The tech-savvy start-ups will be beating drums as the market regulator, SEBI, in its board meeting held on June 27, 2019 has decided to come up with new norms for issuance of Differential Voting Rights (DVR) shares. The proposal related to issuance of DVR would be considered as a game changer for start—ups which are dealing with technology.
This is a welcome move by SEBI for startups. The framework for issuance of DVRs would allow promoters of startups to have greater control over the company even after their shareholding is diluted. Generally, in the initial years, the shareholding of the startup promoters gets substantially diluted due to issuance of Sweat Equities, ESOPs given to the employees as an incentive/remuneration. With DVRs norms in place, the promoters would have greater control over their companies. This move would further encourage more and more promoters of startups to get their units listed in India.
Economic Survey 2018-19 tabled in the Parliament by FM
The Economic Survey for the year 2018-19 has been tabled in the Parliament on July 4, 2019. The Economic Survey reviews the developments in the Indian economy over the previous 12 months. Economic Survey suggests policy recommendations for an effective design of Minimum Wage System. It also suggests policy measures to lower the overall lifetime ownership costs of Electric Vehicles.
Government Reduces the Rate of ESI Contribution from 6.5% to 4%
The Government of India has taken a historic decision to reduce the rate of contribution under the ESI Act from 6.5% to 4%(employers’ contribution being reduced from 4.75% to 3.25% and employees’ contribution being reduced from 1.75% to 0.75%). Reduced rates will be effective from 01.07.2019. This would benefit 3.6 crore employees and 12.85 lakh employers. The reduced rate of contribution will bring about a substantial relief to workers and it will facilitate further enrollment of workers under the ESI scheme and bring more and more workforce into the formal sector. Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments. This shall also lead to enhanced Ease of Doing Business. It is also expected that reduction in rate of ESI contribution shall lead to improved compliance of law.
Tighter Disclosure for CSR Spend Soon
India Inc may soon have to make higher disclosures on their corporate social responsibility (CSR) spending, a government official said.
A high-level panel on CSR is likely to propose increased disclosures to bring transparency in spending on these activities.
All companies with a net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more are required to spend 2% of their average profit of the previous three years on CSR activities every year.
“There is a view that disclosures need to be enhanced,” the official told, adding that this was needed to facilitate a “social audit”, or an examination of CSR spending.
These could include disclosures on amounts spent on foundations or trusts related to companies and spending in the local area of the company relative to that in other areas. The move comes in the backdrop of reports of companies spending CSR funds on trusts related to the group.
Promoters may Find It Hard to Raise Funds by Pledging Shares
A key source of funding for promoters is set to dry up with the Securities and Exchange Board of India (Sebi) tightening rules for lending by mutual funds against shares as collateral. The capital market regulator has asked fund houses to collect shares worth four times the investment as collateral.
The new threshold will make it unviable for promoters to raise money from mutual funds, which drew flak for reckless lending against shares, said asset managers and experts.
Until Thursday, there were no rules on the equity cover that mutual funds should take as collateral. Fund houses generally took shares worth 1.5 to 1.75 times the investment. This meant that for raising Rs 1,000 crore, promoters had to pledge shares worth as much as Rs 1,750 crore. That pledge value has risen to Rs 4,000 crore, based on the rules approved by Sebi.
Due date of filing E-form NFRA-1 will be July 31, 2019: MCA
The Ministry of Corporate Affairs has intimated that NFRA-1 has been deployed on the website (www.nfra.gov.in ) and accordingly the last date of filing the same will be July 31, 2019. Form NFRA-1 is required to be filed by body corporates and specified companies under sub-rule(2) & sub-rule(3) of Rule 3 of NFRA Rules, 2018 to inform particulars of appointment of auditor to Authority within the specified timeframe.