India: RBI discontinues issuance of LoUs/LoCs
In 2004, in an attempt to liberalize the procedures relating to trade credits for imports, the Reserve Bank of India (hereinafter referred as ‘RBI’) had notified a general permission to ADs to issue guarantees or Letters of Undertaking (hereinafter referred as ‘LoUs’) or Letters of Comfort (hereinafter referred as ‘LoCs’) in favour of overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to one year for import of all non-capital goods permissible under the Foreign Trade Policy (except gold) and up to three years for import of capital goods.
Issue of LoUs and LoCs not allowed any more
The RBI vide notification dated March 13, 2018, has now decided to discontinue the practice of issuance of LoUs and LoCs for trade Credits for imports into India by AD Category –I banks with immediate effect.
Validity of Letters of Credit and Bank Guarantees:
RBI has notified that despite discontinuance of LoUs and LoCs, the issuance of Letters of Credit (hereinafter referred as ‘LCs’) and Bank Guarantees for Trade Credits for imports into India may continue to be issued subject to compliance with the provisions contained in Department of Banking Regulation on ‘Guarantees and Co-acceptances’ .
The financial regulator has made this move to discontinue the LoUs and LoCs in the light of the news regarding the PNB scam. Such a move would make the importers move towards the utilization of LCs which are more expensive in nature and may increase their transaction costs by 2-5%. This move is made by RBI with the agenda to improve the confidence of the public-sector banks.
In the light of the PNB scam, the Cabinet has also approved the Fugitive Economic Offenders Bill, 2018, for increasing the chances of banks to recover from financial defaults made by fugitive economic offenders.
Further, the government has also notified on March 16, 2018 that it has ordered investigation into the affairs of about 107 companies and 7 LLPs under the provisions of Section 212(1)(c) of the Companies Act, 2013 and Section 43(3)(c)(i) of Limited Liability Partnership Act, 2008 on February 17, 2018 belonging to Mr. Nirav Modi (Firestar Diamond Group) and Mr. Mehul Chinubhai Choksi (Gitanjali Group) to be carried out by the Serious Fraud Investigation Office (SFIO) connected with Punjab National Bank Fraud.
Refer RBI Master Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015.
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India: Company Name Approval Process
Source : www.mca.gov.in
For the incorporation of a private limited company or a limited liability partnership, the first step to be undertaken is getting an approval for your proposed company name. An application for company name approval can be made online only. For this, the general process is as follows:
- An online application in eForm 1 is to be submitted to the concerned Registrar of Companies to ascertain the availability of name.
- A fee of INR 500/- has to be paid.
- The digital signature of the applicant proposing the company has to be attached in the eForm.
- After reviewing the application on merits, the Ministry of Corporate Affairs shall either approve for reject the same.
A few TIPS for a faster and easier company name approval process are:
Select a unique name. The swiftest hack to ensure your company name approval is by selecting a new and unique word for your company.
Sometimes companies plan ahead and apply for trademarks well in advance. If your trademark is secured, the company name approval process can be a smooth ride.
The trick lies in preferences! One must give enough variations of their name in the preferences. Also, if there is an existing name in a particular type of services, which is different than the type of services by your own company, you may consider adding a few descriptive words in the name.
For Eg: If XYZ is the proposed name for your medical devices’ company and there is a company by the name XYZ Apparels Pvt. Ltd., then you may consider marking the distinction by naming your company XYZ Medical Devices Pvt. Ltd. or such other names.
- Run a company name search:
To ascertain the chances of success for your approval, one may consider running a search on the MCA website and see how many companies with the same name and similar services already exist.
- Run a Trademark search:
You may consider running a trademark search before actually finalizing your preferences. While you may consult an IP law firm to run a detailed and authentic search, you can do the same yourself, at a preliminary level by visiting the MCA website. In case the name for which you seek approval is already a trademark of some other entity, then one is required to submit a No Objection Certificate from the owner of such trademark.
The company name approval process is now completely automated and digitalized. If all the documents and formalities are complete in all respects, it takes less than a week to get a company name approval done. Since the digital system rejects the wrong forms without discretion, it is important that the name should be unique and new.
After the name approval the applicant should apply for registration of the new company by filing the required forms (that is Form 1, 18 and 32) within 60 days.
India: Role of Insolvency Resolution Professionals appointed under IBC
Enforced with the objective of time-bound insolvency resolution and maximization of assets, the Insolvency Bankruptcy Code, 2016 (hereinafter referred to as “IBC”), in order to facilitate the process of insolvency resolution, has provision for appointment of an insolvency resolution professional (hereinafter referred to as “IRP”).
According to the provisions of the IBC, the erstwhile management of the debtor is divested of its powers and the same is then vested in an IRP. The IRP then continues the business of the corporate body as a going concern until a resolution plan is drawn up, which enables the corporate body to pay back its debts. The IRP is duty-bound to monitor the assets of the debtor and claims made against it and constitute a committee of creditors. The control and custody of the assets of the debtor may be taken over by the IRP.
The amendments to the IBC have made an attempt to ensure that only viable resolution plans from credible sources are accepted. The IRP appointed under the provisions of the IBC shall submit to the Committee of Creditors all resolution plans which comply with the requirements of the IBC.
The IRP shall render services for a fee which is a reasonable reflection of his work, raise bills / invoices in his name towards such fees, and such fees shall be paid to his bank account. There have been reported cases where the losses of the debtor companies have been reduced by the appointment of IRP. For instance, the Assam Company India Ltd., reported a loss of INR 213,800,000 against INR 224,700,000 a year earlier for the June quarter of 2017 . Likewise, the losses for Bhushan Steel reduced from INR 14,860,000,000 to INR 4,670,000,000 for September quater . Losses for Monnet Ispat reduced from INR 4,000,000,000 to INR 3,530,000,0002.
The IBC ensures implication of strict measures against unscrupulous debtors escaping and delaying the repayment of debts incurred by using the legislative framework and thus prevents the scope of one taking advantage of their own wrong. The IRPs take up the management of the debtor with themselves separating the management who were taking care of
the affairs of the Company earlier. The IBC is aimed with the objective to accord another opportunity to the dying debtor entity by taking over its responsibility of management and thereby helping it to get back on its feet.
Legal framework governing Organic food in India
Source : www.fssai.gov.in
Organic food products are grown in a system of agriculture, which can achieve sustainable productivity without the use of artificial external inputs such as chemicals, fertilizers and pesticides. Besides the superior nutritional quality of the products so grown and cultivated, the organic agriculture can be cost effective and also enhances the soil fertility content. Being devoid of any harmful chemical and synthetic influence, the organic products are beneficial with respect to the health of the consumers.
The growing awareness surrounding the advantages of organic products has resulted in an increased consumer demand. With the view of regulating the standards of organic products on India, the Food Safety and Standards (Organic Foods) Regulations, 2017 (hereinafter referred to as “Regulations”), along with the ‘Jaivik Bharat’ Logo and “Indian Organic Integrity Database Portal”was introduced vide notification dated December 29, 2017 by the Food Safety and Standards Authority of India (hereinafter referred to as the ‘Food Authority’). The portal helps consumers verify the authenticity of organic foods. The regulations provide for labelling, certification and import guidelines of organic products.
As per the Regulations the package of organic food should convey full and accurate information about the organic status. The product in addition to the Food Authority’s organic logo is required to bear the certification or quality assurance mark in accordance to National Programme for Organic Production or Participatory Guarantee System for India or any other standards as notified by the Food Authority. The organic products are required to ensure compliance to the other existing Food Safety and Standards Regulations, including packaging and labelling, food product standards and food additives, contaminants, toxins and residues rules.
With the increasing popularity in the production and consumption of organic foods, the Food Authority, with previous approval of Central Government has been working towards monitoring the legal framework regarding organic products. The new regulations would aid in distinguishing the organic products from non-organic ones to enable the consumers to make an informed and better choice.