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Published : April 21, 2016 | Author : Legit
Category : Company Law | Total Views : 704 | Unrated

  
Legit

 

The Ease of Doing Business: A New Era of Corporate Law In India

Abstract
The ease of doing business in India has brought a mechanism to operate in transparency and accountability, as it has been addressed within which comprehends the dynamic changes in addressing the financial sector and the impact of co’s amendment act, 2014,which has brought a plethora of benefits to a co. whereas Alternate Capital Raising Platform, that is a new protocol of procuring funds which harness the potential buyer with options at hand that may be Venture Capital funds, angel investors etc to make informed decision about investments and describe that unethical business of Front running or insider trading which are mostly executed by the acts of stockbrokers as they are making a profit at the direct expense of their customers in other words it is an illegitimate act by stockbroker/s who are assenting orders on the basis of security for its own account, hence thereby taking the upper hand advantage of the pending orders from its customers, regardless to that , this part has been covered by the virtue of the finance ministry and this shall be harshly monitored by financial setups etc. To focus on the urgent need doing business in India with ease the ministry of finance has set up new projects that have an impact on the globalized markets henceforth which would eventually benchmark the countries current economy to the one at the top or even surpassing that in time and the principal objective of this task which must take stringent expedition to provide with the proper tactics on the field along with the logistics in furtherance to executing the sublime strategy in finalizing the plan to reality and the processes and organizational arrangements in modernizing and streamlining them into full effect. In layman words the time has come that India will be a hot tub for business grossing from the international and domestic spectrum, it is a vision to speculate to accumulate, this by far is the part that pursues the central govt. in rendering a brighter mission of the sustainable developments of the govt. of India.

The ease of doing business in India has surpassed to be a welcoming step towards development in the financial sectors by all means of broadening the horizons, that being said the country’s gross domestic product will dramatically increase in the up-coming future needless to say that our countries economy is in safe hands for the time to come as all road blocks have been analyzed to be turned into an oblivion, in other words the business spectrum in both international and domestic scenario look high in perspective, meaning that business will flourish in trade and commerce . The pathfinder for India’s first financial Special economic zone , that being the Gujarat International Finance Tec-City (GIFT) , wherein it would provide the composite regulatory framework for the financial sector players expected to set up shop there, but shied away from announcing the tax sops that would eventually help it to give a credible competition to entrenched counterparts in Dubai and Singapore. (GIFT) in the next’s coming years to come will be a stronghold to get financial services with the exclusive regulations for the exclusive regulations for making the impact for international financial services centre (IFSC) which would with most certainty render domestic and international co.’s to commence commerce with the their start ups of offshore banking. This advantage will allow companies incorporated outside India to raise money in foreign currency by issuing and listing their shares on stock exchanges within the IFSC, where individual and institutional investors from India and abroad, including NRIs, would be allowed to trade and thus all the co.’s regardless of it being a domestic or international co. all of them will be able to underwrite insurance/reinsurance business of even foreign jurisdictions and allow banks, stock exchanges, depositories and clearing corporations to do business with a relatively low level of capital. SEBI, RBI and other regulators have already issued the relaxed norms for IFSCs , with in which the IFSC regulatory regime would allow Indian and foreign stock exchanges to set up separate bourses within IFSCs as subsidiaries, while market entities from India and abroad would be permitted to function there by providing issuance and trading in depository receipts and debt securities of domestic as well as overseas companies The ease of doing business in India has brought a mechanism to operate in transparency and accountability, as it has been addressed in the financial SEZ which comprehends the dynamic changes in addressing the financial sector and the impact of co’s amendment act, 2014 ,which has brought a plethora of benefits to a co. whereas Alternate Capital Raising Platform, that is a new protocol of procuring funds which harness the potential buyer with options at hand that may be Venture Capital funds, angel investors etc to make informed decision about investments and describe that unethical business of Front running or insider trading which are mostly executed by the acts of stockbrokers as they are making a profit at the direct expense of their customers in other words it is an illegitimate act by stockbroker/s who are assenting orders on the basis of security for its own account, hence thereby taking the upper hand advantage of the pending orders from its customers, regardless to that , this part has been covered by the virtue of the finance ministry and this shall be harshly monitored by financial setups etc. To focus on the urgent need doing business in india with ease the ministry of finance has set up new projects that have an impact on the globalized markets henceforth which would eventually benchmark the countries current economy to the one at the top or even surpassing that in time and the principal objective of this task which must take stringent expedition to provide with the proper tactics on the field along with the logistics in furtherance to executing the sublime strategy in finalizing the plan to reality and the processes and organizational arrangements in modernizing and streamlining them into full effect. In layman words the time has come that India will be a hot tub for business grossing from the international and domestic spectrum, it is a vision to speculate to accumulate, this by far is the part that pursues the central govt. in rendering a brighter mission of the sustainable developments of the govt. of India.

v Private Placement and Preferential Allotment

Private Placement: Under section 42 , chapter III , Part II of the co.’s act,2013 , private placement is majorly concerned with and deals in matters only to private placements which is an agreement or compatibility between opinions or actions , vie an issue of private placement offer letter and According to the supreme court of India , their interpretation is defined in the following quote "any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in this section including the condition that he offer or invitation is made to not more than 50 or such higher number of persons as may be prescribed (excluding QIB's and employees offered securities under ESOP) in a financial year”. A point to be noted is that the very provisos of this topic is in matters relevant only to securities which means that the instruments such as shares , bonds , debentures have been duly provided with a vast scope. The provisions under section 42(4) state any offer or invitation not in compliance with the provisions of this section shall be treated as a public offer and all provisions of this Act, and the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 shall be required to be complied with. Which in other words clarifies that the all capital stationed for subscription of securities by private placement are duly paid vie the means of a cheque , demand draft , and other such channels which could be traced through various sources , that being said cash payment transaction is out of the question, nevertheless all securities under private placement are allotted within 60 days from the receipt of application of the fund transaction and in case by some circumstances that a co. cannot allot such securities within the said period , the amount provided would be refunded within 15 days. Coming on to the final segment of the amount of capital raised by the very issue of offer or invitation shall be deposited in a separate bank account which can only be used when allotted which makes every co. submit with the registrar of the allotment of particulars of every private offer within 30 days of circulation of offer letter as prescribed under the aforesaid section.

Preferential Allotment:
Preferential Allotment is the process by which allotment of securities/shares is done on a preferential basis to a select group of investors. The raising of funds is a task which is not easily accomplished into fruition by any co. as to issue securities to the masses of society because of the very factors of time consumption etc. if a co. does come up with such hindrances on its path, the co.’s option would be to place offers of the securities to a considered smaller group of individuals that may be directors or any existing share holder, hence this procedure is called as preferential allotment.

Alternate Capital Raising Platform

Alternate Capital Raising Platform, Is a new protocol of procuring funds which harness the potential buyer with options at hand that may be Venture Capital funds, angel investors etc to make informed decision about investments.The Securities & Exchange Board of India (SEBI) had proposed new initiative in order to render more proactive sets of guidelines so that new startups can raise funds from the market, keeping in line that that any new startups will not have the tension of any considerations for opting an Initial Public Offering. The Board (SEBI) in its meeting held on June 25, 2013, approved a proposal to permit listing of small and medium sized enterprises (SME’S)in Institutional Trading platform (ITP) without having to make an IPO wherein the cos. listed on the ITP, were not permitted to raise equity capital vie public issues albeit all such cos. listed in the ITP have the option to make private placements.SEBI submission recognizing the availability of capital raising by small scale businesses institutional investors in order for a swift withdrawal which in other words renders the plethora of avenues that are made amenable for the ever growing large-scale accommodations.SEBI received suggestions by various associations of investment bankers to accommodate and facilitate issuers with lower holding of founding members. Keeping in line with the international scenario such as Singapore and Hong Kong which are thus by far the fastest preferred locations for the purpose of raising funds within which SEBI introduced the alternate capital raising platform in pursuance of alterations in question to having an impact of the outflow, which would be different from IPO, keeping in mind that it would act like an IPO. In furtherance to that SEBI acknowledges the drastic changes in the in present day nation, knowing that knowledge based products are perceived as non comprehendible by most of the investors which deters the investors to invest, wherein SEBI has taken initiative to highlight the need for a similar capital market which recognizes and encourages entrepreneurs and innovators.

Ø Paramount Alterations announced:

§ Evaluated analyzing that Pre-issue capital to be locked-in for a period of 6 months.
§ The Disclosure of business model and objectives will be made easier for startups.
§ Given the considerations of all risks involved the retail investors would not be allowed to invest in these startups.
§ ITP would be allowed for Raising of capital.

Comment
There are still remnants of grey areas of the Alternate Capital Raising Platform as there will be only two types of investor’s namely qualified institutional buyers and non-institutional investors, and the list will be for a minimum period of one year. On the Exact presumptions that the new platform will therefore coincide and operate for these specific co.’s while the existing Institutional Trading platform will operate for the other co.’s that do not fall under the specified category. In the light of the aforesaid statements, it would be a paramount consideration here to define what exactly knowledge-based technology sector comprises for co.’s such as those co.’s that are in the area of software product development, e-commerce, and new-age companies having innovative business model, for instances where for these co.’s create new business ambiance all together , in a short period of time the flexibility of the regulations and rules laid down by The Securities & Exchange Board of India is an issue to discuss as the opportunities or which service plays or will/would play an important efficient way of enhancement in existing business activities and that is the very reason why there are still remnants of grey areas in the Alternate capital raising platform which drastically cascades and fades into the very meaning within the definition of vague wherefore the meaning of innovative businesses which may be anything from time to time can be subjective so forth making it a necessity for the securities & Exchange board of India to be clear as crystal on the specification laid down by them and also be more proactive in being clear to the co.’s in question regarding matters on whether or whether not that the co.’s would have the liberty to choose to raise capital in either of the institutional platforms. The Securities & Exchange Board of India by the virtue of their due diligence would be required to render an remedies for the same and of course shares its learning’s in a quantative form from the very existing Institutional Trading platforms and more importantly The Securities & Exchange Board of India has laid recent announcements on 24th June 2015 in their website that the following would be followed:-

# No individual entity can hold more than 25 per cent stake in a company, while no institutional investor can hold more than 10 per cent of the issue.
# IPO listing – Issue completion will be reduced from 12 days after the transaction to 6 days through paperless filing.
# M-cap requirement for companies to use fast-track FPOs and rights issues set at Rs 1,000 crore and Rs 250 crore, respectively
# Reclassification of promoters – Regulator has provided proper framework to address the issue

The discussion paper of The Securities & Exchange Board of India has definitely brought and caught the lime light with the fancy of several start-ups, one of the queries as a paramount on the glimpse of every entrepreneurs mastermind is regarding whether their start-ups can raise capital through this proposed “alternative platform”. If you happen to be one of them, you may want to take this brief test to find out the answer. In the same discussion paper on the proposed Alternative capital raising platform for the renderation of catering such start – ups or as per the discussion paper “New – Age Co,’s” . In layman words it is a positive step without a doubt as it potentially offers a regulatory regime where start-ups can realize better valuations like in jurisdictions such as USA or Singapore, which have a head start in terms of a more conducive regulatory framework for start-ups to raise risk capital.

This write-up summarizes the entire thought process under two distinct heads:
Suggestions/recommendations for the possible a) Eligibility Criteria b) The Platform c) The Process d) Objects of raising capital e) Lock in of shares &f) Issue Price for an Alternative Capital Raising Platform; and
Review of other regulatory requirements.

Conditions
1. If you are not a software product development company or e-commerce company or not considered as a “new-age company” having an “innovative business model” that creates “new business opportunities” or which serves “important efficiency enhancements in business activities” The paper does not define these terms.

2. Is your company planning to raise equity capital from retail Investors?

3. Is your company planning to raise less than Rs. 10 Lakhs from a single investor?

4. Is your company planning to raise funds from less than 500 Investors?

5. Is your company’s fund-raising target less than Rs. 50 Crores?

6. Do you, along with other co-founders/relatives, hold more than 25% of the paid-up share capital in the company?

The answer to the above mentioned question are vague and simple comprehension of a mere yes or no ,to answering the question itself is of no news. Besides it is just a discussion paper published by the securities and exchange boards of India to comprehend the manner of question or difficulties that may arise , the basis of this discussion paper published by them is to criss-cross any demerits in the making of a most suitable stance for all new start ups or any other co.’s mentioned in the aforesaid matter above, in other words the pivotal agenda is to aiming into the path to the very eliciting responses from the opinion of the masses at large and of course entrepreneurs and eminent business tycoons that who either by their way of choice can collectively procure positive suggestion , feedback or recommendations which is the most stark way of executing a very improving regulatory framework of sorts for the objective for fund raising by start – ups per se. To come into a better conclusion or let’s say ways forward as there is a never ending phase to this topic as time is in a phase of development in a thorough process , so quite literally it requires the seeking of the intellects of eminent personalities into vying the path of the untold project work into finally bringing in the rigidity and flexibility into making it a time bound regular enhancement procedure to finally bringing a fruition into the program and moralizing it to the beautification of a better economy, so forth that it requires minimizing the negativity and maximizing the positivity and humanizing the grass roots of the program into a great success, but of, course it is just my personal opinion after researching on this topic to give a clear picture.

v Crowd Funding:
A Crowd funding is solicitation of funds from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause.

In other words, the sources of funds that are generated by means of raising money for projects which may indulge in a creative project, business venture or as the case may be, vie the virtue from a number of persons that provide financial contributions to them. This funding is possible in present day by the medium of online platform and are promoted so forth in various areas of the internet, it may be either through social media, etc.

Ø Categories of Crowd Funding:
1. Donation Crowd Funding: This denotes the funds procured from solicitation for social, artistic, philanthropic or other purpose, and which does not exchange for anything of tangible value. For example in the US, Kickstarter, Indiegogo etc. are some of the platforms that support donation based crowd funding.

2. Reward Crowd funding: In Reward Crowd Funding, the investors receive something in return which can membership etc., as consideration and a point to be noted is that most websites which support donation of crowd funding, render reward crowd funding, for example Kicktstarter, Rockethub etc.

3. Peer-To-Peer Lending: Peer-to-peer lending is basically a procedure wherein an online portal platform renders the most suitable conditions within where it settles matches for lenders and investors with borrowers and issuers to pertaining unsecured loans with the interest rate being set by the platform itself. There are a few platforms that even arrange loans between individuals, and there are also various other platforms to pool funds which are then lent to small and medium-sized businesses. The leading examples from the US are Lending Club, Prosper etc. and from UK are Zopa, Funding Circle etc.

A report by the Open Data Institute in July 2013 found that between October 2010 and May 2013 some 49,000 investors in the UK funded peer-to-peer loans worth more than 378 million pounds.There are also many online portal platforms where a fee is charged based on the loan origination wherein they provide incentives of sorts, in pursuance to the investors into a much larger loans which more or less does not accompany an investors risk profile, albeit these loans may by virtue of the contract between both the parties become securities.

4. Equity Based Crowd funding: It is a procedure where Equity Shares of the Company are issued in the consideration of funds solicited from investors.China is one of the few countries that render platforms with restrictions to offer this type of capital raising to sophisticated investors or to a limited number of investors who are individuals.

Ø Advantages of Crowd Funding: Crowd funding plays a vital role as a means of financing for startup, small and medium sized enterprises wherein they are able to raise funds at lower cost of capital without undergoing through rigorous procedures. In layman words Crowd funding provides new investment avenue and renders new product for portfolio diversification of Investors, all in all It increases competition in a traditionally dominated by a few providers. To say the least the people behind the scenes of the crowd funding platform by virtue of their due diligence of projects in maintaining the reputation of these online portals containing these platforms.

Ø Disadvantages of Crowd Funding: Crowd funding faces a lot of disarrays in its path to fruition as building up interest before the project launches can be quite a difficult task in hand, it is somewhat more of a probability than a possibility. In other words it doesn’t reach funding target sometimes due to its appeal and in furtherance to this the risk if damaging the reputation of your business would be imminent.

v Front Running and Insider Trading
Ø Front Running: Front running is an unethical practice executed by the acts of stockbrokers as they are making a profit at the direct expense of their customers in other words it is an illegitimate act by stockbroker/s who are assenting orders on the basis of security for its own account, hence thereby taking the upper hand advantage of the pending orders from its customers, In layman’s words front running may be defined whereby a stockbroker either buys shares prior to filling a customers buy orders that instantly increase the price and sells the shares, post the buyout of shares by the customer. For instance, a stockbroker receives a call from a client to buy shares of ABC Ltd, let’s say 1,00,000 shares , but prior to placing that order for the client, the stockbroker buys 10,000 shares of the same stock for his account for Rs 500 per share, then post his buying of shares the broker places the order of his client and then immediately sells his own shares as the equity increased the 1 share of ABC Ltd would equate to for Rs 501.23 ,hence the broker sold his shares immediately. Here the stock broker is generating quick profits in a short time.

Ø Insider Trading: In simple words insider trading takes place when the co.’s securities is undertaken by a group of individuals who have access to public information. In other words it is a malpractice of trading a co.’s securities address by a group of individuals having public information. For Instance Key managerial personal who have a direct access to the strategic relevant information and who use the same for trading in the co.’s stocks/securities are the responsible persons who create inside trading , this trading is highly discouraged by the Securities and Exchange Board of India to promote fair trading in the market for the benefit of the common investor. In other words Insider trading is a highly discouraged practice in which others stockholders are at a disadvantage that being due to the lack of paramount insider non-public information.

Liability for insider trading: The liability for insider trading revolves around the very present scenario where by the situation being that insider trading is occurring within which all the parties involved are at the potential risk of being found guilty. This liability get its geneses from traders passing relevant particulars in a format of a advantage gains that being an advantage on both sides that being said , the source being procured by means, that it was a non-public information. The reprimand for being guilty of insider trading depends on the following ground, mainly

The significance of the trading – How much money was involved How many people were affected by your wrongdoing and how much money was in Evidence – Anyone charged is innocent until proven guilty. The burden of proof falls on the prosecution. If no one “flips”, or if there isn’t a smoking gun, the prosecution has a harder time proving guilt. This may result in prosecution moving away from criminal charges, and instead choosing to pursue civil charges.

SEC violations – If SEC regulations have been broken, the department of justice may be called in to conduct an independent parallel investigation.

§ Proof of responsibility: This is the part where difficulty arises as is being difficult to prove an individual responsible for his acts in furtherance to insider trading as they hide behind nominees, offshore co.’s and any other proxy there may be, albeit by the virtue of stock exchanges monitoring trade with due diligence, the responsible individual or groups are so forth apprehended and produced before the hon’ble court for rendering a decree.

§ Trading on information in general: This sub-topic delivers a message that all insider trading is not illegitimate, for instance a person in a queue hears that a another person’s profit will increase than expected , and the person buys stock will not be liable to be guilty for insider trading, unless they had a close connection.

Comment
Section 195, of the co.’s act, 2013 deals with the prohibition of insider trading & lays down certain provisions that are relevant to prohibiting insider trading in association all co.’s in India wherein the co.’s act,213 and SEBI (Securities and Exchange Board of India)Act, 1992 go hand in hand and under the provision of section 195, of the co.’s act 2013 , no director or key managerial personnel should indulge in insider trading including matters of subscribing or even selling the securities and rendering any important information that is sensitive to this regard, to any person. And section 194 of the co.’s act prohibits on forward dealings in securities, which puts key managerial personnel’s in a lens and ban them from dealing in these securities of their respective co.’s on a forward basis. SEBI has the power to liberalize forward transactions by allowing put and call options ,in order to put a certain amount of restrictions on the aforesaid matter into the co.’s act,2013 regardless to that , this section prevents any such person/individual from any benefitting from insider information within which this sections applicability is also to private co.’s and unlisted public co.’s , an important note to be kept in mind is that this section applies if the transaction is for a specified period , within a specified time and for a specified number of relevant shares or specified amount of relevant debentures.

Court decisions:
In Re: SEC v. Texas Gulf Sulphur Co., a federal circuit court stated that anyone in possession of inside information must either disclose the information or refrain from trading. Officers of the Texas Gulf Sulphur Corporation had used inside information about the discovery of the Kidd Mine to make profits by buying shares and call options on company stock.

In the year of 1909, the Supreme Court of the United States ruled in Strong v. Repide If an act of a director of a co. is in manner of expecting to act in such a way where the his/her action affects the equity of shares, so forth cannot use that information/knowledge to acquire shares from those who do not know of the expected action. Even though in general, ordinary relations between directors and shareholders in a business corporation are not of such a fiduciary nature as to make it the duty of a director to disclose to a shareholder the general knowledge which he may possess regarding the value of the shares of the company before he purchases any from a shareholder, yet there are cases where, by reason of the special facts, such duty exists.

In 1984, the Supreme Court of the United States ruled in the case of Dirks v. SEC that tippees are liable if they had reason to believe that the tipper had breached a fiduciary duty in disclosing confidential information and the tipper received any personal benefit from the disclosure.

The Dirks case also defined the concept of "constructive insiders," who are lawyers, investment bankers and others who receive confidential information from a corporation while providing services to the corporation. Constructive insiders are also liable for insider trading violations if the corporation expects the information to remain confidential, since they acquire the fiduciary duties of the true insider.

The next expansion of insider trading liability came in SEC vs. Materia 745 F.2d 197 (2d Cir. 1984), the case which first introduced the misappropriation theory of liability for insider trading. Materia, a financial printing firm proofreader, and clearly not an insider by any definition, was found to have determined the identity of takeover targets based on proofreading tender offer documents during his employment. After a two week trial, the district court found him liable for insider trading, and the Second Circuit Court of Appeals affirmed holding that the theft of information from an employer, and the use of that information to purchase or sell securities in another entity, constituted a fraud in connection with the purchase or sale of a securities. The misappropriation theory of insider trading was born, and liability further expanded to encompass a larger group of outsiders.

In United States v. Carpenter (1986) the US Supreme Court cited an earlier ruling while unanimously upholding mail and wire fraud convictions for a defendant who received his information from a journalist rather than from the company itself. The journalist R. Foster Winans was also convicted, on the grounds that he had misappropriated information belonging to his employer, the Wall Street Journal. In that widely publicized case, Winans traded in advance of "Heard on the Street" columns appearing in the Journal.

The court ruled in Carpenter: "It is well established, as a general proposition, that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principal for any profits derived there from."

However, in upholding the securities fraud (insider trading) convictions, the justices were evenly split.

In 1997, the U.S. Supreme Court adopted the misappropriation theory of insider trading in United States v. O'Hagan, 521 U.S. 642, 655 (1997). O'Hagan was a partner in a law firm representing Grand Metropolitan, while it was considering a tender offer for Pillsbury Company. O'Hagan used this inside information by buying call options on Pillsbury stock, resulting in profits of over $4.3 million. O'Hagan claimed that neither he nor his firm owed a fiduciary duty to Pillsbury, so he did not commit fraud by purchasing Pillsbury options.

The Court rejected O'Hagan's arguments and upheld his conviction.

The "misappropriation theory" holds that a person commits fraud "in connection with" a securities transaction and thereby violates {10(b) and Rule 10b-5}, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information. Under this theory, a fiduciary's undisclosed, self-serving use of a principal's information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of the information. In lieu of premising liability on a fiduciary relationship between company insider and purchaser or seller of the company's stock, the misappropriation theory premises liability on a fiduciary-turned-trader's deception of those who entrusted him with access to confidential information.

The Court specifically recognized that a corporation's information is its property: "A company's confidential information ... qualifies as property to which the company has a right of exclusive use. The undisclosed misappropriation of such information in violation of a fiduciary duty ... constitutes fraud akin to embezzlement – the fraudulent appropriation to one's own use of the money or goods entrusted to one's care by another."

In 2000, the SEC enacted SEC Rule 10b5-1, which defined trading "on the basis of" inside information as any time a person trades while aware of material nonpublic information. It is no longer a defense for one to say that one would have made the trade anyway. The rule also created an affirmative defense for pre-planned trades.

v Gift City: India's First Financial SEZ:
The ministry of finance perseverance of the sad and utter departure of the rupee and nifty trading outside Indian shores as the most paramount equation in furtherance of pursuing India’s first financial special economic zones (SEZ). The ministry finalized a report after due analysis from reputed financial surveys conducted by eminent financial; mainly being the National Institute of Public Finance and policy experts as the ministry thought fit wherein in the report stated that more than Rs2 lakh crore of annual revenues are being generated outside the territory India on the basis of account trading in rupee derivatives — a revenue which can potentially be brought onshore. An another report put forward by the ministry which came about the inception of developing financial SEZ in India, nevertheless the second paramount point in the report stated that the global activity on the rupee derivatives was around $70 Billion per day , in other words assuming a grand total revenue stream of 0.15% per order, the daily revenue amounts to Rs 1,334 crore which includes revenues from both legs of the order. "A substantial part of this trading can be captured by Indian firms, if appropriate regulatory and tax regime exists," the report said. The report further stated that setting up a finance SEZ would require alterations to present/existing laws foreign investment and taxation, creating a legal system for enforceability of contracts within the SEZ and having rupee convertibility within the SEZ. An urgent corrigendum of the laws which would require suitable amendments will include those laws such as Foreign Exchange Management Act, and even provisions for arbitration proceedings and a strong international style district court with jurisdiction over the SEZ. The report contains matters in need of being pushed out of key financial markets in India. "The problems of Indian capital controls, financial regulation and taxation have led to a flight of trading in the rupee and nifty out of the country. Roughly half of the global trading in the rupee and in the nifty is now taking place outside India, at locations such as Singapore, Dubai, London, etc," the report said. The report has cited the example of Gujarat International Finance Tec-City as a finance SEZ; but the Pery Mistry committee recommended Mumbai as the Financial centre, however the Pery Mistry committee had prudent aspirations for India , but the report said so otherwise and stating that "At present, no city in India can compete in this global market owing to problems of capital account restrictions, financial regulation, taxation and urban governance". A person must first comprehend that a rupee is not convertible , offshore trading in rupee happens by way of derivatives , the case is where foreign investors place bets on rupee movements in Singapore or the UK and settle the transaction in dollars, although the currency risk is that of the rupee. The impact of bets spot exchange rate as most of the players are multinational banks which can arbitrage between India and overseas whereas the central bank of India too has cited the growing non-deliverable market as one of the triggers for rupee volatility. Arun Jaitley the finance minister unveiled the pathfinder for the countries first finance SEZ, that being the Gujarat International Finance Tec-City (GIFT), wherein it would provide the composite regulatory framework for the financial sector players expected to set up shop there, but shied away from announcing the tax sops that would eventually help it to give a credible competition to entrenched counterparts in Dubai and Singapore. (GIFT) in the next coming years to come will be a stronghold to get financial services with the exclusive regulations for the exclusive regulations for making the impact for international financial services centre (IFSC) which would with most certainty render domestic and international co.’s to commence commerce with the their start ups of offshore banking. This advantage will allow companies incorporated outside India to raise money in foreign currency by issuing and listing their shares on stock exchanges within the IFSC, where individual and institutional investors from India and abroad, including NRIs, would be allowed to trade and thus all the co.’s regardless of it being a domestic or international co. all of them will be able to underwrite insurance/reinsurance business of even foreign jurisdictions and allow banks, stock exchanges, depositories and clearing corporations to do business with a relatively low level of capital.SEBI, RBI and other regulators have already issued the relaxed norms for IFSCs , with in which the IFSC regulatory regime would allow Indian and foreign stock exchanges to set up separate bourses within IFSCs as subsidiaries, while market entities from India and abroad would be permitted to function there by providing issuance and trading in depository receipts and debt securities of domestic as well as overseas companies. The capital and other requirements have been relaxed for some time for exchanges, clearing corporations and depositories to set up shop in the IFSC.

Ø Advantages:
· Attract investment of approx. Rs 78,000 Crore ( When Operational)

· GDP growth ( over a period of 5 years )

· Strategically located on the Delhi-Mumbai Industrial Corridor and is connected by road with plans for a bus rapid transit system and a Metro link express for Gandhinagar and Ahmedabad mass transit rail system in the pipeline.

Comment
SEZ units allowed removing goods for repair, replacement, testing, calibration and development on self-attestation

v The Companies Amendment Act, 2014: The co.’s amendment act, 2014 has brought a large scope of improvements from correction of law and jurisdictional matter to amendments for unpaid amount. This act emphasized on the need of improvement as things in this matter or field changes in a constant pace , nevertheless the following points will give a helping hand as to what has been amendment for better
§ No need of common seal
§ Punishment for acceptance of deposits
§ Restrictions on inspection and obtaining copies of resolution
§ Restriction on declaration and payment of dividend
§ Amendment for unpaid amount
§ Additional responsibility of the auditors
§ Special provision for related party transactions
§ Relaxation on restrictions for providing loans to directors
§ Restrictions on the power of Benches of tribunal
§ Correction of law and jurisdictional matter

Comment
The initiative to “MAKE IN INDIA” From Red Tape to Red Carpet Initiatives for ease of doing business, revived the scene, from the lowest of lows and rose to the top with a vision where the govt. of India, has successfully rendered the following-
a) Requirement minimum paid-up capital for co.’s removed

b) Requirement of common seal for co.’s removed

c) Requirement of filing declaration of commencement of business removed

d) Single step incorporation of co.’s through INC-29 Form

e) Loans and guarantee to fully owned subsidiaries allowed

f) Process to approve related party transaction made simpler

g) Board’s resolution taken off disclosure requirements

h) Order to facilitate revival and rehabilitation of MSMEs issued

i) Customs Clearance Facilitation Committees (CCFCs) constituted at ports for expeditious clearance of goods

j) Five services of co. inc. , allotment of PAN & TAN and registration with ESIC & EPFO through a single process on eBiz portal

k) Assessment framework for ranking of states released

l) Investment by NRIs to be deemed as domestic investment by residents

m) Initial validity of industrial license for Defense Sector revised to seven/7 years, extendable up to three/3 years

n) FDI policy mapped with NIC code 2008

The state govt. initiatives go hand in hand in the utter & stark fruition as done by the central govt, and the following measures are taken by various states-
a) Online system for grant of consent to establish and operate ( RAJASTHAN )

b) Tatkal scheme introduced for consent to Establish and operate ( RAJASTAHN )

c) Industrial Disputes Act, contract Labour Act and apprentices Act amended to facilitate investments ( RAJASTAHN )

d) Labour Inspections restricted to one inspection in a year ( UTTAR PRADESH )

e) 20 industries exempted from obtaining consent to establish ( UTTAR PRADES )

f) Online system for grant of consent to establish and operate ( UTTAR PRADESH )

g) Speedy disposal mechanism for less-polluting industries ( UTTAR PRADESH )

h) Extended validity of Consent to Establish and operate ( UTTAR PRADESH )

i) Self-certification-cum-Voluntary Compliance Scheme (VCS) to exempt industries from multiple inspections, returns and registers ( MADHYA PRADESH )

j) Only intimation to the Revenue Authorities is required for industrial use ( MADHYA PRADESH)

k) Unified returns and registers under thirteen/13 Labour Laws ( MADHYA PRADESH )

l) Approval of building plan through online single-window portal (MADHYAPRADESH)

m) Online system for grant of consent to establish and operate 9 MADHYA PRADESH )

n) Online application for electric connection; connection to be released in fifteen/15 days ( WEST BENGAL )

o) Simplified online procedure for building plan approval with time limits and deemed approval ( WEST BENGAL )

p) Simplified labour compliance with extended time of operation, third-party inspection and e- registration ( WEST BENGAL )

Footer
# Private placement (or non-public offering) is a funding round of securities which are sold not through a public offering, but rather through a private offering, mostly to a small number of chosen investors. PIPE (private investment in public equity) deals are one type of private placement.

# Qualified institutional buyers (QIBs) those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets.

# An employee stock ownership plan (ESOP) is an employee-owner program that provides a company's workforce with an ownership interest in the company. In an ESOP, companies provide their employees with stock ownership, often at no up-front cost to the employees

# Corporate/CommercialLaw,available at http://www.mondaq.com/india/x/305626/Securities/PRIVATE PLACEMENT UNDER COMPANIES ACT 2013 , last seen on 6/7/15
# Within a period of 60 days from the receipt of application money.
# Supra 4
# Preferential Allotment , Economic Times, available on http://economictimes.indiatimes.com/definition/preferential-allotment , Last seen on 6/7/15
# ibid
# Start Up , Track , available at http://trak.in/tags/business/2015/05/02/sebi-alternate-capital-raising-platform-indian-startups/ , Last seen on 19/6/2015.

# Securities & Exchange Board of India, Ministry of Finance , Government of India , Discussion Paper on Alternate Capital Raising Platform and Review of other regulatory requirements, available at http://www.sebi.gov.in/sebiweb/, last seen on 19/6/2015
# Ibid
# Supra 7
# Supra 7
# Ibid at 5
# Securities & Exchange Board of India, Ministry of Finance , Government of India , Consultation Paper on Crowd funding in India , available at http://www.sebi.gov.in/sebiweb/, last seen on 20/6/2015
# Ibid
# Crowd Based Equity Funding , Discussion Paper , Corporations and Markets Advisory Committee, Australia , last seen on 23/6/2015
# IOSCO Staff Working Paper - Crowd-funding: An Infant Industry Growing Fast , last seen on 23/6/2015
# Supra 9
# A contract between the lender and the borrower being the security note.
# Ibid at 10

# It refers to fund raising by a business, particularly early-stage funding, through offering equity interests in the business to investors online. Businesses seeking to raise capital through this mode typically advertise online through a crowd funding platform website, which serves as an intermediary between investors and the start-up companies.
Traditionally, Start-ups are funded through private equity, angel investor or loan arrangements with a financial institution. Any offering of public equity takes place only after the product or business becomes commercially viable. However, in Equity based Crowd funding solicitation is done at an earlier stage.
Some examples of equity crowd funding platforms are Syndicate Room, Crowdcube and Seedrs.
Ibid , at 5

# providing finance to Start-ups and SMEs
# An abundance of money and time is necessary.
# Crowd funding , nibusinessinfo , available at https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-crowdfunding , last seen on 23/6/15
# About us ,"Front-running; an Unethical Behavior", available at www.cmic.sec.gov. , last seen on 23/6/15
# Equity , EconomicTimes , available at http://economictimes.indiatimes.com/definition/insider-trading , last seen on 23/6/15
# SEBI
# Supra 20
# Quid pro que
# Information about a company that is not known by the public and will, when released, have an impact on that company's stock price.
That person being a key managerial person of a co.

# Securities and Exchange Com'n v. Texas Gulf Sulphur Co., 401 F. 2d 833 (2d Cir. 1968,Federal Circuit Court of the US)
# The Federal Circuit is an appellate court with jurisdiction generally given in 28 U.S.C. § 1295. The court hears certain appeals from all of the United States District Courts, appeals from certain administrative agencies, and appeals arising under certain statutes.
# Dolgopolov, Stanislav (2008). "Insider Trading". In David R. Henderson. Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty.
# Kidd Mine is an underground base metal mine in the city of Timmins, Ontario, Canada. It is owned and operated by Xstrata Copper, following the August 2006 takeover of Falconbridge Ltd.
# Brooks, John (November 9, 1968). "A Reasonable Amount of Time". The New Yorker: 160–188.
# Strong v. Repide, 213 U.S. 419 (1909, Supreme Court of the US)
# DIRKS v. SEC, No. 82-276 (1983, Supreme Court of the US)
# receivers of second-hand information
# A fiduciary duty is a legal duty to act solely in another party's interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals.
# Since Dirks disclosed the information to expose a fraud, rather than for personal gain, nobody was liable for insider trading violations in his case.
# SEC vs. Materia 745 F.2d 197 (2d Cir. 1984, US Supreme Court)

# A perspective that defines the act of stealing confidential information from an employer and then trading securities based on the misappropriated insider knowledge. In the United States, a person guilty according to the misappropriation theory will likely be convicted of insider trading. The misappropriation theory gained prominence in the Supreme Court's conviction of James H. O'Hagan. O'Hagan was an attorney who acted on insider information regarding a takeover bid for Pillsbury. The United States versus O'Hagan was a watershed case for the theory, defining its validity. This take on insider trading expands the traditional view of what constitutes guilt. Instead of looking only at people who trade their own companies' shares based on stolen information, the theory extends to those who use the knowledge to profit in any corporation.

# CARPENTER v. UNITED STATES, No. 86-422 (1987,US Supreme Court)
# R. Foster Winans is a former columnist for The Wall Street Journal who co-wrote the "Heard on the Street Column" from 1982 to 1984 and was convicted of insider trading and mail fraud.

# The Wall Street Journal is a New York-based English-language international daily newspaper with a special emphasis on business and economic news.

# Cox, Christopher. "Speech by SEC Chairman: Remarks at the Annual Meeting of the Society of American Business Editors and Writers". U.S. Securities and Exchange Commission.
# United States v. O'Hagan, 521 U.S. 642, 655 (1997).

# Section 10b is the antifraud provision of the Exchange Act, while Rule 10b-5 is the rule the SEC promulgated under that section. Rule 10b-5 prohibits the use of any "device, scheme, or artifice to defraud," and creates liability for any misstatement or omission of a material fact, or one that investors would think was important to their decision to buy or sell the stock.

# SEC Rule 10b-5, codified at 17 C.F.R. 240.10b-5, is one of the most important rules targeting securities fraud promulgated by the U.S. Securities and Exchange Commission, pursuant to its authority granted under § 10(b) of the Securities Exchange Act of 1934. The rule prohibits any act or omission resulting in fraud or deceit in connection with the purchase or sale of any security. The issue of insider trading is given further definition in SEC Rule 10b5-1.

# A defense in which the defendant introduces evidence, which, if found to be credible, will negate criminal or civil liability, even if it is proven that the defendant committed the alleged acts. Self-defense, entrapment, insanity, and necessity are some examples of affirmative defenses.

# Mayur Shetty, Finance SEZs can halt rupee trading exodus: Finance ministry, The Times Of India, 23/2/15, http://timesofindia.indiatimes.com/business/india-business/Finance-SEZs-can-halt-rupee-trading-exodus-Finance-ministry/articleshow/46337112.cms , Last seen on 7/7/2015
# Ibid , at 10
# Supra 54
# Supra 54
# Supra 54
# Supra 54
# Ibid , at 10
# Ibid , at 10
# fe Bureau, India’s GIFT: Arun Jaitley unveils norms for finance SEZs , The Financial Express, 11/4/15 , available at http://www.financialexpress.com/article/economy/indias-gift-arun-jaitley-unveils-norms-for-finance-sezs/62754/ , Last Seen on 7/7/15
# Ibid
# Supra 54
# Supra 54
# Ibid , at 10

 




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