Regulatory Updates #25: SEBI on KYC, MCA issues NCLT Rules & 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 updates by the Securities and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs (MCA)..SEBI asks intermediaries to upload KYCs on Central Registry.In a step towards standardising Know Your Client (KYC) norms for all financial institutions, SEBI has issued a circular for the operationalisation of Central KYC Records Registry (CKYCR), based on a finance ministry Gazette notification of November 2015..The Central Registry of Securitization and Asset Reconstruction and Security interest of India (CERSAI) is the appointed authority for performing the functions of the CKYCR for the purposes of receiving, storing, safeguarding and retrieving KYC records of clients..As a part of the first phase, all intermediaries have been directed to upload KYC details of all individual accounts opened on or after August 1 on the CKYCR, which has gone live since 15 July. However, for now, these rules will be applicable only for new accounts and not existing ones. The benefits of uniformity will be felt only once it is applicable to existing accounts as well..Once this initiative is implemented fully, it will help banks, fund houses and insurance companies to share digitised KYC records..However, under the new system, the amount of information to fulfil KYC requirements has increased manifold. To add to this, PAN has lost its status as a sole identifier. In fact, there is no one unique identifier under the new KYC Registry Operating Guidelines..MCA issues NCLT Rules.As reported earlier, the MCA had, on June 1, notified the constitution of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). Last week, the MCA issued the much awaited NCLT Rules, 2016 and the NCLAT Rules, 2016..MCA notifies amendment to Share Capital and Debentures Rules .MCA has notified the Companies (Share Capital and Debentures) Third Amendment Rules 2016 modifying rules, inter alia, relating issue of securities and their pricing..Key highlights of the changes introduced:.Equity shares with differential voting rights may now be issued by defaulting companies, after 5 years from the end of the financial year in which they make good the default;Start-ups (as defined by the Department of Industrial Policy and Promotion) are now permitted to issue sweat equity shares up to 50% of their paid-up capital for the first 5 years from the date of their incorporation/ registration as start-up;Start-ups are now permitted to issue stock options to their promoters and to directors who hold more than 10% of the start-up’s equity shares for the first 5 years from the date of their incorporation/ registration as start-up;Before the amendment, while issuing convertible securities, an upfront determination of conversion price was required to be made. Now, the company may chose to determine this price at a period not later than 30 days prior to the date the holder of such convertible securities becomes entitled to convert such convertible securities, based on a valuation report which is not older than 60 days;Companies may now issue securities on preferential basis to partly-paid shares as well;Secured debentures issued by companies can now be secured using assets of their subsidiaries, holding company or associate companies instead of only its own assets. However, this relaxation is limited to creation of charge on specific movable properties.