Corporate Law Updates Union Budget 2019-20

SEBI to consider raising the threshold for minimum public shareholding in the listed companies from 25% to 35%.

Finance Minister in her Budget speech for 2019 mentioned that it is the right time to consider increasing minimum public shareholding in the listed companies. She has proposed SEBI to consider raising the current threshold of 25% to 35%.

Buyback Tax Extended to Listed Companies

In order to discourage the practice of avoiding Dividend Distribution Tax (DDT) through buy back of shares by listed companies, it is proposed to provide that listed companies shall also be liable to pay additional tax at 20% in case of buy back of share, as is the case currently for unlisted companies.

Requirement of creating a Debenture Redemption Reserve will be done away with to allow NBFCs to raise funds in public issues.

NBFCs which do public placement of debt have to maintain a Debenture Redemption Reserve (DRR) and in addition, a special reserve as required by RBI, has also to be maintained. To allow NBFCs to raise funds in public issues, the requirement of creating a DRR, which is currently applicable for only public issues as private placements are exempt, will be done away with.

Penalty to be levied under Securities Contracts (Regulation) Act, 1956 for non-furnishing of information, return to SEBI.

Amendment has been made in Securities Contracts (Regulation) Act, 1956 so that penalty can also be levied under this act where the listed entity fails to furnish information, return, etc to the SEBI. Earlier the penalty was levied if the listed entity failed to report to the stock exchange only.

Various Penalties Under Securities Exchange Board of India Act, 1992.

Penalty for non-compliance by stock brokers extended to one crore rupees under SEBI Act, 1992.

Penalty to be levied under SEBI Act, 1992 for for failure to redress investors’ grievances.

Penalty to be levied under SEBI Act, 1992 for alteration, destruction, etc., of records and failure to protect the electronic database of Board. In this case Penalty shall not be less than one lakh rupees but which may extend to ten crore rupees or three times the amount of profits made out of such act, whichever is higher.

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