 10,000 from the earlier

Rs7,500.

The RBI by its Circular dated

September 6, 2013 has decided to

allow Non-resident Indians to acquire

shares of a listed Indian Company on

the recognised stock exchanges

through a registered broker under the

FDI Scheme provided thatthe non-

resident investor has already acquired

and continues to hold the control in

Issue of Bank Guarantee on

behalf of person resident

outside India for FDI

transactions

Export and Import of Currency

Purchase of shares on the

recognised stock exchanges in

accordance with SEBI

(Substantial Acquisition of

Shares and Takeover)

Regulations

accordance with the SEBI Takeover

Regulations, 2011.

The other conditions that are required

to be complied with include those

relating to pricing, manner of

payment of consideration and

compliance with other aspects of the

FDI policy such as sectoral caps.

With a view to providing greater

flexibility to AD Category - I banks in

seeking access to overseas funds from

its head office, overseas branches or

correspondents, the RBI by its circular

dated September 10, 2013 has

enhanced its borrowing limit to 100%

of its unimpaired Tier I capital as at the

close of the previous quarter or USD

10 million, whichever is higher, subject

to certain compliances including:

(i) The bank having a board

approved policy on overseas

borrowings which shall contain

the risk management practices

that the bank would adhere to

while borrowing abroad in

foreign currency;

(ii) The bank to maintain a CRAR of

12%.

(iii) The borrowings to have a

minimum maturity of 3 years.

Further the borrowing bank may enter

into a swap transaction with RBI in

respect of the borrowings raised in

pursuance of the issuance of the

circular.

SEBI by its circular dated September

13, 2013 has extended the investment

Enhancement of limit for

Overseas Foreign Currency

Borrowings by AD

FIIs/QFIs investment in

Government Debt in line with

Corporate Debt investment

2013 made the reporting of over the

counter ('OTC') transactions in

securitized debt instruments within 15

days of its trade on the Fixed Income

Money Market and Derivatives

Association of India mandatory.

The RBI has by its circular dated 30

August 2013 prohibited Urban Co-

operative Banks ('UCBs') from making

donations to trusts having charitable

or benevolent objects in which the

directors or their relatives of such

UCBs are interested."Interest" has

been defined to mean the director or

his relative is either a trustee or a

beneficiary or is working in a way

which is likely to influence the

independence of the directors.

The RBI by its circular dated

September 3, 2013 has highlighted the

risks involved in the innovative

housingloan schemes (popularly

known as 80:20, 75:25 Schemes)

introduced by certain banks in

association with developers/builders

that provide up front disbursal of

loans without linking the disbursals to

Restriction on donations to

Trusts and Institutions where

Directors, their relatives hold

position or are interested

Innovative Housing Loan

Products risky

principle which is currently in place for

FIIs/QFIs investing in corporate debt

to FIIs investing in government debt

as well. Now FIIs/QFIs can invest

without purchasing debt limits till the

over all investment reaches 90% after

which the auction mechanism shall be

initiated for allocation of there

maining limits.

The SEBI has provided a framework

for registration and regulation of

angel funds provided under Category

I- Venture Capital Funds by notifying

amendments to SEBI (Alternative

Investment Funds) Regulations, 2012

('AIF Regulations') on 16September,

2013.

Angel funds have now been included

in the definition of 'Venture Capital

Funds' ('VCF'). For an individual angel

investor to qualify as a VCF it has to

have at least 10 years of investment or

entrepreneurial or management

experience and net tangible assets of

at least Rs. 2 crore. While, corporate

angel investors are required to have

Rs. 10 crore net worth of a registered

AIF/ VCF.

Amendments to SEBI (Alternative

Investment Funds) Regulations, 2012

GLOBAL REGULATORY UPDATE

1110

Angel funds are allowed to make

i n v e s t m e n t o n l y i n i n v e s t e e

companies that: are incorporated in

India and are not more than 3 years

old; and have a turnover of not more

than Rs. 25 Crores; and are unlisted;

and are not promoted, sponsored or

related to an industrial group whose

group turnover is in excess of Rs. 300

Cr; and has no family connection with

the investors proposing to invest in

the company. The investment limit by

the angel fund in the company is

floored by Rs. 50 lakh and capped at

Rs. 5 Crore with a lock-in period of 3

years.

After taking into account the

h a r m o n i s e d m a s t e r l i s t o f

infrastructure sub-sectors, the RBI by

its Circular dated 18 September, 2013

has expanded the definition of the

infrastructure sector for raising funds

t h r o u g h e x t e r n a l c o m m e r c i a l

Expansion of definition of

'infrastructure' under ECB

borrowings ('ECBs'). The widened

definition provides: the energy sector

to now include electricity generation,

transmission, distribution and oil

pipelines; communications to include

mobi le te lephony serv ices or

companies providing cellular services,

fixed network telecom and telecom

towers; water and sanitation to

include irrigation and water treatment

plants; social and commercial

infrastructure to now include

hospitals and hotel and convention

centres etc.

APPOINTMENTS

l

l

l

l

Mr. Raghuram Rajan appointed as RBI Governor

E s s a r S t e e l I n d i a a p p o i n t s M r. F i r d o s e Va n d r e v a l a a s Executive Vice Chairman

Mr. Anjan Lahiri appointed CEO of Sasken

Mr. D.K. Sarraf appointed ONGC chairman

l

l

l

l

Mr. Vijay Gopalan appointed Air Asia India CFO

E s s a r E n e r g y a p p o i n t s Mr. Sushil Maroo as CEO

Mr. R.S. Gujral given additional charge of the post of Secretary, Department of Disinvestment

Mr. Sudhir Chaturvedi joins NIIT Tech as COO

l

l

l

Mr. Joe King Appointed as Head of Audi India

Jones Lang LaSalle Appoints Mr. Juggy Marwaha as MD south India Operations

WNS appoints Mr. Sanjay Puria as CFO

By :

GLOBAL

INTERNATIONAL UPDATES

Recommendation 7.4 states that

"a listed entity should disclose

whether, and if so how, it has

r e g a r d t o e c o n o m i c ,

e n v i r o n m e n t a l a n d s o c i a l

s u s t a i n a b i l i t y r i s k s " . T h e

Consultation Paper states that

t h i s R e c o m m e n d a t i o n i s

intended to address "the

increasing attention being given

by the investment community to

environmental and social issues

and the investment risks they

raise". At present, there is no

proposal to mandate this

reporting, and the ASX Council

considers that it would be

premature to expect listed

entities in Australia to adopt

mandatory integrated reporting

until the international framework

for such reporting is better

developed than it currently is.

1. ASX corporate governance

principles propose

environmental risk

disclosure obligations

The Australian Stock Exchange

Corporate Governance Council

has recommended that entities

listed on the Australian Stock

E x c h a n g e ( A S X ) d i s c l o s e

e n v i r o n m e n t a l a n d s o c i a l

sustainability risks to investors.

The proposed amendments to

include environmental r isk

disclosure are embodied in the

revision of Principle 7.

Principle 7, titled "Recognise and

manage risk", recommends that

"a listed entity should establish a

s o u n d r i s k m a n a g e m e n t

framework and periodically

review the effectiveness of that

framework".

The consultation paper notes

that, amongst other things, the

framework needs to adequately

address issues such as relevance,

materiality, timeframe, exclusion

o f c o m m e rc i a l l y s e ns i t i ve

information and the compliance

burden, before listed entities

a c r o s s t h e b o a r d c a n b e

reasonably expected to adopt

integrated reporting.

The Draft is avai lable for

comment until November 15 2013.

The Association of Brit ish

Insurers (ABI) has issued a report

o n i m p r o v i n g c o r p o r a t e

2. Association of British

Insurers publishes paper on

improving corporate

governance and

shareholder engagement

GLOBAL REGULATORY UPDATE

1110

Angel funds are allowed to make

i n v e s t m e n t o n l y i n i n v e s t e e

companies that: are incorporated in

India and are not more than 3 years

old; and have a turnover of not more

than Rs. 25 Crores; and are unlisted;

and are not promoted, sponsored or

related to an industrial group whose

group turnover is in excess of Rs. 300

Cr; and has no family connection with

the investors proposing to invest in

the company. The investment limit by

the angel fund in the company is

floored by Rs. 50 lakh and capped at

Rs. 5 Crore with a lock-in period of 3

years.

After taking into account the

h a r m o n i s e d m a s t e r l i s t o f

infrastructure sub-sectors, the RBI by

its Circular dated 18 September, 2013

has expanded the definition of the

infrastructure sector for raising funds

t h r o u g h e x t e r n a l c o m m e r c i a l

Expansion of definition of

'infrastructure' under ECB

borrowings ('ECBs'). The widened

definition provides: the energy sector

to now include electricity generation,

transmission, distribution and oil

pipelines; communications to include

mobi le te lephony serv ices or

companies providing cellular services,

fixed network telecom and telecom

towers; water and sanitation to

include irrigation and water treatment

plants; social and commercial

infrastructure to now include

hospitals and hotel and convention

centres etc.

APPOINTMENTS

l

l

l

l

Mr. Raghuram Rajan appointed as RBI Governor

E s s a r S t e e l I n d i a a p p o i n t s M r. F i r d o s e Va n d r e v a l a a s Executive Vice Chairman

Mr. Anjan Lahiri appointed CEO of Sasken

Mr. D.K. Sarraf appointed ONGC chairman

l

l

l

l

Mr. Vijay Gopalan appointed Air Asia India CFO

E s s a r E n e r g y a p p o i n t s Mr. Sushi l Maroo as CEOMr. R.S. Gujral given additional charge of the post of Secretary, Department of Disinvestment

Mr. Sudhir Chaturvedi joins NIIT Tech as COO

l

l

l

Mr. Joe King Appointed as Head of Audi India

Jones Lang LaSalle Appoints Mr. Juggy Marwaha as MD south India Operations

WNS appoints Mr. Sanjay Puria as CFO

By :

GLOBAL

INTERNATIONAL UPDATES

Recommendation 7.4 states that

"a listed entity should disclose

whether, and if so how, it has

r e g a r d t o e c o n o m i c ,

e n v i r o n m e n t a l a n d s o c i a l

s u s t a i n a b i l i t y r i s k s " . T h e

Consultation Paper states that

t h i s R e c o m m e n d a t i o n i s

intended to address "the

increasing attention being given

by the investment community to

environmental and social issues

and the investment risks they

raise". At present, there is no

proposal to mandate this

reporting, and the ASX Council

considers that it would be

premature to expect listed

entities in Australia to adopt

mandatory integrated reporting

until the international framework

for such reporting is better

developed than it currently is.

1. ASX corporate governance

principles propose

environmental risk

disclosure obligations

The Australian Stock Exchange

Corporate Governance Council

has recommended that entities

listed on the Australian Stock

E x c h a n g e ( A S X ) d i s c l o s e

e n v i r o n m e n t a l a n d s o c i a l

sustainability risks to investors.

The proposed amendments to

include environmental r isk

disclosure are embodied in the

revision of Principle 7.

Principle 7, titled "Recognise and

manage risk", recommends that

"a listed entity should establish a

s o u n d r i s k m a n a g e m e n t

framework and periodically

review the effectiveness of that

framework".

The consultation paper notes

that, amongst other things, the

framework needs to adequately

address issues such as relevance,

materiality, timeframe, exclusion

o f c o m m e rc i a l l y s e ns i t i ve

information and the compliance

burden, before listed entities

a c r o s s t h e b o a r d c a n b e

reasonably expected to adopt

integrated reporting.

The Draft is avai lable for

comment until November 15 2013.

The Association of Brit ish

Insurers (ABI) has issued a report

o n i m p r o v i n g c o r p o r a t e

2. Association of British

Insurers publishes paper on

improving corporate

governance and

shareholder engagement

GLOBAL REGULATORY UPDATE

12 13

governance and shareholder

engagement. The paper reviews

t h e e x i s t i n g r o l e s a n d

responsibilities in corporate

governance and shareholder

e n g a g e m e n t a n d m a k e s

recommendations on how these

c o u l d b e e n h a n c e d , w i t h

reference to the UK Corporate

Governance Code.

T h e r e p o r t m a k e s

recommendations for:

Improving corporate governance

reporting;

Encouraging companies to

review the time-commitment

requirements of different non-

executive roles and how different

non-executive roles may best be

structured;

Empowering non-executive

directors, with measures to

ensure they receive the right level

of information to enhance their

ability to support and challenge

the Executive Directors;

Ensuring Non-Executive Directors

receive early and full information

on potential M&A transactions,

including where appropriate

independent advice;

Maintaining the UK's leadership

p o s i t i o n i n s h a r e h o l d e r

engagement, by opening ABI

collective engagement to non-

members and launching an

Investor Exchange mechanism;

and

Improving mutual understanding

by encouraging companies to

develop a transparent investor

re lat ions programme that

i n c l u d e s t h e s c h e d u l e o f

corporate governance-related

meetings

l

l

l

l

l

l

3. Ireland Central Bank

proposes changes to

Corporate Governance

Code for Credit Institutions

and Insurance

Undertakings\

The Central Bank has published a

consultation paper in which it

proposes the introduction of a

number of changes to the

Corporate Governance Code for

Credit Institutions and Insurance

Undertakings. The Code applies

on a statutory basis to all credit

inst itut ions and insurance

undertakings which are licensed

or authorised by the Bank

( i n c l u d i n g r e i n s u r e r s b u t

excluding captives which are

g o v e r n e d b y a s e p a r a t e

Corporate Governance Code).

T h e s i g n i f i c a n t p r o p o s e d

amendments include provision

relating to risk committees to

require that the committee be

composed of a majority of non-

executive directors; introduce a

n e w r e q u i r e m e n t f o r a l l

institutions to appoint a Chief

Risk Officer (CRO); issues

surrounding the implementation

of the current requirement for

High Impact institutions to hold

eleven board meetings per year;

a l l o w t h e C h a i r m a n o f

subsidiaries of groups which are

designated as Medium-High,

Medium-Low or Low Impact

institutions, to hold more than

one Chairman position in another

credit institution or insurance

undertaking provided that the

institution resides within the

same group and the Chairman

has sufficient time available to

fulfill the role; amend the current

prohibition on the CEO holding

more than one CEO position in

another credit institution or

insurance undertaking at any one

time; amend the provision

concerning Annual Compliance

Statements to permit institutions

with a non-calendar year financial

reporting period to change the

submission basis of the annual

compliance statement to that of

the institution's financial year;

board diversity requirements;

etc. The consultation runs until 1

October 2013.

T h e C o m m i s s i o n e r o f

Competition has announced a

new whistleblowing program

developed by the Competition

Bureau's Cr iminal Matters

Branch. The Criminal Cartel

Whistleblowing Initiative will

encourage members of the public

to provide information to the

Competition Bureau regarding

possible violations of sections 45

to 49 of the Competition Act, i.e.,

the criminal cartel provisions

which prohibit, among other

4. Canada Competition Bureau

Introduces Criminal Cartel

Whistleblowing Initiative

t h i n g s , a g r e e m e n t s o r

a r r a n g e m e n t s a m o n g

competitors to fix prices, allocate

markets, restrict output or rig

bids.

T h e U n f a i r C o m p e t i t i o n

Prevention and Trade Secret

Protection Act protects IP rights by

preventing unfair competition and

the misappropriation of trade

secrets. Recent amendments to

the act identify additional activities

t h a t a r e d e e m e d u n f a i r

competition and reward those

who apprise the authorities of such

behaviour, among other things.

The amendments will become

effective on January 31 2014. The

existing act lists nine specific

unlawful activities that support a

potential unfair competition claim.

The recent amendment has added

a 10th anti-competitive activity

under Article 2(1)(x), as follows:

"an act of infringing a person's

5. Korea adds to the list of

activities deemed as unfair

competition

right to profit by using that

person's product, which was the

result of considerable effort and

investment, without authorization

for one's business through a

method that contravenes fair

commercial trade practice or

competition order."

The European Union and the Swiss

Confederation have signed a

C o o p e r a t i o n A g r e e m e n t i n

C o m p e t i t i o n M a t t e r s . T h e

agreement provides for broad

p o s s i b i l i t i e s o f t h e S w i s s

competition authority and the

E u r o p e a n C o m m i s s i o n t o

e x c h a n g e p r o t e c t e d o r

confidential information they have

obtained in their investigations,

even without the consent of the

investigated companies

T h e r e p o r t ' s G l o b a l

Competitiveness Index (GCI)

places Switzerland at the top of

the ranking for the fifth year

running. Singapore and Finland

remain in second and third

positions respectively. Germany

moves up two places (4th) and the

United States reverses a four-year

downward trend, climbing two

places to fifth. Hong Kong SAR

(7th) and Japan (9th) also close the

gap on the most competitive

economies, while Sweden (6th),

the Netherlands (8th) and the

United Kingdom (10th) fall. The

United States continues to be a

world leader in bringing innovative

products and services to market.

Its rise in the ranking is down to a

6. EU Swiss Bilateral

Cooperation Agreement In

Competition Matters

7. WEF Global Competitiveness

Report 2013-2014.

perceived improvement in the

country's financial market as well

as greater confidence in its public

institutions. However, serious

c o n c e r n s p e r s i s t o v e r i t s

macroeconomic stability, which

ranks 117 out of 148 economies.

Of the five BRICS, the People's

Republic of China (29th) continues

to lead the group, followed by

South Africa (53rd), Brazil (56th)

India (60th) and Russia (64th).

Among the BRICS, only Russia

improves its ranking, climbing

three places, while Brazil drops

eight places.

The Securities and Exchange

Commission said Tuesday that

foreign private issuers who

prepare their financial statements

in accordance with International

Financial Reporting Standards do

not have to submit interactive data

files until the SEC decides on a

suitable XBRL taxonomy.

More AIM companies are set to

become subject to the provisions

of the UK Takeover Code at the end

of September 2013 as a result of

changes published earlier this year.

The Code will now also apply to

Jersey and Guernsey companies

whose shares are admitted to

trading on a UK multilateral trading

facility (MTF), e.g. AIM, regardless

of where the company is managed

and controlled.

This means that Jersey and

Guernsey companies whose

shares are admitted to trading on

8. SEC Changes IFRS XBRL

Rules for Foreign Private

Issuers

9. Changes to the UK Takeover

Code

GLOBAL REGULATORY UPDATE

12 13

governance and shareholder

engagement. The paper reviews

t h e e x i s t i n g r o l e s a n d

responsibilities in corporate

governance and shareholder

e n g a g e m e n t a n d m a k e s

recommendations on how these

c o u l d b e e n h a n c e d , w i t h

reference to the UK Corporate

Governance Code.

T h e r e p o r t m a k e s

recommendations for:

Improving corporate governance

reporting;

Encouraging companies to

review the time-commitment

requirements of different non-

executive roles and how different

non-executive roles may best be

structured;

Empowering non-executive

directors, with measures to

ensure they receive the right level

of information to enhance their

ability to support and challenge

the Executive Directors;

Ensuring Non-Executive Directors

receive early and full information

on potential M&A transactions,

including where appropriate

independent advice;

Maintaining the UK's leadership

p o s i t i o n i n s h a r e h o l d e r

engagement, by opening ABI

collective engagement to non-

members and launching an

Investor Exchange mechanism;

and

Improving mutual understanding

by encouraging companies to

develop a transparent investor

re lat ions programme that

i n c l u d e s t h e s c h e d u l e o f

corporate governance-related

meetings

l

l

l

l

l

l

3. Ireland Central Bank

proposes changes to

Corporate Governance

Code for Credit Institutions

and Insurance

Undertakings\

The Central Bank has published a

consultation paper in which it

proposes the introduction of a

number of changes to the

Corporate Governance Code for

Credit Institutions and Insurance

Undertakings. The Code applies

on a statutory basis to all credit

inst itut ions and insurance

undertakings which are licensed

or authorised by the Bank

( i n c l u d i n g r e i n s u r e r s b u t

excluding captives which are

g o v e r n e d b y a s e p a r a t e

Corporate Governance Code).

T h e s i g n i f i c a n t p r o p o s e d

amendments include provision

relating to risk committees to

require that the committee be

composed of a majority of non-

executive directors; introduce a

n e w r e q u i r e m e n t f o r a l l

institutions to appoint a Chief

Risk Officer (CRO); issues

surrounding the implementation

of the current requirement for

High Impact institutions to hold

eleven board meetings per year;

a l l o w t h e C h a i r m a n o f

subsidiaries of groups which are

designated as Medium-High,

Medium-Low or Low Impact

institutions, to hold more than

one Chairman position in another

credit institution or insurance

undertaking provided that the

institution resides within the

same group and the Chairman

has sufficient time available to

fulfill the role; amend the current

prohibition on the CEO holding

more than one CEO position in

another credit institution or

insurance undertaking at any one

time; amend the provision

concerning Annual Compliance

Statements to permit institutions

with a non-calendar year financial

reporting period to change the

submission basis of the annual

compliance statement to that of

the institution's financial year;

board diversity requirements;

etc. The consultation runs until 1

October 2013.

T h e C o m m i s s i o n e r o f

Competition has announced a

new whistleblowing program

developed by the Competition

Bureau's Cr iminal Matters

Branch. The Criminal Cartel

Whistleblowing Initiative will

encourage members of the public

to provide information to the

Competition Bureau regarding

possible violations of sections 45

to 49 of the Competition Act, i.e.,

the criminal cartel provisions

which prohibit, among other

4. Canada Competition Bureau

Introduces Criminal Cartel

Whistleblowing Initiative

t h i n g s , a g r e e m e n t s o r

a r r a n g e m e n t s a m o n g

competitors to fix prices, allocate

markets, restrict output or rig

bids.

T h e U n f a i r C o m p e t i t i o n

Prevention and Trade Secret

Protection Act protects IP rights by

preventing unfair competition and

the misappropriation of trade

secrets. Recent amendments to

the act identify additional activities

t h a t a r e d e e m e d u n f a i r

competition and reward those

who apprise the authorities of such

behaviour, among other things.

The amendments will become

effective on January 31 2014. The

existing act lists nine specific

unlawful activities that support a

potential unfair competition claim.

The recent amendment has added

a 10th anti-competitive activity

under Article 2(1)(x), as follows:

"an act of infringing a person's

5. Korea adds to the list of

activities deemed as unfair

competition

right to profit by using that

person's product, which was the

result of considerable effort and

investment, without authorization

for one's business through a

method that contravenes fair

commercial trade practice or

competition order."

The European Union and the Swiss

Confederation have signed a

C o o p e r a t i o n A g r e e m e n t i n

C o m p e t i t i o n M a t t e r s . T h e

agreement provides for broad

p o s s i b i l i t i e s o f t h e S w i s s

competition authority and the

E u r o p e a n C o m m i s s i o n t o

e x c h a n g e p r o t e c t e d o r

confidential information they have

obtained in their investigations,

even without the consent of the

investigated companies

T h e r e p o r t ' s G l o b a l

Competitiveness Index (GCI)

places Switzerland at the top of

the ranking for the fifth year

running. Singapore and Finland

remain in second and third

positions respectively. Germany

moves up two places (4th) and the

United States reverses a four-year

downward trend, climbing two

places to fifth. Hong Kong SAR

(7th) and Japan (9th) also close the

gap on the most competitive

economies, while Sweden (6th),

the Netherlands (8th) and the

United Kingdom (10th) fall. The

United States continues to be a

world leader in bringing innovative

products and services to market.

Its rise in the ranking is down to a

6. EU Swiss Bilateral

Cooperation Agreement In

Competition Matters

7. WEF Global Competitiveness

Report 2013-2014.

perceived improvement in the

country's financial market as well

as greater confidence in its public

institutions. However, serious

c o n c e r n s p e r s i s t o v e r i t s

macroeconomic stability, which

ranks 117 out of 148 economies.

Of the five BRICS, the People's

Republic of China (29th) continues

to lead the group, followed by

South Africa (53rd), Brazil (56th)

India (60th) and Russia (64th).

Among the BRICS, only Russia

improves its ranking, climbing

three places, while Brazil drops

eight places.

The Securities and Exchange

Commission said Tuesday that

foreign private issuers who

prepare their financial statements

in accordance with International

Financial Reporting Standards do

not have to submit interactive data

files until the SEC decides on a

suitable XBRL taxonomy.

More AIM companies are set to

become subject to the provisions

of the UK Takeover Code at the end

of September 2013 as a result of

changes published earlier this year.

The Code will now also apply to

Jersey and Guernsey companies

whose shares are admitted to

trading on a UK multilateral trading

facility (MTF), e.g. AIM, regardless

of where the company is managed

and controlled.

This means that Jersey and

Guernsey companies whose

shares are admitted to trading on

8. SEC Changes IFRS XBRL

Rules for Foreign Private

Issuers

9. Changes to the UK Takeover

Code

15

GLOBAL REGULATORY UPDATE

14

W: www.verus.net.in

New DelhiE-177 Lower Ground FloorEast of Kailash New Delhi 110065

E: delhi@verus.net.in

T: +91 11 26215601 / 02

F: +91 11 26215603

Kolkata10 Old Post Office StreetGround FloorKolkata 700001

E: kolkata@verus.net.in

T: +91 33 22308909

F: +91 33 22487823

HyderabadChamber#103 Ground Floor 6-3-252/A/10 Sana Apartments, ErramanzilHyderabad 500082

E: hyderabad@verus.net.in

T: +91 40 39935766

Winner: Best Newcomers: India Business Law Journal Awards2012

Mumbai24 M. C. C. LaneFortMumbai 400023

E: mumbai@verus.net.in

T: +91 22 22834130 / 01

F: +91 22 22834102

India member firm of:

CONTACT

Krishnayan Sen / Dipankar Bandyopadhyay

partners@verus.net.in

AIM and which are not currently

subject to the Code because they

are central ly managed and

controlled outside the United

Kingdom, the Channel Islands and

the Isle of Man, will now have

certainty that the Code applies to

them and that they are subject to

the jurisdiction of the Takeover

Panel with effect from 30

September 2013.

Global credit rating agency

Moody cautioned that India is

among the countries that are

most vulnerable to capital

outflows as it relies heavily on

external funding. In its report -

10.India's vulnerability to cash

outflows

'How US Monetary Tightening

Affects Asian Markets' the agency

have highlighted the impact of

the US Fed agency

announcements on the bond

yields in the Indian market. To

counter the effect the RBI

Governor has said India needs to

build a "bullet-proof national

balance sheet" to deal with the

fallout on the economy from US

Fed's tapering of stimulus.

The Japanese Minister Hakubun

Shimomura, on the sidelines of

the World Economic Forum

meeting at Dalian in China has

shown interest in funding and

sharing technology in a bullet

train project in Karnataka. Also,

Karnataka State officials said

Malaysia's Q1 Group has

expressed interest in investing in

e-retail, IT and education sectors

in Karnataka while Spanish firm

Acciona in waste water

treatment, renewable energy

projects and wind energy.

11. Investor interest in infra,

technology and renewable

sectors

12. U.S. bans import of generic

drugs from Ranbaxy's Indian

plant

13. Cooper Tire & Rubber deal

with Apollo Tyres comes to a

standstill

The $2.5 billion deal between Cooper

Tire & Rubber and Apollo Tyres has

come to a standstill by the decision of

the arbitrator to block the sale of

Cooper's Texas plants to Apollo on the

ground that the consent of the

workers at the two plants was not

obtained. The biggest ever takeover

of the US company by an Indian group

was brought to notice by the United

Steel Workers, the union which

objected to the takeover. The

arbitrator, James Oldham, ruled that

on the basis of the 'successor ship

clause' a consent of the workers of

both the factories had to be taken in

case of any change of control. As this

was not taken, the deal could not go

ahead. After the decision of the

arbitrator, both the companies have

agreed to enter into discussions with

the union of United Steel Workers.

The basic concern of United Steel

Workers was the amount of debt

which was going to be placed on

Cooper as a result of the merger.

Hence, it will be interesting to see how

the parties will finally settle the

matter. The two companies had

announced the $35 per share all-cash

deal in June which would create the

world's seventh-biggest tyre maker by

revenues.

15

GLOBAL REGULATORY UPDATE

14

W: www.verus.net.in

New DelhiE-177 Lower Ground FloorEast of Kailash New Delhi 110065

E: delhi@verus.net.in

T: +91 11 26215601 / 02

F: +91 11 26215603

Kolkata10 Old Post Office StreetGround FloorKolkata 700001

E: kolkata@verus.net.in

T: +91 33 22308909

F: +91 33 22487823

HyderabadChamber#103 Ground Floor 6-3-252/A/10 Sana Apartments, ErramanzilHyderabad 500082

E: hyderabad@verus.net.in

T: +91 40 39935766

Winner: Best Newcomers: India Business Law Journal Awards2012

Mumbai24 M. C. C. LaneFortMumbai 400023

E: mumbai@verus.net.in

T: +91 22 22834130 / 01

F: +91 22 22834102

India member firm of:

CONTACT

Krishnayan Sen / Dipankar Bandyopadhyay

partners@verus.net.in

AIM and which are not currently

subject to the Code because they

are central ly managed and

controlled outside the United

Kingdom, the Channel Islands and

the Isle of Man, will now have

certainty that the Code applies to

them and that they are subject to

the jurisdiction of the Takeover

Panel with effect from 30

September 2013.

Global credit rating agency

Moody cautioned that India is

among the countries that are

most vulnerable to capital

outflows as it relies heavily on

external funding. In its report -

10.India's vulnerability to cash

outflows

'How US Monetary Tightening

Affects Asian Markets' the agency

have highlighted the impact of

the US Fed agency

announcements on the bond

yields in the Indian market. To

counter the effect the RBI

Governor has said India needs to

build a "bullet-proof national

balance sheet" to deal with the

fallout on the economy from US

Fed's tapering of stimulus.

The Japanese Minister Hakubun

Shimomura, on the sidelines of

the World Economic Forum

meeting at Dalian in China has

shown interest in funding and

sharing technology in a bullet

train project in Karnataka. Also,

Karnataka State officials said

Malaysia's Q1 Group has

expressed interest in investing in

e-retail, IT and education sectors

in Karnataka while Spanish firm

Acciona in waste water

treatment, renewable energy

projects and wind energy.

11. Investor interest in infra,

technology and renewable

sectors

12. U.S. bans import of generic

drugs from Ranbaxy's Indian

plant

13. Cooper Tire & Rubber deal

with Apollo Tyres comes to a

standstill

The $2.5 billion deal between Cooper

Tire & Rubber and Apollo Tyres has

come to a standstill by the decision of

the arbitrator to block the sale of

Cooper's Texas plants to Apollo on the

ground that the consent of the

workers at the two plants was not

obtained. The biggest ever takeover

of the US company by an Indian group

was brought to notice by the United

Steel Workers, the union which

objected to the takeover. The

arbitrator, James Oldham, ruled that

on the basis of the 'successor ship

clause' a consent of the workers of

both the factories had to be taken in

case of any change of control. As this

was not taken, the deal could not go

ahead. After the decision of the

arbitrator, both the companies have

agreed to enter into discussions with

the union of United Steel Workers.

The basic concern of United Steel

Workers was the amount of debt

which was going to be placed on

Cooper as a result of the merger.

Hence, it will be interesting to see how

the parties will finally settle the

matter. The two companies had

announced the $35 per share all-cash

deal in June which would create the

world's seventh-biggest tyre maker by

revenues.

16

GLOBAL REGULATORY UPDATE

17

By Mr. Koosai Lehery, Director, Accounting Advisory Services, KPMG, India

T h e R u p e e h a s d e p r e c i a t e d

significantly against major foreign

currencies (US Dollar, Euro, GBP etc)

over the last few months on account

of the significant current account

deficit and reduced inflows from

foreign institutional investors into

emerging markets, including India.

This has adversely impacted several

companies, especially those that are

i m p o r t d e p e n d e n t o r h a v e

borrowings in foreign currencies.

Conversely, the volatility also affects

exporters in terms of volatile

performance results. An entity may

opt to address such volatility by

entering into derivative transactions

to hedge their exposures.

An entity can manage its exposure to

variability in cash flows arising from

exchange rate movements using a

forward contract that fixes the

amount to be paid or received on

settlement. Similarly, foreign currency

debt, raised via foreign currency

convertible bonds or external

commercial bonds often creates dual

risk, relating to variable interest rates

as well as foreign exchange risk, which

are commonly hedged using cross

currency swaps.

The current accounting for forward

exchange contracts entered in order

to hedge recognised assets or

liabilities is governed by AS 11 "The

effects of changes in foreign

exchange rates" In accordance with

the guidance in AS 11, the premium or

discount arising at the time of

inception of the forward contract is

required to be amortized as expense

or income over the life of the contract

and exchange differences on such

contracts should be recognised in the

profit or loss account in the reporting

period during which there is change in

the exchange rates.

However, in relation to forward

contracts not covered by AS 11 (i.e.

contracts to hedge forecasted

purchase or sale of transactions) and

all other derivative contracts entered

into by an entity, the guidance issued

by the Institute of Chartered

Accountants of India requires

companies to reflect in their profit and

loss statement, all the mark-to-market

losses at each reporting date, on the

basis of prudence. No mark-to-market

gains whatsoever can be recognised.

H e n c e , e v e n i f a n e n t i t y i s

economically hedging its forecasted

transactions, such asymmetrical

accounting may result in a distorted

p i c t u r e o f t h e e n t i t y ' s r i s k

management strategy, unless it opts

to adopt pr inciples of hedge

accounting enunciated in AS 30

"Financial instruments: recognition

and measurement". This is not yet a

mandatory accounting standard,

however , i t may be adopted

voluntarily to the extent that it does

not conflict with the guidance

contained in any notified accounting

standards. This standard allows an

entity to either, measure hedged

a s s e t s , l i a b i l i t i e s a n d f i r m

commitments on a basis different

from that otherwise stipulated in the

accounting standards ("fair value

hedge accounting model") or to defer

the recognition of gains or losses on

derivatives until the underlying

hedged transaction affects earnings,

for example until the forecasted sales

or purchases occur ("cash flow hedge

a c c o u n t i n g m o d e l " o r " n e t

investment hedging") in the profit or

loss, thus aligning the measurement

and reporting relating to the hedged

items, such as a loan or foreign

currency exposure and the hedging

instrument, such as the forward

contracts or cross-currency swaps.

Hedge accounting can be used not

only for aligning measurement and

reporting, but also for a more

appropriate presentation. Thus, while

companies that do not follow hedge

accounting are required to reflect

foreign exchange gains and losses as a

separate component in the profit and

loss, hedge accounting may enable

presentation of gains and losses on

hedging derivatives along with the

underlying transactions.

It should be noted that hedge

accounting is permitted only when the

criteria prescribed in AS 30 are met.

These include formal designation and

written documentation, as well as,

testing the hedge effectiveness at

inception and on an ongoing basis. Its

implementation can sometimes

present challenges in terms of

determining the hedging relationship,

identifying upfront the methods for

testing hedge effectiveness. Some of

the commonly used methods for

testing effectiveness include the

dollar offset method, hypothetical

derivative method, regression

analysis amongst others. The hedge is

assessed to evaluate if it would be

highly effective on an ongoing basis

throughout the hedge relationship. A

hedge is highly effective if the ratio of

changes in the fair value or expected

cash flows of the hedging instrument

and the changes in the fair value or

expected cash flows of the hedged

item attributable to the hedged risk

falls within the range of 80 - 125

percent, as tested at the reporting

date. Ineffectiveness in hedging

relationships can arise if the key terms

of the hedged item and hedging

instruments do not match, for

example, the notional and principal

amounts for derivative and hedged

item may be different, or, if there are

timing differences in the maturity

dates or currencies.

Therefore, whilst hedge accounting

can enable a fairer representation of

an entity's market risk profile in its

financial statements, it should be

remembered that adopting hedge

accounting brings its own share of

c h a l l e n g e s . H o w e v e r , c a r e f u l

evaluation of the requirements at

i n c e p t i o n , e m b e d d i n g t h e

requirements into the entity's

financial reporting framework and

training of employees can lead to a

smoother transit ion to hedge

accounting. The benefits of hedge

accounting far outweigh the efforts

required.

Mr. Koosai LeheryDirector

Accounting Advisory Services KPMG, India

Authored by:

Hedging the financials from foreign exchange fluctuationsHedging the financials from foreign exchange fluctuations

16

GLOBAL REGULATORY UPDATE

17

By Mr. Koosai Lehery, Director, Accounting Advisory Services, KPMG, India

T h e R u p e e h a s d e p r e c i a t e d

significantly against major foreign

currencies (US Dollar, Euro, GBP etc)

over the last few months on account

of the significant current account

deficit and reduced inflows from

foreign institutional investors into

emerging markets, including India.

This has adversely impacted several

companies, especially those that are

i m p o r t d e p e n d e n t o r h a v e

borrowings in foreign currencies.

Conversely, the volatility also affects

exporters in terms of volatile

performance results. An entity may

opt to address such volatility by

entering into derivative transactions

to hedge their exposures.

An entity can manage its exposure to

variability in cash flows arising from

exchange rate movements using a

forward contract that fixes the

amount to be paid or received on

settlement. Similarly, foreign currency

debt, raised via foreign currency

convertible bonds or external

commercial bonds often creates dual

risk, relating to variable interest rates

as well as foreign exchange risk, which

are commonly hedged using cross

currency swaps.

The current accounting for forward

exchange contracts entered in order

to hedge recognised assets or

liabilities is governed by AS 11 "The

effects of changes in foreign

exchange rates" In accordance with

the guidance in AS 11, the premium or

discount arising at the time of

inception of the forward contract is

required to be amortized as expense

or income over the life of the contract

and exchange differences on such

contracts should be recognised in the

profit or loss account in the reporting

period during which there is change in

the exchange rates.

However, in relation to forward

contracts not covered by AS 11 (i.e.

contracts to hedge forecasted

purchase or sale of transactions) and

all other derivative contracts entered

into by an entity, the guidance issued

by the Institute of Chartered

Accountants of India requires

companies to reflect in their profit and

loss statement, all the mark-to-market

losses at each reporting date, on the

basis of prudence. No mark-to-market

gains whatsoever can be recognised.

H e n c e , e v e n i f a n e n t i t y i s

economically hedging its forecasted

transactions, such asymmetrical

accounting may result in a distorted

p i c t u r e o f t h e e n t i t y ' s r i s k

management strategy, unless it opts

to adopt pr inciples of hedge

accounting enunciated in AS 30

"Financial instruments: recognition

and measurement". This is not yet a

mandatory accounting standard,

however , i t may be adopted

voluntarily to the extent that it does

not conflict with the guidance

contained in any notified accounting

standards. This standard allows an

entity to either, measure hedged

a s s e t s , l i a b i l i t i e s a n d f i r m

commitments on a basis different

from that otherwise stipulated in the

accounting standards ("fair value

hedge accounting model") or to defer

the recognition of gains or losses on

derivatives until the underlying

hedged transaction affects earnings,

for example until the forecasted sales

or purchases occur ("cash flow hedge

a c c o u n t i n g m o d e l " o r " n e t

investment hedging") in the profit or

loss, thus aligning the measurement

and reporting relating to the hedged

items, such as a loan or foreign

currency exposure and the hedging

instrument, such as the forward

contracts or cross-currency swaps.

Hedge accounting can be used not

only for aligning measurement and

reporting, but also for a more

appropriate presentation. Thus, while

companies that do not follow hedge

accounting are required to reflect

foreign exchange gains and losses as a

separate component in the profit and

loss, hedge accounting may enable

presentation of gains and losses on

hedging derivatives along with the

underlying transactions.

It should be noted that hedge

accounting is permitted only when the

criteria prescribed in AS 30 are met.

These include formal designation and

written documentation, as well as,

testing the hedge effectiveness at

inception and on an ongoing basis. Its

implementation can sometimes

present challenges in terms of

determining the hedging relationship,

identifying upfront the methods for

testing hedge effectiveness. Some of

the commonly used methods for

testing effectiveness include the

dollar offset method, hypothetical

derivative method, regression

analysis amongst others. The hedge is

assessed to evaluate if it would be

highly effective on an ongoing basis

throughout the hedge relationship. A

hedge is highly effective if the ratio of

changes in the fair value or expected

cash flows of the hedging instrument

and the changes in the fair value or

expected cash flows of the hedged

item attributable to the hedged risk

falls within the range of 80 - 125

percent, as tested at the reporting

date. Ineffectiveness in hedging

relationships can arise if the key terms

of the hedged item and hedging

instruments do not match, for

example, the notional and principal

amounts for derivative and hedged

item may be different, or, if there are

timing differences in the maturity

dates or currencies.

Therefore, whilst hedge accounting

can enable a fairer representation of

an entity's market risk profile in its

financial statements, it should be

remembered that adopting hedge

accounting brings its own share of

c h a l l e n g e s . H o w e v e r , c a r e f u l

evaluation of the requirements at

i n c e p t i o n , e m b e d d i n g t h e

requirements into the entity's

financial reporting framework and

training of employees can lead to a

smoother transit ion to hedge

accounting. The benefits of hedge

accounting far outweigh the efforts

required.

Mr. Koosai LeheryDirector

Accounting Advisory Services KPMG, India

Authored by:

Hedging the financials from foreign exchange fluctuationsHedging the financials from foreign exchange fluctuations

GLOBAL REGULATORY UPDATE

18 19

Competition Law Update Competition Law Update

By Ms. Shweta Shroff Chopra, Partner, Competition Law Practice, Amarchand & Mangaldas & Suresh A. Shroff & Co.

1. Abuse of Dominance

1.1CCI finds no prima facie case of

a b u s e o f d o m i n a n c e b y

builders/developers in the real

estate sector

Following its order in the DLF

C a s e s , t h e C o m p e t i t i o n

Commission of India (CCI) has

received a large number of

complaints pertaining to unfair

and discriminatory clauses in the

apartment buyer agreements,

i.e., the agreements for sale.

Recently, the CCI has dismissed

five complaints against different

builders/developers based in

d ifferent places, namely,

Hyderabad, Pune, Delhi National

Capital Region and Bhiwadi

(Rajasthan) on the basis that the

builder/developer was not

dominant in the relevant

market. It should be noted that

assessment of dominance of

builder/developer in these cases

is in sharp contrast to the CCI’s

approach in the DLF cases,

where the DLF’s dominance was

assessed in respect of high-end

residential accommodations in

Gurgaon.

Interestingly, in Case no. 31/2013

(Achyut P. Rao v. M/s Designarch

Infrastructure Private Limited),

the CCI has held that e-homes

(residential accommodations

with pre-fitted hi-tech gadgets

such as wifi, finger print security

system and parkings, etc.) in

Delhi NCR cannot be treated

differently in comparison to

o t h e r r e s i d e n t i a l

apartments/flats and therefore,

they are part of the same

product market. Accordingly,

the CCI in this case has defined

the relevant market in respect of

residential flats/apartments in

Delhi NCR.

Further, in relation to the tall

claims made by companies in

respect of their market position

(for example, claims of being a

leading/major/dominant market

p l a y e r ) i n t h e i r p u b l i c

documents, the CCI has stated

t h a t “ s e l f a c c l a i m s b y

enterpr ises in the i r own

documents like red herring

prospectus cannot be taken as

evidence of dominance per se”.

(Case No. 34/2013 (Casa Paradiso

Owner’s Welfare Association v.

M/s Santharam Enterprises

Limited))

These cases appear to suggest a

retreat from the position taken

by the CCI in the DLF cases. It

acutely shows that it was

perhaps not wise to have

prosecuted the DLF cases under

the Competition Act 2002, if the

intent of the CCI had been to

r e f o r m t h e c o m m o n

malpractices in the real estate

sector, which are followed

irrespective of dominance of the

builder/developer.

1.2 CCI finds no prima facie case

of abuse of dominance by

Central Bureau of Narcotics

and Narcotics Control Bureau

R e c e n t l y , t h e C C I h a s

dismissed a complaint filed

against the Central Bureau of

Narcotics (CBN)and Narcotics

Control Bureau (NCB) for

alleged violations of the

Competition Act. It has been

alleged that CBN and NCB, the

r e g u l a t o r y a u t h o r i t i e s

monitoring the import and

export of poppy seeds under

the EXIM Policy 2009-14, have

violated the Competition Act

by permitting import of huge

quantities of poppy seeds

under Special Import Licence

scheme to the detriment of

domestic cultivators. As per

the Government of India’s

regulations, all contracts for

import of poppy seeds are

required to be compulsorily

registered with the NCB.

Further, import of opium

seeds are permissible only

from those countries which

legally cultivate opium poppy

and which can produce the

quantity of seeds sought to be

imported.

The informant was aggrieved

by the fact that, as a result of

the import of opium poppy

seeds, the prices of poppy

produced by the domestic

cultivators have decreased by

almost 50%. Further over the

time, several restrictions have

been imposed on the Indian

cultivators such that they are

now prohibited from growing

opium in an unrestricted

manner. As a result of the

government policies, the

demand for opium is much

higher than the production

and the deficit is met through

the imports.

After considering the records

produced before it, the CCI

observed that CBN and NCB

are government appointed

agencies who are responsible

for ensuring that illegally

cultivated poppy seeds are

n o t a v a i l a b l e i n I n d i a .

Accordingly, CBN and NCB

c a n n o t b e s a i d t o b e

enterprises within Section

2(h) of the Competition Act.

Further, the CCI has noted

that import of poppy seeds is

governed by the EXIM Policy

of the Ministry of Commerce

and the prices of poppy seeds

are not fixed by either CBN or

NCB. On this basis, the CCI has

observed that a prima facie

case of violation of the

Competition Act has not been

made out against CBN and

NCB.

1.3 CCI gives clean chit to Odisha

Mining Corporation Limited

In a significant decision on

i m p o s i t i o n o f u n f a i r

conditions and pricing by a

dominant enterprise, the CCI

recently passed an order

exonerating Odisha Mining

Corporation Limited (OMC) of

a n y b r e a c h o f t h e

Competit ion Act in the

context of the conditions and

the prices imposed by OMC

through the Price Setting

Tenders (PSTs). Whilst noting

that OMC was dominant in the

market for friable chrome ore

in Orissa, the CCI found that it

had not abused its position of

dominance.

In relation to the alleged

unfair conditions imposed by

OMC in the PSTs, the CCI

found that the relevant

clauses of the PSTs protected

OMC’s legitimate commercial

interests, as these clauses

allowed OMC to explore

alternative price discovery

s y s t e m s , e s p e c i a l l y i n

situations where in OMC’s

view, the PST did not reflect

the fair market value of

chrome ore. Interestingly, the

CCI noted that OMC was free

to adopt measures in order to

protect its legitimate business

interests.

In relation to the alleged

unfair pricing, the CCI held

that chrome ore being a non-

renewable natural resource,

its pricing and supply cannot

be determined by the market

forces. Accordingly, while

noting that assessing the

correct economic value of

chrome ore was a difficult

task, the CCI observed that

prices charged by OMC were

not unreasonable on the basis

of the ferro chrome prices in

the international market. The

CCI observed that the prices

charged by OMC did not yield

supra-competitive profits, as

had that been the case, it

would have retained Tata

Steel, who chose to exit the

business of chrome ore sales

(despite OMC being the only

other Indian player), in the

business.

GLOBAL REGULATORY UPDATE

18 19

Competition Law Update Competition Law Update

By Ms. Shweta Shroff Chopra, Partner, Competition Law Practice, Amarchand & Mangaldas & Suresh A. Shroff & Co.

1. Abuse of Dominance

1.1CCI finds no prima facie case of

a b u s e o f d o m i n a n c e b y

builders/developers in the real

estate sector

Following its order in the DLF

C a s e s , t h e C o m p e t i t i o n

Commission of India (CCI) has

received a large number of

complaints pertaining to unfair

and discriminatory clauses in the

apartment buyer agreements,

i.e., the agreements for sale.

Recently, the CCI has dismissed

five complaints against different

builders/developers based in

d ifferent places, namely,

Hyderabad, Pune, Delhi National

Capital Region and Bhiwadi

(Rajasthan) on the basis that the

builder/developer was not

dominant in the relevant

market. It should be noted that

assessment of dominance of

builder/developer in these cases

is in sharp contrast to the CCI’s

approach in the DLF cases,

where the DLF’s dominance was

assessed in respect of high-end

residential accommodations in

Gurgaon.

Interestingly, in Case no. 31/2013

(Achyut P. Rao v. M/s Designarch

Infrastructure Private Limited),

the CCI has held that e-homes

(residential accommodations

with pre-fitted hi-tech gadgets

such as wifi, finger print security

system and parkings, etc.) in

Delhi NCR cannot be treated

differently in comparison to

o t h e r r e s i d e n t i a l

apartments/flats and therefore,

they are part of the same

product market. Accordingly,

the CCI in this case has defined

the relevant market in respect of

residential flats/apartments in

Delhi NCR.

Further, in relation to the tall

claims made by companies in

respect of their market position

(for example, claims of being a

leading/major/dominant market

p l a y e r ) i n t h e i r p u b l i c

documents, the CCI has stated

t h a t “ s e l f a c c l a i m s b y

enterpr ises in the i r own

documents like red herring

prospectus cannot be taken as

evidence of dominance per se”.

(Case No. 34/2013 (Casa Paradiso

Owner’s Welfare Association v.

M/s Santharam Enterprises

Limited))

These cases appear to suggest a

retreat from the position taken

by the CCI in the DLF cases. It

acutely shows that it was

perhaps not wise to have

prosecuted the DLF cases under

the Competition Act 2002, if the

intent of the CCI had been to

r e f o r m t h e c o m m o n

malpractices in the real estate

sector, which are followed

irrespective of dominance of the

builder/developer.

1.2 CCI finds no prima facie case

of abuse of dominance by

Central Bureau of Narcotics

and Narcotics Control Bureau

R e c e n t l y , t h e C C I h a s

dismissed a complaint filed

against the Central Bureau of

Narcotics (CBN)and Narcotics

Control Bureau (NCB) for

alleged violations of the

Competition Act. It has been

alleged that CBN and NCB, the

r e g u l a t o r y a u t h o r i t i e s

monitoring the import and

export of poppy seeds under

the EXIM Policy 2009-14, have

violated the Competition Act

by permitting import of huge

quantities of poppy seeds

under Special Import Licence

scheme to the detriment of

domestic cultivators. As per

the Government of India’s

regulations, all contracts for

import of poppy seeds are

required to be compulsorily

registered with the NCB.

Further, import of opium

seeds are permissible only

from those countries which

legally cultivate opium poppy

and which can produce the

quantity of seeds sought to be

imported.

The informant was aggrieved

by the fact that, as a result of

the import of opium poppy

seeds, the prices of poppy

produced by the domestic

cultivators have decreased by

almost 50%. Further over the

time, several restrictions have

been imposed on the Indian

cultivators such that they are

now prohibited from growing

opium in an unrestricted

manner. As a result of the

government policies, the

demand for opium is much

higher than the production

and the deficit is met through

the imports.

After considering the records

produced before it, the CCI

observed that CBN and NCB

are government appointed

agencies who are responsible

for ensuring that illegally

cultivated poppy seeds are

n o t a v a i l a b l e i n I n d i a .

Accordingly, CBN and NCB

c a n n o t b e s a i d t o b e

enterprises within Section

2(h) of the Competition Act.

Further, the CCI has noted

that import of poppy seeds is

governed by the EXIM Policy

of the Ministry of Commerce

and the prices of poppy seeds

are not fixed by either CBN or

NCB. On this basis, the CCI has

observed that a prima facie

case of violation of the

Competition Act has not been

made out against CBN and

NCB.

1.3 CCI gives clean chit to Odisha

Mining Corporation Limited

In a significant decision on

i m p o s i t i o n o f u n f a i r

conditions and pricing by a

dominant enterprise, the CCI

recently passed an order

exonerating Odisha Mining

Corporation Limited (OMC) of

a n y b r e a c h o f t h e

Competit ion Act in the

context of the conditions and

the prices imposed by OMC

through the Price Setting

Tenders (PSTs). Whilst noting

that OMC was dominant in the

market for friable chrome ore

in Orissa, the CCI found that it

had not abused its position of

dominance.

In relation to the alleged

unfair conditions imposed by

OMC in the PSTs, the CCI

found that the relevant

clauses of the PSTs protected

OMC’s legitimate commercial

interests, as these clauses

allowed OMC to explore

alternative price discovery

s y s t e m s , e s p e c i a l l y i n

situations where in OMC’s

view, the PST did not reflect

the fair market value of

chrome ore. Interestingly, the

CCI noted that OMC was free

to adopt measures in order to

protect its legitimate business

interests.

In relation to the alleged

unfair pricing, the CCI held

that chrome ore being a non-

renewable natural resource,

its pricing and supply cannot

be determined by the market

forces. Accordingly, while

noting that assessing the

correct economic value of

chrome ore was a difficult

task, the CCI observed that

prices charged by OMC were

not unreasonable on the basis

of the ferro chrome prices in

the international market. The

CCI observed that the prices

charged by OMC did not yield

supra-competitive profits, as

had that been the case, it

would have retained Tata

Steel, who chose to exit the

business of chrome ore sales

(despite OMC being the only

other Indian player), in the

business.

GLOBAL REGULATORY UPDATE

20 21

2. Merger Control

2.1 CCI approves the proposed

scheme of consolidation of

CIE group’s automotives

Forgings Business with

Mahindra group

On 21 August 2013, the CCI

c l e a r e d t h e p r o p o s e d

consolidation of the auto-

components business of CIE

g r o u p c o m p a n i e s a n d

Mahindra group companies

stating that the proposed

transaction was not likely to

cause an AAEC in India. The

p r o p o s e d t r a n s a c t i o n

involved consolidation of the

E u r o p e a n a u t o m o t i v e s

forgings business of the CIE

Group Companies with the

f o r g i n g s , c o m p o s i t e s ,

castings, gears, stampings,

and magnetics businesses of

Mahindra Group Companies

into one entity, i.e., Mahindra

CIE Automotive Limited

(Mahindra CIE) through a

series of inter-connected

share acquisitions, open

offers and two schemes of

amalgamation.

P r i o r t o t h e p r o p o s e d

t r a n s a c t i o n , C I E G r o u p

Companies were operational

in European Union, Canada,

Mexico, United States of

America, Brazil, Russia and

China; and Mahindra Group

Companies were primarily

operational in India and

European Union. Therefore,

the proposed transaction was

aimed to confer Mahindra CIE

with a global foot print with

c o m p l e m e n t a r i t y i n

geographies.

W h i l e g r a n t i n g a n

unconditional approval to the

proposed transaction, the CCI

noted that the proposed

transaction did not involve

the merger of two existing

players in the market, as CIE

did not have any presence in

the Indian auto-components

sector and that the existing

t e c h n o l o g i e s u s e d b y

Mahindra Group Companies

would continue to be used

even after completion of the

proposed transaction.

2.2 CCI clears the proposed

acquisition of certain specific

businesses of Royal Bank of

Scotland by Ratnakar Bank

Through its order dated 10

September 2013, the CCI has

approved the proposed

acquisition by Ratnakar Bank

Limited (Ratnakar Bank) of

the credit cards, mortgage 1portfol io and bus iness

2banking segments of Royal

Bank of Scotland (RBS) in

furtherance of the Master

S a l e a n d P u r c h a s e

Agreement. While Ratnakar

Bank had no presence in the

credit cards business prior to

the proposed transaction, the

p r o p o s e d t r a n s a c t i o n

contemplated RBS’ exit from

the credit cards, mortgage

p o r t f o l i o a n d b u s i n e s s

banking segments.

W h i l e g r a n t i n g a n

unconditional approval to the

proposed transaction, the CCI

has observed that given the

The CCI noted neither Baring Asia nor

any companies belonging to the

Baring Private Equity Asia Group has

any investments in any company

engaged in the same sector as

Hexaware (i.e. providing IT and IT

enabled services in domains such as

human resources and business

analytics in the banking and financial,

insurance, healthcare, manufacturing,

transportation and logistics sectors)

in India. On this basis, the CCI

o b s e r v e d t h a t t h e p r o p o s e d

transaction was unlikely to cause an

AAEC in India as it did not contemplate

a combination of two existing players

in the Indian IT and IT enabled services

industry.

3.1 Delhi High Court holds that

the CCI is not required to

serve a notice to the affected

parties before directing a

further investigation

Through its order dated 2

September 2013, the High

Court of Delhi dismissed a writ

petition filed by South Asia

LPG Company Private Limited

stating that while passing an

order d i rect ing further

investigation into a matter

under Section 26(7) of the

Competition Act, the CCI is not

required to serve a notice to

3. Procedure

1 Mortgage portfolio business includes housing loans and loans against property.

2 Business banking segment includes the high end products and services that are offered to

small and medium sized enterprises.

the informant or the opposite

party.

To substantiate its order, the

Court has relied on the

decision of the Supreme Court

in Competition Commission of

India v. Steel Authority of India

Limited (2010) 10 SCC 74,

where it was held that no

notice is required to be given

to the affected parties before

the CCI forms an opinion as to

whether or not a prima facie

case exists on the basis of the

records produced before it.

The Court has observed that,

“if the law does not mandate

issue of notice to the affected

p a r t y b e f o r e d i r e c t i n g

investigation to be made by

the Director General, there

would be no reason to imply

such a notice before directing

further invest igation in

exercise of the powers

c o n f e r r e d u p o n t h e

C o m m i s s i o n u n d e r s u b

section (7) of the said

Section.” Further, the Court

has also observed that there is

no difference between the

directions for investigation

and directions for further

investigation insofar as the

a f f e c t e d p a r t i e s a r e

concerned, since any further

investigation is merely a

c o n t i n u a t i o n o f t h e

investigation carried out by

the Director General.

Additionally, in relation to the

petitioner’s claims of alleged

violations of the principles of

natural justice, the Court has

categorically stated that the

principles of audi alteram

partem would not apply as an

order directing a further

investigation cannot be said

to be an order prejudicially

affecting the person against

w h o m i n f o r m a t i o n i s

provided or a reference is

made. The Court appears to

have based its findings on the

fact that an order of further

investigation neither entails

any civil consequences nor

does it impair any legal right of

any such person.

Ms. Shweta Shroff Chopra

Partner - Competition Law Practice

Amarchand & Mangaldas & Suresh A. Shroff & Co.

Advocates and Solicitors

216, Amarchand Towers, Okhla Industrial Estate

Phase III, New Delhi 110020

Email - shweta.shroff@amarchand.com

Mobile - +91 98100 98335

fact that the banking sector in

India was thriving with a large

number of banks and that

both Ratnakar Bank and RBS

had relatively small number of

branches operating in India,

the proposed transaction was

not likely to cause an AAEC in

India.

2.3 CCI clears proposal for

acquisition of Hexaware

Technologies Limited

On 19 September 2013, the CCI

unconditionally approved the

proposed acquisit ion in

Hexaware Technologies

Limited (Hexaware) by HT

Global IT Solutions Holdings

Limited, a company belonging

to the Baring Asia Private

Equity group (Baring Asia) of:

(i) 4 1 . 4 8 % e q u i t y s h a r e s

(including unlisted American

D e p o s i t o r y R e c e i p t s

equivalent to 7.01% of the

equity share capital) pursuant

t o a s h a r e p u r c h a s e

agreement; and

(ii) an additional 26% equity

shares pursuant to the

mandatory open offer under

t h e S E B I ( S u b s t a n t i a l

Acquisition of Shares and

Takeovers) Regulations, 2011.

GLOBAL REGULATORY UPDATE

20 21

2. Merger Control

2.1 CCI approves the proposed

scheme of consolidation of

CIE group’s automotives

Forgings Business with

Mahindra group

On 21 August 2013, the CCI

c l e a r e d t h e p r o p o s e d

consolidation of the auto-

components business of CIE

g r o u p c o m p a n i e s a n d

Mahindra group companies

stating that the proposed

transaction was not likely to

cause an AAEC in India. The

p r o p o s e d t r a n s a c t i o n

involved consolidation of the

E u r o p e a n a u t o m o t i v e s

forgings business of the CIE

Group Companies with the

f o r g i n g s , c o m p o s i t e s ,

castings, gears, stampings,

and magnetics businesses of

Mahindra Group Companies

into one entity, i.e., Mahindra

CIE Automotive Limited

(Mahindra CIE) through a

series of inter-connected

share acquisitions, open

offers and two schemes of

amalgamation.

P r i o r t o t h e p r o p o s e d

t r a n s a c t i o n , C I E G r o u p

Companies were operational

in European Union, Canada,

Mexico, United States of

America, Brazil, Russia and

China; and Mahindra Group

Companies were primarily

operational in India and

European Union. Therefore,

the proposed transaction was

aimed to confer Mahindra CIE

with a global foot print with

c o m p l e m e n t a r i t y i n

geographies.

W h i l e g r a n t i n g a n

unconditional approval to the

proposed transaction, the CCI

noted that the proposed

transaction did not involve

the merger of two existing

players in the market, as CIE

did not have any presence in

the Indian auto-components

sector and that the existing

t e c h n o l o g i e s u s e d b y

Mahindra Group Companies

would continue to be used

even after completion of the

proposed transaction.

2.2 CCI clears the proposed

acquisition of certain specific

businesses of Royal Bank of

Scotland by Ratnakar Bank

Through its order dated 10

September 2013, the CCI has

approved the proposed

acquisition by Ratnakar Bank

Limited (Ratnakar Bank) of

the credit cards, mortgage 1portfol io and bus iness

2banking segments of Royal

Bank of Scotland (RBS) in

furtherance of the Master

S a l e a n d P u r c h a s e

Agreement. While Ratnakar

Bank had no presence in the

credit cards business prior to

the proposed transaction, the

p r o p o s e d t r a n s a c t i o n

contemplated RBS’ exit from

the credit cards, mortgage

p o r t f o l i o a n d b u s i n e s s

banking segments.

W h i l e g r a n t i n g a n

unconditional approval to the

proposed transaction, the CCI

has observed that given the

The CCI noted neither Baring Asia nor

any companies belonging to the

Baring Private Equity Asia Group has

any investments in any company

engaged in the same sector as

Hexaware (i.e. providing IT and IT

enabled services in domains such as

human resources and business

analytics in the banking and financial,

insurance, healthcare, manufacturing,

transportation and logistics sectors)

in India. On this basis, the CCI

o b s e r v e d t h a t t h e p r o p o s e d

transaction was unlikely to cause an

AAEC in India as it did not contemplate

a combination of two existing players

in the Indian IT and IT enabled services

industry.

3.1 Delhi High Court holds that

the CCI is not required to

serve a notice to the affected

parties before directing a

further investigation

Through its order dated 2

September 2013, the High

Court of Delhi dismissed a writ

petition filed by South Asia

LPG Company Private Limited

stating that while passing an

order d i rect ing further

investigation into a matter

under Section 26(7) of the

Competition Act, the CCI is not

required to serve a notice to

3. Procedure

1 Mortgage portfolio business includes housing loans and loans against property.

2 Business banking segment includes the high end products and services that are offered to

small and medium sized enterprises.

the informant or the opposite

party.

To substantiate its order, the

Court has relied on the

decision of the Supreme Court

in Competition Commission of

India v. Steel Authority of India

Limited (2010) 10 SCC 74,

where it was held that no

notice is required to be given

to the affected parties before

the CCI forms an opinion as to

whether or not a prima facie

case exists on the basis of the

records produced before it.

The Court has observed that,

“if the law does not mandate

issue of notice to the affected

p a r t y b e f o r e d i r e c t i n g

investigation to be made by

the Director General, there

would be no reason to imply

such a notice before directing

further invest igation in

exercise of the powers

c o n f e r r e d u p o n t h e

C o m m i s s i o n u n d e r s u b

section (7) of the said

Section.” Further, the Court

has also observed that there is

no difference between the

directions for investigation

and directions for further

investigation insofar as the

a f f e c t e d p a r t i e s a r e

concerned, since any further

investigation is merely a

c o n t i n u a t i o n o f t h e

investigation carried out by

the Director General.

Additionally, in relation to the

petitioner’s claims of alleged

violations of the principles of

natural justice, the Court has

categorically stated that the

principles of audi alteram

partem would not apply as an

order directing a further

investigation cannot be said

to be an order prejudicially

affecting the person against

w h o m i n f o r m a t i o n i s

provided or a reference is

made. The Court appears to

have based its findings on the

fact that an order of further

investigation neither entails

any civil consequences nor

does it impair any legal right of

any such person.

Ms. Shweta Shroff Chopra

Partner - Competition Law Practice

Amarchand & Mangaldas & Suresh A. Shroff & Co.

Advocates and Solicitors

216, Amarchand Towers, Okhla Industrial Estate

Phase III, New Delhi 110020

Email - shweta.shroff@amarchand.com

Mobile - +91 98100 98335

fact that the banking sector in

India was thriving with a large

number of banks and that

both Ratnakar Bank and RBS

had relatively small number of

branches operating in India,

the proposed transaction was

not likely to cause an AAEC in

India.

2.3 CCI clears proposal for

acquisition of Hexaware

Technologies Limited

On 19 September 2013, the CCI

unconditionally approved the

proposed acquisit ion in

Hexaware Technologies

Limited (Hexaware) by HT

Global IT Solutions Holdings

Limited, a company belonging

to the Baring Asia Private

Equity group (Baring Asia) of:

(i) 4 1 . 4 8 % e q u i t y s h a r e s

(including unlisted American

D e p o s i t o r y R e c e i p t s

equivalent to 7.01% of the

equity share capital) pursuant

t o a s h a r e p u r c h a s e

agreement; and

(ii) an additional 26% equity

shares pursuant to the

mandatory open offer under

t h e S E B I ( S u b s t a n t i a l

Acquisition of Shares and

Takeovers) Regulations, 2011.

GLOBAL REGULATORY UPDATE

22 23

CII's RECENT INITIATIVE

GLOBAL REGULATORY UPDATE

22 23

CII's RECENT INITIATIVE

GLOBAL REGULATORY UPDATE

24 25

GLOBAL REGULATORY UPDATE

24 25

1426

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Notes

1426

ADVERTISEMENT FOR CII'S GLOBAL REGULATORY UPDATE

This update would be circulated to the membership of CII; direct membership of over 7000 organisations from the private

as well as public sectors, including SMEs and MNCs, and an indirect membership of over 90,000 companies from around

400 national and regional sectoral associations.

We invite you to get associated with CII Global Regulatory Update by way of creating your own space in the update:

CATEGORY Members Non-Members

Back Cover Page (Inside) ` 50,000 55,000

Full Page ` 30,000 ` 35,000

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Tel: 011-41506492 Fax: 011-24615693 Email: prabhat.negi@cii.in

Notes

Notes

Notes

Confederation of Indian Industry

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to

the development of India, partnering industry, Government, and civil society, through advisory and

consultative processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a

proactive role in India's development process. Founded over 118 years ago, India's premier business

association has over 7100 members, from the private as well as public sectors, including SMEs and

MNCs, and an indirect membership of over 90,000 enterprises from around 257 national and regional

sectoral industry bodies.

CII charts change by working closely with Government on policy issues, interfacing with thought

leaders, and enhancing efficiency, competitiveness and business opportunities for industry through

a range of specialized services and strategic global linkages. It also provides a platform for

consensus-building and networking on key issues.

Extending its agenda beyond business, CII assists industry to identify and execute corporate

citizenship programmes. Partnerships with civil society organizations carry forward corporate

initiatives for integrated and inclusive development across diverse domains including affirmative

action, healthcare, education, livelihood, diversity management, skill development, empowerment

of women, and water, to name a few.

The CII Theme for 2013-14 is Accelerating Economic Growth through Innovation, Transformation,

Inclusion and Governance. Towards this, CII advocacy will accord top priority to stepping up the

growth trajectory of the nation, while retaining a strong focus on accountability, transparency and

measurement in the corporate and social eco-system, building a knowledge economy, and broad-

basing development to help deliver the fruits of progress to all.

With 63 offices, including 10 Centres of Excellence, in India, and 7 overseas offices in Australia, China,

Egypt, France, Singapore, UK, and USA, as well as institutional partnerships with 224 counterpart

organizations in 90 countries, CII serves as a reference point for Indian industry and the international

business community.

Confederation of Indian Industry

The Mantosh Sondhi Centre

23, Institutional Area, Lodi Road, New Delhi – 110 003 (India)

T: 91 11 45771000 / 24629994-7 F: 91 11 24626149

E: info@cii.in W: www.cii.in

Reach us via our Membership Helpline: 00-91-11-435 46244 / 00-91-99104 46244

CII Helpline Toll free No: 1800-103-1244