Bankruptcy Rescue Rules Tightened, RBI Mandates Unique Code for Large Borrowers – India Regulatory Brief

Posted by Reading Time: 4 minutes

Insolvency board enforces stringent tests for reviving defaulting companies

The Insolvency and Bankruptcy Board of India (IBBI) has amended its rules governing lenders who invest in bankrupt companies. Promoters or any party proposing a rescue plan for a sinking company will be subject to strict tests of creditworthiness and credibility. The rescue plan must provide details explaining the background of the promoter, including any convictions, disqualifications, criminal proceedings, and the categorization of wilful defaulters.

This move puts greater responsibility on the professionals working out the resolution and the committee of creditors, to ensure that defaulting companies do not fall back into the hands of their original promoters. Lenders have long feared that promoters regaining control of defaulting entities cast a doubt on the credibility of the lending process.

 

Professional-Service_IB-icons-2017RELATED: Audit and Financial Review Advsiory

No need for separate form for PAN/TAN

The Ministry of Corporate Affairs (MCA) recently issued a clarification that, Permanent Account Number (PAN)/ Tax Deduction and Collection Account Number (TAN) forms do not have to be submitted separately, after filling the Simplified Proforma for Incorporating a Company Electronically (SPICe) e-form. PAN and TAN will now be issued based on the details submitted in the SPICe e-form.

This latest step is a part of the Central Board of Direct Taxes’ (CBDT’s) measures towards improving the ease of doing business for new companies. The CBDT had previously directed the MCA to issue the PAN/TAN within one day. New companies are also issued e–PAN in addition to the physical PAN card. The SPICe e-forms were introduced in October 2016 to facilitate speedy incorporation of companies and remove the requirement of filling multiple forms.

 Related-Link_IB-icons_2017RELATED: Shutting Down India’s Shell Companies – Government Continues Anti-Corruption Drive

RBI mandates unique code for all large corporate borrowers

The Reserve Bank of India (RBI) has made it mandatory for corporate borrowers with an exposure of US$767,401 (Rs50 million) and above to obtain a 20-digit Legal Entity Identifier (LEI) from banks – a move that will significantly improve risk management in India’s stressed banking sector.

The LEI code is a key measure to improve the quality and accuracy of financial data for better risk management post the global financial crisis. According to the notification, large corporate borrowers must obtain the code for their parent as well as subsidiaries and associates. Borrowers who do not obtain an LEI within the stipulated time-period will not be granted renewal or enhancement of credit facilities.

  • Borrowers with an exposure of US$153 million (Rs10 billion) and more to the banking system must obtain the code by March 31, 2018.
  • Those between US$76.7 million (Rs5 billion) and US$153 million (Rs10 billion) by June 30, 2018.
  • Corporates with an exposure between US$15.3 million (RS 1 billion) and US$76.5 million (Rs5 billion) must get the code by March 31, 2019, and those with US$7.6-15.3 million (Rs500 million-1 billion) by December 31, 2019.

For borrowers of US$767,401 (Rs50 million) to US$7.6 million (Rs500 million), a deadline for obtaining LEI code will be issued in due course.

About Us

India Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEANChinaIndonesiaRussia, the Silk Road, & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout India and the Asian region. We maintain offices in Delhi and Mumbai and throughout China, South-East Asia, India, and Russia. For assistance with India investment issues or into Asia overall, please contact us at india@dezshira.com or visit us at www.dezshira.com.

Related-Readings_IB-icons_2017Related Reading:

dsa brochure

Dezan Shira & Associates Brochure

Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.


2017-18 Tax Guide Thumbnail for Related Sources

Tax, Accounting and Audit in India 2017-18

The third edition of Tax, Accounting and Audit in India is updated for 2017, and provides an overview of the fundamentals of India’s tax, accounting, and audit regime. The guide also includes a detailed introduction of the Goods and Services Tax (GST) that was launched on July 1, 2017, representing the complete transformation of India’s indirect taxation structure. 


The IT Sector

The IT Sector: Time to Invest in India

In this edition of India Briefing Magazine, we make the case for why now is the right time for foreign firms to invest in India’s IT sector. Firms can take advantage of the existing IT infrastructure, new industrial verticals, proliferation of technological startups, and federal incentives. Finally, we discuss India’s talent procurement advantages, with its labor pool of STEM (science, technology, engineering, and mathematics) graduates.