Tag Archives: GIFT City

corporate governance

IFSCA has laid down guidelines on corporate government which needs to be followed by every Finance Company set up in the IFSC GIFT CITY, Ahmedabad. The gist of the guidelines are given below:

Part I
Generic Guidelines

  1. Corporate governance framework and disclosure
    4.1 Every Finance Company registered with the Authority shall develop and implement a Board approved framework on Corporate Governance and Disclosure Requirements as relevant to its business operations which may be guided by the Guidelines specified in Part II of this Circular.
    4.2 Every Finance Company shall publish the framework on Corporate Governance and Disclosure Requirements as per the disclosures mandated under the Companies Act, 2013, on its website, wherever available and/or in their Annual Report.
  2. Fit and Proper Criteria
    5.1 The Finance Company shall establish effective systems and controls to ensure that all the members of its Board meet the ‘fit and proper’ criteria and are eligible to be a member of its Board. A Finance Company must carry out due diligence of its Board members, both at the time of their appointment and at reasonably regular frequency during their term on the Board. The Finance Company shall, inter-alia, ensure:
    (i) To undertake a process of due diligence to determine the suitability of the person for appointment / continuing to hold appointment as a director on the Board, based upon qualification, expertise, track record, integrity and other ‘fit and proper’ criteria as specified by the Authority from time to time. It shall obtain necessary information and declaration from the proposed / existing director (s) for this purpose as per the format given in the Information on Management , on an annual basis.
    (ii) To have a Board approved mechanism to scrutinize the results of the due diligence process, information and declarations given by the proposed/existing director (s) and accordingly decide on their on-boarding.
    (iii) To obtain a declaration on an annual basis, from each and every member of its Board giving details of the material changes, if any, in the information provided earlier. Declaration shall also be required in case there is no material change in the information provided earlier. The declaration as obtained by the Finance Company, shall be certified by the auditor of the Finance Company for onward submission to the Authority not later than 30 days from the end of the financial year.

Part II
Detailed Guidelines

  1. Board of Directors
    (i) The Board of Directors of a Finance Company shall be of an appropriate size based on the scope and nature of operations of its business.
    (ii) The Board of Directors shall possess core competencies such as accounting, finance, law, business or management experience, industry knowledge, strategic planning experience and customer based experience or knowledge.
    (iii) There shall be director’s training on a regular basis to ensure that the members of the Board are kept up to date on the relevant field.
    (iv) The Finance Company shall obtain a duly signed deed of covenants (which shall deal with, but not be limited to the points mentioned below) whereby:
    (a) Every director shall:
     acknowledge that his/her appointment as the director on the Board is subject to the applicable laws, rules, regulations and Articles of Association and that he/she shall act only within the powers as laid down by the same.
     undertake to exercise the powers vested in him/her in good faith and in the interest of the Finance Company.
     disclose by general notice to the Board, his/her directorships, memberships or any interest in any form, in other corporate bodies.
     acquire proper understanding of the business of the Finance Company and perform his/her duties with proper care, diligence and skills, based on his/her knowledge and experience.
     exercise independent judgement in discharging his/ her duties and not seek to influence any decision of the Board for any consideration other than the interest of the Finance Company, shall express his/her views and opinions at the Board meetings without any fear or favor, shall not evade responsibility in any form and shall not make improper use of information disclosed to him/her.
     assist the Board in exercising adequate oversight on the business and operations of the Finance Company, particularly for ensuring compliance with all applicable laws, rules and regulations.


 shall also commit to inform the Authority, on becoming aware of a real or potential breach of any applicable laws, rules or regulations by the Finance Company.
(b) The deed of covenant shall include that the Finance Company has apprised the directors about the relevant control systems and procedures, voting rights at Board meetings, remuneration policy, insider dealing restrictions, appointment of senior executives and their authority, deliberations of the Committees of the Board and all other
information which is reasonably required for them to carry out their functions and duties, effectively.

  1. Compliance Officer
    The Finance Company shall appoint a Compliance Officer who shall be a member of the senior management with direct reporting to the Board. The Compliance Officer shall be responsible for implementing/operationalizing the policies and procedures approved by the Board and shall monitor adherence to all applicable laws, rules and
    regulations including these Guidelines as well as all internal policies and procedures.
  2. Committees of the Board
    Depending on the nature, scale and complexity of its business operations, the Board may constitute committees which may include audit committee, nomination and remuneration committee, risk management committee, stakeholder relationship committee or any other committee as may be mandated under the Companies Act, 2013, and by the Authority from time to time.
  3. Related Party Transactions
    The Finance Company shall formulate a Board approved policy which addresses all aspects of related party transactions. The same shall be reviewed by the Board of the Finance Company from time to time.
  4. Disclosure and Transparency
    Besides ensuring disclosures under the Companies Act, 2013 and these Guidelines, the Finance Company shall ensure that the information provided to stakeholders, as the case may be, is timely, accurate, relevant and is not
    misleading.
    10.1 Information to be placed before Board of Directors
    The Finance Company shall ensure to place before the Board at least the following information:
    (i) Annual operating plans and budgets, capital budgets and related updates.
    (ii) Quarterly results of the Finance Company.

(iii) Minutes of meetings of the Board constituted Committees.
(iv) A statement on the change of directors, if any, and a declaration confirming the compliance with the ‘fit and proper’ criteria about them.
(v) Any materially adverse event which could affect the Finance Company, its property or operations.
(vi) Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property and about any other transaction which is carried out beyond the normal course of business of the Finance Company.
(vii) Conformity with Corporate Governance and Disclosure Requirements framework.
(viii) All material breaches of internal policies, norms, risk limits and any other important information of the like nature.
10.2 Disclosures to be made on the website of the Finance Company
The Finance Company shall disseminate the requisite information on its website, wherever available and/or in their Annual Report, which shall include the following:
(i) Basic information about the Finance Company and about its group;
(ii) The Annual Report of the Finance Company;
(iii) Corporate Governance report in conformity with the provisions of the Companies Act, 2013 and these Guidelines; and
(iv) Other significant information, if any;
10.3 Disclosures to be made in the Annual Financial Statements (AFS)
In addition to the disclosure required under the Companies Act, 2013, a Finance Company shall also include the following in its Annual Financial Statement:
(i) Components of owned funds and other related information;
(ii) Details on the off-balance sheet exposures, if any;
(iii) Its Asset Liability profile;
(iv) Extent of financing by parent company;
(v) Business ratios including Return on Equity (RoE) and Return on Assets (RoA);
(vi) Concentration of Non-Performing Assets (NPAs) including total exposure to top five NPAs;
(vii) Disclosures on provisioning in the Balance Sheet;
(viii) Details on the registration/license/ authorization, by whatever name called, obtained from any financial sector regulators;

(ix) Penalties or fine imposed by any statutory authority/ financial sector regulators including strictures or directions on the basis of inspection reports or other adverse findings against it.

NOTE: I am surprised to find no role for company secretaries in this corporate governance guidelines to the Finance Company situated in IFSC. The Compliance officer should have been a Company Secretary and the certificate of auditor in respect of the Fit and Proper Criteria of the Board of Directors should ideally have been by a Practicing Company Secretary.

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fee structure for DP in IFSC

IFSCA circular dated 27th July, 2021 laying down fee structure for setting up a Depository Participant in the IFSC GIFT City.

  1. The depository participants have been permitted to operate in GIFT-IFSC in terms of the applicable provisions under SEBI (International Financial Services Centres) Guidelines, 2015, as amended from time to time.
  2. The fee structure for Depository Participants in GIFT-IFSC shall be as follows:
    i. Application fee of USD 500 at the time of application for registration;
    ii. Registration fee of USD 2,500;
    iii. Fee of USD 2,500 every five years post registration.
  3. The fees shall be remitted to the following account of IFSCA:
    Account Name: International Financial Services Centres Authority
    Account Number: 970105000174
    Type of Account: USD Current Account
    SWIFT Code: ICICINBBIBU
    NOSTRO Details: BOFAUS3N, Bank of America, N.A., New York Branch, A/c no: 6550491848

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negotiated large trade facility

IFSCA has vide its circular dated 22nd June, 2021 introduced a concept of negotiated large trade (NLT) facility in the stock exchanges situated in IFSC i.e. at GIFT City, Ahmedabad. The facility is applicable only for derivatives on its stock exchanges. The salient features of this facility is given below:

a) The NLT Window shall be open throughout normal trading hours of the stock exchanges.
b) The orders placed shall be within +/- 1% of the applicable Reference price. The Reference price shall be the Volume Weighted Average Price (VWAP) of trades executed in the 30 minutes preceding the NLT order execution.
c) The minimum order size in terms of notional value, for execution of trades, shall be USD 1 million.
d) The NLT transactions shall not be considered for calculation of the daily Open, High, Low, Close (OHLC), VWAP or Daily Settlement Price (DSP) or the Final Settlement Price (FSP) of the derivatives contract for which the transaction has been executed.
e) The NLT trades on behalf of clients shall not be executed against the trading member’s own account. The Trading Members shall execute NLT trades on behalf of their clients only after obtaining explicit written consent from their respective clients.
f) The position limits applicable to the normal market shall be applicable to the NLT window.
g) The Stock Exchange shall ensure that all appropriate trading and settlement practices as well as surveillance and risk containment measures as applicable to the normal trading segment are made applicable and implemented with respect to the NLT window.
h) The Stock Exchange shall disseminate details of the NLT trades to the public on the same day, after the market hours.

Copy of the circular can be found at the IFSCA site https://ifsca.gov.in/Circular

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custodian of assets/ securities at IFSC

IFSCA circular dated 24th February, 2021 allowing custodians of assets/ securities to set up branch office at GIFT-IFSC. Salient features are as under:

Entity registered and regulated in India as a custodian

  1. Any entity registered as a custodian with the Securities and Exchange Board of India (SEBI) shall be permitted to provide custodial services in GIFT-IFSC, by establishing a branch at GIFTIFSC. The branch established shall be subject to prior approval by the Authority and shall comply with the following conditions:
    a) The entity shall adequately ring fence the operational, technological and financial aspects of the branch in GIFT-IFSC from its domestic operations.
    b) The entity shall ensure financial segregation by allocating funds to the tune of USD 700,000 towards its IFSC branch. The entity shall submit a declaration to the Authority in this regard.
    Entity registered and regulated in overseas jurisdictions
  2. Any entity regulated as a custodian in a foreign jurisdiction, shall be permitted to provide custodial services by establishing a branch at GIFT-IFSC. The branch established shall be subject to prior approval by the Authority and shall comply with the following conditions:
    a) The entity is from a Financial Action Task Force (FATF) compliant jurisdiction
    b) The entity is registered as a custodian and regulated by a securities market regulator in its home jurisdiction
    c) The entity shall adequately ring fence the operational, technological and financial aspects of the branch in GIFT-IFSC from its overseas operations
    c) The entity shall ensure financial segregation by allocating funds to the tune of USD 700,000 towards its IFSC branch. The entity shall submit a declaration to the Authority in this regard
    d) The entity should have a minimum net worth of USD 7 million
  3. Any entity regulated as a capital market intermediary in a foreign jurisdiction, shall be permitted to provide custodial services by establishing a branch at GIFT-IFSC. The branch established shall be subject to prior approval by the Authority and shall comply with the following conditions:
    a) The entity is from a Financial Action Task Force (FATF) compliant jurisdiction
    b) The entity is registered as a capital market intermediary and regulated by a securities market regulator in its home jurisdiction
    c) The entity shall adequately ring fence the operational, technological and financial aspects of the branch in GIFT-IFSC from its overseas operations.
    d) The entity shall ensure financial segregation by allocating funds to the tune of USD 3 million towards its IFSC branch. The entity shall submit a declaration to the Authority in this regard
    d) The entity should have a minimum net worth of USD 35 million
    Entity not falling under any of the above categories
  4. Any entity shall be permitted to provide custodial services by establishing a subsidiary at GIFT-IFSC. The subsidiary established shall be subject to prior approval by the Authority and comply with the following conditions:
    a) The entity is from a Financial Action Task Force (FATF) compliant jurisdiction
    b) The subsidiary should have a net worth to the tune of USD 70 million. The entity shall submit a declaration to the Authority in this regard.
    Additional requirements
  5. The entity shall obtain a certificate of recognition from the Authority prior to commencement of operations of its branch or subsidiary, whichever is applicable.
  6. All the other fees applicable to a custodian in IFSC shall be applicable to such a branch or subsidiary of the entity.
  7. An entity desirous of obtaining a certificate of recognition as a custodian shall submit an application form provided at Annexure I, along with supporting documents, to the Authority. The application shall be accompanied with an application fee of USD 1000 and a recognition fee of USD 10,000. In the event the Authority refuses to grant recognition to the applicant, the
    recognition fee shall be refunded to the applicant.
  8. The certificate of recognition granted by the Authority shall be valid for a period of three years from the date of grant of recognition or its renewal.
  9. The branch office shall have adequate mechanisms for the purposes of reviewing, monitoring, and evaluating the controls, systems, procedures and safeguards.
  10. The branch office shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Authority or the Central Government.

https://ifsca.gov.in/Viewer/Index/153

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regulatory framework for REITs and InvITs in IFSC

https://pib.gov.in/PressReleasePage.aspx?PRID=1666500

The International Financial Services Centres Authority (IFSCA), with an objective to develop the financial products and services in the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC) has prescribed the regulatory framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) in IFSC.

IFSCA has permitted global participants i.e. REITs and InvITs incorporated in FATF compliant jurisdictions to list on the stock exchanges in GIFT IFSC.Additionally, InvITs have been permitted to raise funds through private placements also.

The REITs and InvITs registered in IFSC have been permitted to invest in real estate assets and infrastructure projects respectively in IFSC, India and other foreign jurisdictions, which is in line with the framework provided in the global financial centres.

Additionally, the REITs and InvITs that are already listed in any of the permissible jurisdictions other than IFSC (currently USA, Japan, South Korea, United Kingdom excluding British Overseas Territories, France, Germany, Canada and India) or India have been permitted to list and trade on the recognised stock exchanges in IFSC, subject to compliance with their respectivelaws of home jurisdiction.

The listing of REITs and InvITs in IFSC shall be in accordance with the requirements of the stock exchanges in IFSC.

The entities in IFSC can participate and benefit from the growth of real estate and infrastructure sector in international jurisdictions.

Further details on the framework for REITs and InvITsare available on the IFSCA website at the URL:https://ifsca.gov.in/Circular

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