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Some news of October 2023

1. Foundation Day of ICSI-4th October 2023 The Institute of Company Secretaries of India (ICSI) celebrated its 55th Foundation Day on Wednesday 4th October 2023, at Vigyan Bhawan, New Delhi in the august presence of Hon’ble President of India, Smt. Droupadi Murmu, and Hon’ble Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman.The event also witnessed the presence of Manoj Govil, Secretary, Ministry of Corporate Affairs, and BK Shivani – recipient of the prestigious Nari Shakti Puraskar. The President of India, Droupadi Murmu said that the future of India’s corporate governance depends on the will power and actions of Company Secretaries, who can make India a role model of Good Corporate Governance as well as of Good Governance.Smt. Nirmala Sitharaman said that the ICSI and its members are responsible for good governance in the country’s corporate domain and will have to play a significant role in setting up Global Capability Centres (GCCs).

2. On 17th October 2023 the Central Government vide the 3rd amendment, further amended the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.

  • Additional duty is cast on the Reporting Entity for Client Due Diligence to use reliable and independent sources of identification.
  • Every Reporting Entity, which is part of a group, is mandated to implement group-wide programsagainst money laundering and terror financing, including group-wide policies for sharing information required for the purposes of client due diligence and money laundering and terror finance risk management. Groups are required to implement group-wide policies for the purpose of discharging obligations under the Prevention of Money Laundering Act ,2002 (PMLA).
  • The Principal Officer of a Reporting Entity is mandated, on being satisfied that the transaction is suspicious, furnish the information promptly in writing by fax or by electronic mail to the Director appointed under the PMLA in respect of transactions.
  • Every Reporting  Entity, its Directors, Officers, and all Employees shall ensure that the fact of maintenance of records referred to in Rule and furnishing of information to the Director is kept confidential.
  • Every Reporting Entity is mandated that at the time of commencement of an account-based relationship or while carrying out occasional transaction of an amount equal to or exceeding Rs.50,000/-, whether conducted as a single transaction or several transactions that appear to be connected, or any international money transfer operations,
    1. identify its clients, verify their identity using reliable and independent sources of identification, obtain information on the purpose and intended nature of the business relationship, where applicable;
    2. take reasonable steps to understand the nature of the customer’s business, and its ownership and control;
    3. determine whether a client is acting on behalf of a beneficial owner, and identify the beneficial owner and take all steps to verify the identity of the beneficial owner, using reliable and independent sources of identification. Further the Reporting Entity immediately obtains from the third party or from the Central KYC Records Registry, the record or the information of such client due diligence carried out by the third party. FATF Recommendation 24 says that competent authorities should have access to beneficial ownership information that is “adequate, accurate, and up-to-date”Financial crime prevention is an ongoing and evolving effort, as criminals continuously adapt to circumvent safeguards. Collaboration, technological advancements, and strong regulatory oversight are essential components of this ongoing battle to protect the integrity of the financial system.

3. SC to examine if it needs to review PMLA– The Supreme Court agreed to hear applications seeking reconsideration of the judgment in the Vijay Madanlal Chaudhary case which asserted the powers of the Enforcement Directorate (ED) under the Prevention of Money Laundering Act 2002 (PMLA).A special bench of Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, and Justice Bela M. Trivedi will hear the review of PMLA judgments on November 22. The top court will examine whether the Supreme Court judgment delivered in July 2022 examined the validity of the PMLA in its entirety. In July 2022, the apex court upheld the 2019 amendments made to the PMLA that deal with ED’s power of arrest, attachment, and search and seizure. The amendments made it nearly impossible for the accused to secure bail. It also shifted the burden of proof of innocence onto the accused rather than the ED. While observing that the Parliament had the power to make these amendments the Court said that the Parliament enacted PMLA as a result of international commitment to sternly deal with the menace of money laundering. However, since the Centre brought in the changes through the Finance Act 2019, the apex court has left the question of deciding whether the said amendments could be brought in as a Money Bill on the recently constituted 7 Judge Constitutional bench. Solicitor General urged the bench to defer the hearing by a month or two arguing that FATF’s review of India’s money laundering investigation is pending. Justice Kaul asserted that the Bench cannot be precluded from laying down the contour of hearing.

Source- SC to review challenges to ED’s powers under PMLA – Daijiworld.com & Economic Time

4. RBI Revises KYC Rules, Offering Improved Guidance to Prevent Money Laundering.Considering amendments to the (a) PML Rules vide Government notifications dated September 4, 2023 and October 17, 2023 (b) Government Order dated August 29, 2023 under the Unlawful Activities (Prevention) Act (UAPA), 1967 and (c ) Government Order dated 30 September 2023 under the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMD Act, 2005)  RBI has amended the Master Direction (MD) on KYC dated February 25, 2016 in terms of which Regulated Entities (REs) have to undertake Customer Due Diligence (CDD), as per the process laid out therein, for their customers.

The amendment is regarding “Customer Due Diligence (CDD)” by Reporting Entity. This CDD step is crucial in enhancing the efficacy of the KYC Process. CDD now covers not just identification and verification of the identity of customers but also emphasis on “using reliable and independent sources of identification”.

5. No IBC to aircraft : The Ministry of Corporate Affairs issued a Notification saying that Section 14 (1) of the Insolvency and Bankruptcy Code shall not apply to transactions, arrangements  or agreements under the convention and the protocol relating to aircraft, aircraft engines, airframes, and helicopters. This new notification may affect Go First’s Insolvency Resolution Proceedings.

6. One in Five Board Members at India Inc. is now a woman. There are 885 women among 473 Directors on the Board of Nifty 500 Companies. There are several companies like Colgate Palmolive, Godrej Consumer, Jyoti Labs, Vinati Organics, Apollo Hospitals and New India Assurance that have women chairpersons or CEO’S. There are certain PSUs such as Power Grid, UCO Bank, and Bank of Maharashtra which do not have a women Director on the Board.

7. Minority Shareholders have defeated  9 resolutions floated by five companies in the last month. These resolutions were pertaining to an increase in remuneration of KMP, Related Party Transactions, and the Reappointment of an Independent Director.

8. The Supreme Court has said that the Resolution Professional does not have the power to file appeals against the decision of Bankruptcy Courts as they are “Neutral” persons appointed to assist the Tribunals. Only the Committee of Creditors (COC) and others can file appeals against the Orders of Tribunals.

9. As per IBBI data the recovery rate for creditors against their admitted claims is 29.5% in the June Quarter compared to 49.4% in the March Quarter.

10. Advisory email form RoC :The office of the Registrar of Companies, Centre Scrutiny Centre had issued email advisories to Companies based on certain criteria, for compliance with provisions of Significant Beneficial Ownership (SBO) and SBO Rules. This Advisory is addressed to Companies and their Directors, requesting them to assess the applicability of SBO provisions and to take steps to comply with the same. These emails are not statutory notices under the Companies Act 2013 and do not require any response to be given. However, this gives a signal that the Registrar of Companies may take action against the non-compliant Companies and its Directors.

11. October 10, is World Mental Health Day and is an international day for education, awareness, and advocacy against the social stigma of mental illness. Companies to take a holistic approach to employee well-being. Companies should have a Mental Health policy and prioritize and celebrate mental well-being by taking initiatives and ideas for attending to a stress-free environment at work place.

12. The Government has announced that soon it will be notifying the Digital Personal Data Rules under the Digital Protection Data Act 2023 which was notified on August 11, 2023. In a survey conducted by EY, there were 32% of Companies/Firms said they find technical hurdles in data law implementation. There are other challenges in implementation like lack of clarity in regulatory guidelines, concern over the need to revisit existing vendor contracts, and organizational resistance to change.

13. Standard Chartered Bank has executed first-ever Overseas Derivative Instrument (ODI) transaction worth $ 5 million through the Foreign Portfolio Investor Route from its Gift City Branch. In the Finance Act 2023, the government exempted the income earned by Non-Resident Investors from ODI issued by Foreign Portfolio Investors based in Gift City.

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