FAQs on IFSCA (BATF Services) Regulations, 2024

17 August 2024

The regulations aim to create a regulatory framework for the development, registration, and operation of services related to bookkeeping, accounting, taxation, and financial crime compliance within International Financial Services Centres (IFSCs). The objective is to develop GIFT IFSC as a leading global offshore hub for these services while generating significant employment opportunities for India’s skilled workforce.

The regulations encompass four key service areas: bookkeeping, accounting, taxation, and financial crime compliance.

  • Bookkeeping services involve classifying and recording transactions, including payroll ledgers, in monetary or other units of measurement within the books of account and associated records.
  • Accounting services include:
    1. reviewing annual and interim financial statements or other accounting information without providing attestation or assurance;
    2. compiling financial statements based on client-provided information, without attesting to their accuracy;
    3. preparing financial statements;
    4. compiling income statements, balance sheets, or other financial data;
    5. analyzing financial statements;
    6. providing related accounting support services, such as valuation assistance.
  • Taxation services cover tax consultation, tax preparation, tax planning, and offering guidance and advice on tax matters, as well as preparing and filing all types of tax returns.
  • Financial crime compliance services focus on compliance with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations, as well as adherence to Financial Action Task Force (FATF) recommendations and other related activities.

The following process has been established for the registration of BATF service providers:

  • Submission of an initial business plan.
  • Submission of a formal application, in the prescribed format, to IFSCA and the SEZ Authority, along with the applicable fee.
  • Issuance of in-principle approval by IFSCA.
  • Granting of the Certificate of Registration.

JCB India Limited and ANR v. The Competition Commission of India and ANR W.P.(C) 2244/2014 & CM APPL. 31397/2021

Background:

This case arose from a legal dispute between JCB India Limited (Petitioner) and M/S Bull Machines Private Ltd (BMPL), with the Competition Commission of India (CCI) becoming involved after BMPL filed a complaint. JCB initially sought legal action to prevent BMPL from infringing on its copyrights, designs, and trademarks. In retaliation, BMPL filed cancellation petitions with the Controller of Designs. Despite settlement talks and an interim arrangement being reached between the parties, BMPL submitted information to the CCI under Section 19(1)(a) of the Competition Act, 2002, leading the CCI to initiate an inquiry.

Key Issues:

  1. JCB argued that since a settlement had been reached in the intellectual property (IP) dispute, the CCI should not have continued its inquiry. The petitioner challenged the CCI’s decision to investigate, claiming it was beyond the CCI’s mandate and disrupted the mediation outcome.
  2. JCB contended that the ongoing mediation settlement should prevent CCI’s investigation and that intellectual property disputes do not automatically fall under the purview of competition law.
  3. The court examined whether the CCI’s actions, post-settlement, could result in unintended and disruptive consequences for both parties, thereby undermining the finality of the mediation process.

Court’s Observations:

  • The court emphasized the importance of respecting settlements achieved through mediation in regulatory matters. It held that regulatory bodies like the CCI should not undermine these outcomes by continuing investigations unless a clear case of abuse of dominance, as per Section 4 of the Competition Act, 2002, exists.
  • The bench reiterated that intellectual property (IP) law grants and enforces monopoly rights, while competition law seeks to prevent monopolies. It cautioned that not every IP dispute should automatically be treated as a competition issue, to avoid encroaching on the statutory rights conferred by IP laws.
  • The court clarified that regulatory bodies must respect the boundaries of their jurisdiction and should only intervene if the terms of a settlement violate competition laws.

Judgment:

The Delhi High Court ruled in favor of JCB India Limited, setting aside the CCI’s order for an inquiry and terminating the proceedings. The court held that the settlement reached between JCB and BMPL in the IP dispute rendered further action by the CCI unnecessary. It acknowledged that the CCI retains the power to act on its own initiative or based on future complaints but should refrain from disrupting settled agreements between parties.

 

Consultation Paper on Streamlining Disclosure in Respect of Appointment of Debenture Trustee in the Offer Document

The Securities and Exchange Board of India (SEBI) has initiated steps to streamline regulations and improve the ease of doing business (EoDB) in the financial sector. Following the budget announcement for FY 2023-24 by the Hon’ble Finance Minister, which focused on simplifying compliance costs across the financial sector, SEBI established Working Groups to review and enhance various regulatory frameworks. One such group reviewed the SEBI (Debenture Trustees) Regulations, 1993, with the aim of reducing complexities and improving operational efficiency for Debenture Trustees (DTs).

As part of this initiative, SEBI invited public comments on proposed amendments to regulations, including the SEBI (Debenture Trustees) Regulations, via a press release dated October 4, 2023. Based on the recommendations of the Working Group (WG) and discussions held with the Corporate Bonds and Securitization Advisory Committee (CoBoSAC), one key proposal involves replacing the term “consent letter” with “debenture trustee agreement” in Clause 3.3.32 of Schedule I of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations). This change aims to enhance legal clarity and improve transparency for investors.

Background on Debenture Trustee Agreement (DTA) –

Under Regulation 13 of the SEBI (Debenture Trustees) Regulations, 1993, all Debenture Trustees must enter into a written agreement with the issuing corporate entity, referred to as the Debenture Trustee Agreement (DTA), before the subscription list for debenture issuance opens. The DTA formalizes the relationship between the issuing entity and the trustee, ensuring clear legal accountability for both parties.

Current Regulation and the Proposed Change –

Clause 3.3.32 of Schedule I of the NCS Regulations currently requires the offer document to disclose the names of the Debenture Trustee(s) and include a statement affirming that the trustee(s) has consented to their appointment, accompanied by a copy of the “consent letter” from the trustee. However, the Working Group observed that while issuers obtain this consent letter before the formal assignment begins, the consent letter lacks legal standing. The group emphasized that the Debenture Trustee Agreement (DTA) is the formal legal document that validates the appointment of the trustee, not the consent letter.

To address this issue, the Working Group recommended replacing the term “consent letter” with “debenture trustee agreement” in the relevant section of the NCS Regulations. This change will ensure that the legally binding document, the DTA, is referenced in the offer document, providing greater legal certainty and protection for both issuers and investors.

Enhancing Transparency for Investors –

In addition to improving legal clarity, SEBI has proposed a new mechanism to enhance transparency for investors. It is suggested that the DTA be made accessible to investors through a QR code provided in the offer document. This would allow investors to easily access and review the Debenture Trustee Agreement, further promoting transparency in the issuance of corporate bonds and non-convertible securities.


 

 

Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard. 

 

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