Govt. specifies provisions of Companies Act, which would be applicable to financial services at IFSCs

Notification No. S.O. 5160(E), Dated, 04.11.2022

The Central Government has specified provisions of the Companies Act, 2013 which shall apply with such exceptions, modifications and adaptations as specified to financial products, financial services or financial institutions in an International Financial Services Centre. Some of the provisions of the Companies Act, 2013 are discussed as follows –

(a) Section 24 – Power of SEBI to regulate issue & transfer of securities, etc

Sec 24 of the Companies Act, 2013 deals with the power of SEBI to regulate the issue & transfer of securities, etc. The provisions relate to issue and transfer of securities and non-payment of dividend, by listed companies or those companies which intend to list get their securities listed on the recognised stock exchange.

Now, the powers of SEBI are given to the International Financial Services Centres Authority (IFSCA) to regulate the issue and transfer of securities, etc.

(b) Section 26 – Matters to be stated in the prospectus

Sec 26 of the Companies Act, 2013 states that every prospectus issued by or on behalf of a public company by or on behalf of any person who is or has been engaged or interested in the formation of a public company, shall be dated and signed and shall state such information and set out such reports on financial information as may be specified by the SEBI in consultation with the Central Government.

Now, the powers of SEBI are given to the International Financial Services Centres Authority (IFSCA) to state such information and matters in the prospectus in consultation with the Central Government.

(c) Section 32 – Red herring prospectus

Sec 32 of the Companies Act, 2013 states that upon the closing of the offer of securities, the prospectus stating the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details which are not included in the red herring prospectus shall be filed with the ROC and SEBI.

Now, the details are required to be filed with the ROC and IFSCA.

(d) Section 39 – Allotment of securities by company

Sec 39 of the Companies Act, 2013 states that no allotment of any securities of a company offered to the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount has been subscribed.

Further, Sec 39(2) states that the amount payable on application on every security shall not be less than 5% of the nominal amount of the security or such other percentage or amount, as may be specified by the SEBI. Now, the same is required to be specified by IFSCA.

(e) Section 40 – Securities to be dealt with in stock exchanges

Sec 40(3) of the Companies Act, 2013 states that all money received on application from the public for subscription to the securities shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than for adjustment against allotment of securities and for repayment of money within the time specified by SEBI.

Now, the powers of SEBI are given to the International Financial Services Centres Authority (IFSCA) to specify the time for repayment of money received from applicants in pursuance of prospectus, where the company is unable to allot securities.

(f) Section 54 – Issue of sweat equity shares

Sec 54(1)(d) of the Companies Act, 2013 states that where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the SEBI.

Now, the powers of SEBI are given to the International Financial Services Centres Authority (IFSCA) to make the regulations with respect to the same.

(g) Section 59 – Rectification of register of members

Sec 59(4) of the Companies Act, 2013 states that where the transfer of securities is in contravention of any of the provisions of the SCRA, the SEBI or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities or the SEBI, direct any company or a depository to set right the contravention and rectify its register or records concerned.

Now, the International Financial Services Centres Authority (IFSCA) has also been inserted i.e IFSCA can also make an application to the Tribunal, in case of contravention, to direct any company or a depository to set right the contravention and rectify its register or records concerned.

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