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SEBI tightens merger norms

The Securities and Exchange Board of India (SEBI) has tightened rules for mergers and amalgamations by Indian companies in a bid to safeguard the interests of the public shareholders.

The market regulator amended rules in an effort to make listing process more transparent and ensure wider public holding, prevent mergers of large unlisted firms with small ones.

The new rules will ensure that all classes of shareholders get an equitable treatment during mergers and acquisitions. It will also stop practice using route of merger to get an indirect listing for an unlisted company.

What new rules say?
  • Holding of public shareholders post the merger cannot be less than 25%. Similar threshold must be for institutional shareholders of the unlisted entity as well, post-merger.
  • Unlisted company can be merged with a listed company only if the latter is listed on a stock exchange having nationwide trading terminals.
  • e-voting will be mandatory in cases wherein the stake of public shareholders reduces by more than 5% in the merged entity.
  • In case of merger of an unlisted company with a listed company, the unlisted company will have to disclose all the material information in the form of an abridged prospectus, similar to initial public offering (IPO).
  • Companies must follow the pricing formula for stocks as per SEBI’s ICDR (issue of capital and disclosure requirements) norms during mergers.

About Securities and Exchange Board of India (SEBI)

  • SEBI is the statutory regulator for the securities market in India. It was established in 1988 and given statutory powers through the SEBI Act, 1992.
  • Purpose: Protect the interests of investors in securities, promote the development of securities market and to regulate the securities market.
  • SEBI has is responsive to needs of three groups, which constitute the market, issuers of securities, investors and market intermediaries.
  • It has three functions: quasi-legislative (drafts regulations in its legislative capacity), quasi-judicial (passes rulings and orders in its judicial capacity) and quasi-executive (conducts investigation and enforcement action in its executive function).

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Unemployment in India to increase marginally in 2017-18: ILO

According to recently released World Employment and Social Outlook for 2017, the number of unemployed people in India is expected to rise by 1 lakh in 2017 and another 2 lakh in 2018.

The report was released by the International Labour Organisation (ILO) with projections based on econometric modelling carried out in November 2016.  The report has clubbed India in the category of emerging nations.

Key highlights of the report
  • Number of jobless in India will increase from 17.7 million in 2016 to 18 million by 2018 even though the country’s unemployment rate is expected to go down from 3.5% to 3.4% in 2017.
  • India performed slightly well in terms of job creation in 2016, as majority of the 13.4 million new employment were created.
  • Globally, the number of jobless people will increase by 3.4 million in 2017. The global unemployment rate is expected to rise modestly from 5.7 to 5.8% in 2017 as pace of labour force growth outstrips job creation.
  • The increase in unemployment levels and rates in 2017 will be driven by deteriorating labour market conditions in emerging countries.
  • Vulnerable forms of employment, which include own account workers and contributing family workers are expected to stay above 42% of total employment.
  • About 1.4 billion people are likely to be engaged in such employment in 2017, with the number rising by 11 million per year. Sub-Saharan Africa and Southern Asia will be the most affected.
  • In developing countries, the number of workers earning less than $3.10 per day is even expected to increase by more than 5 million over the next two years.
  • Global uncertainty and the lack of decent jobs are, among some of the other factors, underpinning social unrest and migration in many parts of the world.

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CBDT inks Bilateral Advance Pricing Agreement

The Central Board of Direct Taxes (CBDT) has entered into a Bilateral Advance Pricing Agreement (BAPA) on the with Indian subsidiary of a Japanese trading company.

Earlier, CBDT also had modified an existing Bilateral APA with another Indian subsidiary of a Japanese company to include rollback provisions. Thus, total three BAPAs have been signed by CBDT with Indian subsidiaries of Japanese companies all including rollbacks. With this total number of BAPAs entered into by CBDT is now eight.

What is Advance Pricing Agreement (APA)?

The APA Scheme was introduced in the Income Tax (IT) Act, 1961 in 2012 and the provisions related to rollback were introduced in 2014. It strengthens Government’s mission of fostering a non-adversarial tax regime.  It endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Under BAPA, certainty in tax treatment is provided for the next 5 years while rollback provides dispute redressal for a maximum of four past years preceding APA years.

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