Regulatory Updates #20: SEBI on InVITs, RBI on S4A & more

Bar & Bench will bring to you the latest regulatory and policy updates from different ministries and regulatory authorities. In this edition of the Bar & Bench Regulatory Updates, we analyse the latest consultation paper issued by the Securities and Exchange Board of India (SEBI), and notifications issued by the Reserve Bank of India (RBI)..Consultation paper on InvITs.SEBI constituted two committees to evaluate the continuous obligations of Infrastructure Investment Trusts (InvITs) under the SEBI (InvIT) Regulations, 2014, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2014 and accounting norms for InvITs. A consultation paper detailing the recommendations has been issued for public consultation, accepting comments till 28 June, 2016..As far as continuous financial disclosures go, it has, inter alia, proposed that:.Annual disclosure to stock exchanges be made on a quarterly basis as opposed to half-yearly which had been suggested earlier;Disclosures other than annual disclosures, to an exchange would be made within 45 days of the end of each quarter or half-year as applicable;Audited standalone results for the financial year to be sent within 60 days from the end of the year, along with the audit report..Further, in case of other continuous disclosures, the paper, inter alia, proposes that InvITs should disclose:.The unit holding pattern of the funds separately for each class of unit holders;Related party transactions if such a transaction involves an acquisition/disposal of assets;Material and price sensitive information such as litigation regarding any infrastructure assets; appointment or removal of the investment manager, project manager, auditors or valuer and changes in investment strategy..The consultation paper also proposes a framework for the calculation of Net Distributable Cash Flows for the InvIT, both at the standalone Special Purpose Vehicle level as well as the consolidated InvIT level..Scheme for Sustainable Structuring of Stressed Assets.The RBI, last week passed the Scheme for Sustainable Structuring of Stressed Assets (S4A), which allows banks to convert up to half the loans held by corporate borrowers into equity or equity-like securities. This is the third attempt, after the 5/25 scheme and the SDR Scheme launched previously, which proved to be insufficient to address the issue of stressed assets..The S4A, unlike the previous schemes, makes it easier for banks to restructure the debt without bringing in new promoters. This will allow banks to bifurcate the debt of stressed borrowers into sustainable and unsustainable portions. Part A would be based on servicing capacity and Part B on equity/ quasi equity instruments..To be eligible under the S4A scheme, the project must have commenced commercial operations, aggregate exposure must not be more than Rs. 500 crores, and the the debt must meet the test of sustainability as laid down in the scheme..Registration of NBFCs simplified.RBI has sought to simplify and rationalise the process of registration for Non Banking Finance Companies (NBFCs) by reducing in the number of documents required to be submitted from 45 to 7-8. Further, from now onwards, there will be two different types of applications for non-deposit taking NBFCs (NBFC-ND), based on sources of funds and customer interface i.e. ‘Type I’ which will not accept public funds and ‘Type II’ which will accept public funds..Type I funds will be processed on a fast track mode and will be subjected to less intensive scrutiny/diligence. However, if Type I NBFC-ND wish to accept public funds in the future, RBI permission will be required.