The Insolvency and Bankruptcy Board of India (IBBI) has introduced the Insolvency Resolution Process for Corporate Persons (Second Amendment) Regulations, 2024, effective from 24 September 2024, to enhance the framework governing insolvency proceedings in India and at the same time, to enhance the representation of large groups/classes of financial creditors, such as homebuyers, during corporate insolvency resolution proceedings.
The IBBI notified the amendment to these regulations on September 24th, 2024. These significant amendments came as a relief to the classes of creditors having significant representation, such as homebuyers, who are now formally recognized as financial creditors under the Insolvency and Bankruptcy Code, 2016.
These new regulations aim to increase fairness and efficiency in the insolvency resolution proceedings. According to these new regulations, till the time that the application for appointment of a permanent authorised representative of a class of creditors is pending before the Adjudicating Authority, an interim representative can be appointed. This interim representative will also be allowed to participate in meetings of the committee of creditors and will have the same rights and duties as are bestowed upon a duly authorised representative.
This initiative is a welcome change for homebuyers, who are major stakeholders, but often suffer because of delayed and complicated insolvency proceedings. The amendment seeks to enhance the effective representation of financial creditors that are large in number and provide them an opportunity to voice their concerns, in the interest of fairness and justice.
SEBI Establishes Foreign Portfolio Investor (FPI) Outreach Cell
The Securities and Exchange Board of India (SEBI) has taken a significant step to enhance the ease of doing business for Foreign Portfolio Investors (FPIs) by establishing a dedicated FPI Outreach Cell. This cell, operating under the Alternative Investment Fund and Foreign Portfolio Investors Department (AFD), will focus on direct engagement with FPIs, ensuring seamless access to the Indian securities market.
The FPI Outreach Cell’s primary responsibilities include providing guidance to prospective FPIs during the pre-application stage, which encompasses assistance with documentation and compliance processes. Additionally, the cell will offer support during the onboarding phase, resolving any operational challenges that may arise during registration or thereafter. This proactive approach aims to streamline the FPI onboarding process, making it more efficient and investor-friendly.
By establishing this dedicated cell, SEBI demonstrates its commitment to facilitating foreign investment in India. The move is expected to improve the overall investor experience, foster a conducive business environment, and potentially attract more foreign portfolio investments to the country.
Operational Guidelines for FCVIs and DDDPs
SEBI has issued guidelines outlining procedures for Foreign Venture Capital Investor (FCVI) registration, compliance, and investment activities, while also specifying the role of Designated Depository Participants (DDPs). SEBI has set a deadline of March 31, 2025, for all existing FVCIs to engage with a DDP. Failure to do so will prevent FVCIs from making new investments.
According to SEBI’s circular, “Existing FVCIs must engage a DDP by March 31, 2025, to utilize its services for conducting due diligence related to the continuation of FVCI registration.” Any FVCI that does not engage a DDP by this deadline will be prohibited from making further investments and must liquidate its holdings in listed securities by March 31, 2026, and other investments by March 31, 2027. The proceeds from these sales must comply with Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating Financing of Terrorism (CFT) regulations.
Additionally, the guidelines require DDPs to carry out eligibility checks on FVCIs within six months of engagement. If an FVCI fails to meet the eligibility criteria, it will be restricted from making new investments but may retain or sell existing holdings. FVCIs with no holdings are required to surrender their registration within 30 days of the DDP’s assessment.
Moreover, if an FVCI or its major investors appear on the United Nations Security Council’s sanctions list or are deemed no longer “fit and proper”, SEBI will halt all related transactions. DDPs must notify SEBI of such cases within seven days. To continue operations, FVCIs are required to submit complete registration applications, including all necessary documents and fees, through their respective DDPs.
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.
