•MF, Hedge Fund, P-Notes, ETF •Corporate governance •Companies Act 2013 •SEBI norms •RPT: Suzuki Mehsana •Vodafone •Transfer pricing •Netherland BIPA •GAAR, DTC •Nokia Royalty tax, Finland DTAA Today’s topics: 8 th May 2014 All PowerPoint Slides available at Mrunal.org/ECONOMY
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•MF, Hedge Fund, P-Notes, ETF•Corporate governance•Companies Act 2013•SEBI norms
•RPT: Suzuki Mehsana
•Vodafone•Transfer pricing•Netherland BIPA•GAAR, DTC
•Nokia Royalty tax, Finland DTAA
Today’s topics: 8th May 2014
All PowerPoint Slides available at Mrunal.org/ECONOMY
Mutual fund
Portfolio (AMC)
UnitUnitUnit
NAV
EXIT LOAD
Portfolio Nature: equity, debt, gilt edged fund, real estate
Income vs riskGrowth Fund: 80 (Equity): 20 (Debt)Balance: 50: 50Income = 20 : 80
Mutual funds types:
ETF: Exchange Traded Fund
Portfolio Goldman Sach
Rs.10Rs.10Rs.10
ONGC, CIL, GAIL10 CPSE
Rs.3000 crore NFO
Rs.20
BSE-NSE
15 ETF: 1 freeRedeem
MF Unit: CASHETF: Shares=> secondary market sell=>CASH
EXIT load…no; commission lessETF: USA 1993; India 2002
ETF different from MF?
Hedge Fund = pvt MF for HNI
Portfolio (Hedge Fund)
UnitUnitUnit
HNI=> private MFKarvy Capital, Motilal Oswald etc.SEBI regulation…not strict like MFAlternative investment fund Cat.IIIHigh risk, high reward100 Cr. Pooled=> bet upto Rs.200 crore (T+2)
Hedge Fund
P-Notes: Participatory Notes
Hedge Fund manager
P-Note: Offshore Derivative Instrument
Hedge Fund manager
FII(India)
AnonymousCGT evade terrorist moneyhot moneyMarch 2014: 2 lakh Crore (13% of FII)
P-notes : SEBI
FPI new classificationRisk profile + KYC complianceCAT I: Foreign government, government's fin. Institutions (UTI, EPFO, LIC)
CAT II: Mutual Fund, Pension Fund, Univ.Fund, CAT III: not in CAT I and CAT II
Who can't issue P-notes?CAT IIICAT II: certain high risk
SEBI on P-Notes
Corporate Governance
1.Definition2.Companies Act 20133.SEBI norms 2014
Way of directing the companyTo protect stakeholders’ interestTo comply with legal-regulatory req.
Corporate governance: Meaning?
Not mere technical complianceMoral-ethical complianceAbsence: fraud, mismanagement
Corporate governance: Meaning?
SEBI Norms:•Sep 2012: Adi Godrej•April 2014: Published•Effective 1st Oct. 2014
Companies Act•Original 1956•Aug 2013 (470 section)•…•Feb 2014: rules notified
Corporate governance in India
Companies Act2013One person
Private ltd.2-200
Public Ltd.7-unlimitedListed
Vodafone India.Unlisted
Nokia India
16
Types of companies
Total ~9 lakh companies>90% private ltd.
Capital: 50 LTurnover 2 cr.
SHARE-HOLDERS
Board of DirectorsChairman-MD
CEOExecutives
Staff
IPO
BoD
Chairman
Executive Director/Full-time
Nominated (Bank/CG)
Independent Director
18
Minimum: OPC-1; Private-2; Public-3Maximum: 15Even more by AGM resolutionOne person: maximum 20 companies.One director Indian resident (182 days)
One director Woman12 months absent = vacate.
Companies Act 2013: Directors
Not a PromoterPecuniary interest…X (except salary)MD nominated…XEmployee…XPublic (listed) company: minimum 1/3rd ID
Term: 5 years x 2 (performance review AGM)
Re-appointment: cooling 3 years
Companies Act 2013: Independent director
ID: Separate meetingsOne person max. 7 companies IDFull-time director in 1 company => 3 companies' ID
Term: 2 x 5 years (Retrospective)Performance report on IDAtleast 1 woman director in the board
SEBI norms: ID
SHARE-HOLDERS
Board of DirectorsChairman-MD
CEOExecutives
Staff
IPO
Independ DirectorsBoard Meetings
Minimum 4 meetings per yearNot > 120 days gapVideo conferencing…yesQuorum: 1/3rd strength OR 2 directors whichever max. (one person company..X)
7 days prior notice
Companies Act 2013 : Board meetings
1. Audit committee2. Stakeholder relationship committee
(SRC)3. CSR committee (CSRC)4. Nomination and Remuneration
committee (NRC): 1. MD/Director: 11% of profit2. CEO vs Median salary3. Pay rise vs Company performance
Companies Act -BoD: Committee
Last 3 years' avg. profit=> 2% CSR spend
Applies to?1. net profit of 50 million (excluding tax)2. net worth of 5 billion (Asset-liability)3. turnover of 10 billion (sales excluding
costs)Foreign branch…X
Corporate Social responsibility (CSR)
SHARE-HOLDERS
Board of DirectorsChairman-MD
CEOExecutives
Staff
IPO
Independ DirectorsBoard Meetings
AGM
One person company: no needPublic & pvt LTD. companies…yesGeneral notice by letter / emailQuorum (physically present): depending on # shareholders: 5 to 30
Proxy voting….YesElectronic Voting…Yes (SEBI C.G. Norms also)
Annual General Meeting (AGM)
Auditing related
1.Independent directors2.Board meetings3.AGM
BoD => Audit Committee (ID)External AuditorsFraud report to Central government + shareholders' meeting
One auditor=> maximum of 20 companies
Companies Act 2013
Individual auditor: 5 yearsAudit firm: 5 year x 2Cooling off: 5 yearsInternal audit: CA/Accountant/othersWhistleblower mechanismFull time Company Secretary: capital >Rs.10 cr (7500)
Companies Act 2013: Auditor’s term
Company cannot give loan to director / related persons
Min. loan interest rate >G-SecCredit rating before accepting public deposit (CIS)
Chief Finance Officer=> audit account
Companies Act 2013: misc.
New bodiesCompanies Act 2013
1.National Company Law Tribunal (NCLT)2.National Financial Reporting Authority
(NFRA)3.Investor and Education Protection Fund4.SFIO Fraud
Judicial + technical membersFinish case in three monthsAppeal: NCLATPresent case by Self, Lawyer, CA, CSCases:1. arbitration, compromise, M&A2. Converting Public ltd. To private ltd.3. Filing Class action suits (Satyam)
National Company Law Tribunal (NCLT)
1 Chairman + 15 membersAccounting standardsPowers of civil courtProfession misconduct of CA/accountant=> debar
Appeal: NFRAAICAI unhappy (Chartered Accountants Act, 1949)
#2: National Financial Reporting Authority (NFRA)
New bodiesCompanies Act 2013
1.National Company Law Tribunal (NCLT)2.National Financial Reporting Authority
(NFRA)3.Investor and Education Protection Fund4.SFIO Fraud
Since 1956’s company actUnclaimed Dividend, interest, principle
Under Corporate Affairs MinistryAwareness, seminar, financial literacyParticipation from RBI, SEBI, experts
Investor and Education Protection Fund
2013’s Act: Statutory authority@Delhi HQ, Regional officesCorp. Affairs Secretary = ChairmanMembers:
RBI Executive directorsSEBI Executive directorsLegal experts etc.
Investor and Education Protection Fund Authority
New bodiesCompanies Act 2013
1.National Company Law Tribunal (NCLT)2.National Financial Reporting Authority
(NFRA)3.Investor and Education Protection Fund4.SFIO Fraud
Naresh Chandra report on Corp. governance
2003: under Corp. MinistryCases
1. Satyam2. Reebok fraud3. Sesa Goa invoice4. Saradha Chitfund
Serious Fraud Investigation Office (SFIO)
Statutory bodyNot just document examinationSearch seize arrestCrPC power- investigatorOnce SFIO gets case, other agencies can’t proceed.
State police, CBI -cooperate, provide documents, witnesses.
Companies Act 2013: SFIO
3 companies: OPC, pvt, public4 new bodies: tribunal, financial reporting, edu. Fund, SFIO
Directors: ID, womenMeeting: Board, AGMAudit: fixed term, whistleblower, report to central Govt.
Companies Act: Memorize
business-friendly regulationsBetter corporate governanceProtecting small investorsSelf-regulationLess government approval
Conclusion: Companies Act 2013
SEBI NormsMinority
shareholdersIndependent Directors
E-Voting
RPT
TransparencySalary
Audit Committee
Whistleblower mechanism
Committee
under ID
1st October 2014
Maruti SuzukiGujarat plant Controversy
Dividend Dividend
Royalty Payment
HARYANA
•1 Manager dead•2 Japanese Executive injures•Rs. >3000 crore
MANESAR UNREST, 2012
Dividend
Mehsana
Suzuki MotorsGujarat
ProfitDividend
Royalty Payment
Cost priceProfit margin
HDFC, Reliance Cap, ICICI, SBI
Less profit for MS=>less dividend
MS. Will become mere distributor/ marketing company.
Suzuki (56%)Why controversy?
HDFC, Reliance Cap, ICICI, SBI
Maruti-Suzuki has surplus of Rs.7500 cr.
Why not upgrade Haryana?
100% subsidiary in Gujarat
15 years leaseIf not renewed, it’ll be merged with Maruti-Suzuki.
(2017) 25-30k Cr.
Suzuki (56%)Why controversy?
HDFC, Reliance Cap, ICICI, SBI
Why not upgrade Haryana?
Profit re-invested in Gujarat
@Haryana 1.5 million cars / PA
@Gujarat 2.5 million (2017)
No Risk for Maruti
Suzuki (56%)Why controversy?
Mehana ~1200 Acre.640 acres in Becharaji ; 550 acres in Vithalapur
Investment of Rs. 25-30k Cr.Full Capacity in 20172.5 million cars /PAAutohub- replacing Tamilnadu +HaryanaSuzuki Motors Gujarat ltd=>Ahmedabad (HQ)EMPLOYMENT
Positive Points for Gujarat
Companies Act 2013 =>1/4/2014. “Related party Transaction” RPTRequire vote from majority of minority shareholders.
Minority shareholders=> SEBI complaint
Suzuki has two choices1. Get voting done2. Re-work on strategy (MS Gujarat plant,
SPV)
Negative for Suzuki
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