Friday 28 July 2023

Alternative Investment Fund (AIF)


Alternative Investment Fund:

Many investors, especially HNIs, are looking beyond equity and bonds for investment. For them, an Alternative Investment Fund (AIF) is one option worth considering. These investment options can deliver higher returns than a traditional investment. They carry higher risk - more than equity (in general). The funds target HNIs, but it is expected that they will also be available to midsize retail investors. 

The Indian AIF industry stood at Rs 6.4 lakh crore as on 31st March 2022, an incredible 7X growth in the past five years. It shows there is high interest among investors in India. 

What is AIF?

The term "alternative investment fund" refers to the collection of pooled investment funds that infuse in hedge funds, private equity, venture capital, and other investment types. An Alternative Investment Fund can be established through a company or a Limited Liability Partnership (LLP).

Types of Alternative Investment Funds (AIF)

You can better understand AIF by learning about its categories. AIF is put into three categories, as per the Securities and Exchange Board of India (SEBI). Below are those categories:

Category 1: Under this category, the AIF can invest in SMEs, start-ups, and new economically viable corporations with high growth potential. The different funds in this category include:

  • Infrastructure fund: These invest in companies engaged in infrastructural works like constructing airports, railroads, etc.
  • Venture Capital Funds (VCF): The fund invests money in promising entrepreneurial businesses that need large amounts of capital.
  • Angel funds: It invests in new-age start-ups that do not receive investment from VCF. Each angel fund investor allocates a minimum of Rs 25 lakh.
  • Social venture fund: The fund puts money into businesses that come under philanthropic activities. They aim to bring a change in society through investments.

Category 2: Funds do not use leverage for any reason other than to cover operational needs that do not fall under categories 1 and 3. Below are the funds under this category:

  • Debt funds: These funds invest in the debt securities of unlisted companies that the fund believes follow good governance models and have good growth potential.
  • Funds of funds: Under this option, the money goes into other alternative investment funds.
  • Private equity fund: Private equity funds invest in unlisted businesses that face problems raising capital by issuing debt and equity instruments.

 

Category 3: Funds that engage in many complex trading techniques, for example, investing in listed or unlisted derivatives. Below are the funds under this category:

  • Private Investment in Public Equity Fund (PEF): These funds invest in public firms by buying their shares at discounted prices. 
  • Hedge funds: They collect money from investors and corporations to invest in equity and debt markets both on the domestic and international levels. These schemes follow an aggressive investment strategy to provide a higher return to their investors.

Who can invest in an AIF?

Below are the criteria for AIF investing:

  • Indian residents, NRIs, and foreign nationals can invest in AIFs.
  • The minimum investment limit is Rs 1 crore for investors. For directors, employees, and fund managers, the minimum limit is Rs 25 lakh.
  • Most AIFs have a minimum lock-in of three years.
  • The number of investors in every scheme is restricted to 100. For angel funds, the number of investors goes up to 49.

Why invest in AIFs?The number of investors in every scheme is restricted to 100. For angel funds, the number of investors goes up to 49.

 Why invest in AIFs?
Below are some benefits of investing in AIFs:

Diversification: Diversification is key for every investor. It is even more crucial for HNIs who have large ticket sizes. AIF allows investors to diversify their portfolios. They act as a cushion in times of market volatility.
High returns: AIFs can deliver higher returns to investors compared to other options. The massive pooled amount allows fund managers to prepare flexible strategies for maximizing returns.
Low volatility: AIFs are unlinked with the stock market. Therefore, the volatility is less in these funds - if you compare it with traditional equity investment (obviously, not without the risk).
Tax benefits of AIFs-
Alternative investments offer significant tax advantages. Because of the structure of alternative funds, you get to keep more of the profit made. 

The AIF taxation will depend on and vary according to the category. For example, for categories 1 & 2, there is a pass-through status. It means the income (or loss) generated by the fund will be taxed at the investor's hand and not by the fund business. In short, under these two categories, you need to pay capital gains tax on profits made. For Category 3, different rates are applicable depending on profit type.

Conclusion
AIFs are an interesting option for investors looking for high returns with a certain level of risk. However, before investing in AIFs, investors must carefully understand the fund and know the associated risk. Small retail investors can continue to learn about this option as it is expected that AIFs will open to retail investors in the coming years.

Wednesday 5 July 2023

Fast Track Merger

WHAT IS A FAST TRACK MERGER?

Merger/Amalgamation is a restructuring tool which helps Companies in expansion & diversification of their business and to achieve their underlying objectives.

Merger means an arrangement whereby one or more existing companies merge their identity into another to form a new & different identity.

Section 233 of Companies Act, 2013 has introduced a new concept of fast track merger for Small Companies and merger of Holding companies with its wholly owned Subsidiary Companies. This is the first significant change to merger and amalgamations regime over the last six decades which has sub-served the need of simplification of procedure.

Fast Track Merger is a new concept which is introduced in India under the Companies Act, 2013. Moreover, fast Track Merger is a unique concept as it does not require approval from National Company Law Tribunal (NCLT) for the merger. Hence, approval by jurisdictional Regional Directors based on the reports by the Registrar of Companies (ROC) and Official Liquidator is sufficient.

PROCEDURE OF FAST TRACK MERGER:
SR. NO PROCEDURE
#1  Applicability-
*Merger between two or more Small Companies
*Merger between Holding and Wholly owned Subsidiary(ies)
*Two or more start-up companies
*one or more start-up company with one or more small company
#2  Issue Notice and Agenda of Board Meeting by Transferor Company(ies) and Transferee Company (Applicant Companies) in compliance with the provisions of Companies Act, 2013 & SS-1 wherein the following matters will be placed for consideration and approval-
Draft Scheme of merger
Draft Form CAA-9 i.e. Notice inviting comments or objections from respective ROC, OL and any person whose interest is likely to be affected(i.e. respective Income Tax Authorities) and appointing any particular person as authorised representative to sign such Form CAA-9 and by whom such comments or objections will be received within 30 days from its submission
Statement of assets and liabilities, Auditor’s Report on Statement of assets and liabilities and authorising Managing Director and 2 (two) other directors of the Company to sign such Statement of assets and liabilities
Draft Form CAA-10 i.e. Declaration of solvency and authorising Managing Director and 2 (two) other directors of the Company to sign such Form CAA-10 and file the same with respective RoC electronically in Form GNL-1
Draft Notice for Member’s Meeting and Creditor’s Meeting and authorising any person to send notice to Member’s and Creditor’s with or without modification subject to any comments or objections received from proposed scheme
Authorising any director(s) to do all such acts, deeds, things etc. in connection with the proposed merger

Note:
Form CAA-9 shall be accompanied with Scheme of merger
Form CAA-10 shall be accompanied with Copy of board resolution, Statement of assets and liabilities and Auditor’s Report on Statement of assets and liabilities
#3  Convene Board meeting wherein aforesaid proposal(s) will be considered and approved by Directors accordingly.
#4  File Form CAA-9 along with annexure(s) with concerned ROC electronically in Form GNL-1.
#5  File Form CAA-9 along with annexure(s) with concerned OL & Income tax Authorities in physical copy.
#6  File Form GNL-1 with respective RoC along with the following attachments-
Form CAA-10;
Copy of board resolution;
Statement of assets and liabilities and
Auditor’s Report on Statement of assets and liabilities
#7  The Person designated by respective Applicant Companies in Form CAA-9 may or may not receive any comments or objections on the draft scheme within 30 days from the date of filing of same the office of ROC, OL & Income tax Authorities.
#8  Where the Person designated by respective Applicant Companies receive any comments or objections on the draft scheme, such comments or objections shall be properly taken care of to the satisfaction of respective person and shall also be placed in the Members Meetings.
Note:
The Company may convene board meeting wherein comments or objections received on the draft scheme will be placed and approval will be taken-
To taken care of comments or objections received to the satisfaction of respective person; &
To make necessary modification in notice of Members Meeting
#9  Issue of Notice for Member’s Meeting and Creditor’s Meeting along with Form CAA-10, Copy of draft scheme and other documents refried to in Section 230(3) of the Act.
#10  Convene Member’s Meeting and Creditor’s Meeting and pass the necessary resolution with requisite majoring in number and value for the approval of Scheme of Merger thereat
Note:
For Member’s Meeting- Approval of members or class of members holding atleast ninety percent of the total number of shares shall be required
For Creditors’ Meeting- Approval of majority of Creditors or class of Creditors holding atleast nine tenths in value of creditors or class of Creditors shall be required
#11  File Form MGT-14 with the respective RoC within 30 days thereof
# 12  Within 7 days of the conclusion of Member’s Meeting and Creditor’s Meeting, the Transferee Company shall file-
copy of the scheme, copy of Notice sent under Section 233(1)(a) along with result of voting with respective RD in Form No. CAA.11 through hand delivery or by registered post or speed post;
copy of the scheme, copy of Notice sent under Section 233(1)(a), result of voting and Form No. CAA.11 with respective OLfor their objection and suggestionthrough hand delivery or by registered post or speed post; &
copy of the scheme, copy of Notice sent under Section 233(1)(a), result of voting and Form No. CAA.11 with respective RoCfor their objection and suggestion in Form GNL-1.
copy of the scheme, copy of Notice sent under Section 233(1)(a), result of voting and Form No. CAA.11 with Income Tax departmentfor their objection and suggestionthrough hand delivery or by registered post or speed post; &
Note:
RD & ROC shall send their objection and suggestion within 30 days of the filing of necessary documents with their good office.
#13  Where no objection and suggestion are received from respective OL & ROC, respective RD shall pass order the merger or amalgamation in Form CRR-12
#14  Where objection and suggestion on scheme are received from respective OL & ROC, satisfy their objection and suggestion; follow up in their office for sending their report with respective RD office.
#15  After resolving of all objection and suggestion raised by respective OL & ROC, respective RD shall pass order in Form CRR-12 affirming themerger or amalgamation.
#16  File Form INC-28 with respective ROC along with-
copy of RD order affirming themerger or amalgamation; and
sheet containing revised authorised share capital of Transferee Company.
Notes
It has been assumed that the approval from SEBI, STXs, IRDA & CCI shall not be required.
The above procedure may be changed based on the requirements of each regulatory authority.

Thursday 26 September 2019

Fast Track Merger (FTM)



Fast Track Merger provides a more straightforward procedure for the amalgamation of certain classes of companies which includes small companies, holding and subsidiary companies. Hence, under this concept, a merger or amalgamation can be entered into between:
i. Two or more small companies, or
ii. A holding company and its wholly-owned subsidiary (WOS) company, or
iii. Such other class or classes of companies as may be prescribed. (No such other Companies are prescribed yet).

It is unique concept because NCLT approval is not required in this Merger, only Regional Directors, Registrar of Companies and Official Liquidator are the authorities whose approval is required.

Under the FTM process, the Central government has the power to approve such schemes and there is no need to approach the NCLT. The whole process can take 3-5 months’ time for completion. The Central government has delegated the power to approve of the merger to the Regional Director.

In case the Regional Director feels that the scheme is not in public interest or in the interest of the creditors, they can file an application to the NCLT stating that the scheme should be considered as per the procedure of a normal merger.

Steps involved in the Fast Track Merger
1. Check Articles of Association: Firstly, both the transferor and transferee company need to check if      their AOA permits for the merger or not.
2. Prepare a draft scheme
3. Conduct a Board Meeting.
4.  Issue notice of the proposed scheme inviting objections/suggestions, from jurisdictional Registrar       of Companies (ROC) and to the persons affected by the scheme within 30 days.
5. Each company needs to file their respective Declaration of Solvency Statement (Form CAA-10)           with the ROC.
6.  The notice for the meeting must be sent before 21 clear days to the members. It must state the copy of proposed scheme, a statement disclosing details of the merger, copy of the latest audited financial statement, valuation report.
7    7. Obtain written authorization from creditors by conducting a Creditors Meeting.
      8. Obtain consent from the members at a general meeting who holds at least 90% of the total number      of shares of the company.
9   9.  Filing of the draft scheme with Regional Director further provide the scheme to ROC in form              GNL-1 and official liquidator through speed post or registered post.
     10.   Approval of scheme by Regional Director. The order of the Regional Director must be filed in Form INC-28 with the ROC within 30 days.

The Companies Act, 2013 by introducing fast track merger has simplified the procedure for mergers and amalgamation of a particular class of companies as stated above. Hence, fast track merger is a welcome move. Earlier, the Companies Act, 1956 does not offer a simple process for such alliances. Also, all such restructuring have to follow a time-consuming and challenging process as any other mergers or amalgamations. Hence, there was a great need to shorten and fast track the procedure for mergers of such companies where interests of third parties are not involved.


Wednesday 13 February 2019

FIDUCIARY DUTIES OF DIRECTORS

A Director owes fiduciary duties towards the company, and not to individual shareholders, creditors generally consists of the following:
·   Good faith and bona fide acts: Directors must act honestly,        without negligence and in good faith in the bona fide best              interests of the company.
·  Proper use of Powers: Directors must not exercise the  powers  conferred upon them for purposes different from those for which they were conferred. Notwithstanding that Directors have acted in honest belief for what they believe to be for the benefit of the company, they may nevertheless be liable for improper use of their powers, especially for purposes collateral to what they have been conferred for.
· Unfettered Discretion: Directors must not fetter their discretion for any reason whatsoever. They cannot validly contract or act pursuant to any arrangement either with one another or with third parties as to how they shall vote at board meetings or otherwise conduct themselves in the future.
· Lack of Conflicting Interests
Directors have to make continuous disclosures of their interests in the various transactions of, and with, the company. A Director cannot enter into a contract with the company without its informed consent, even if there is no unfair advantage to be gained, or abuse of position, by such Director.
Directors cannot use, without the consent of the company, the company’s properties, opportunities or information for their own profit. In order to establish a breach of this duty, it must be shown: (1) that what the Directors did was so related to the affairs of the company that it can be said to have been done in the course of their management and in utilization of their opportunities and special knowledge as Directors, and (2) that what they did resulted in a profit to themselves. The English Courts, adopting a strict approach, have held directors to be in breach of this fiduciary duty, even if the opportunity was not one which would have been of use to the company.
Directors have a duty not to compete with the company, which is in many respects a corollary of the immediately preceding rule.


Wednesday 31 May 2017

HOW TO GET OUT OF CORPORATE SLAVERY

For becoming successful, the most important thing is to see what a person does in his/her spare time. One can waste time in watching movies, sleeping or can do any of the following activities which relate to his passion. One can express himself/herself and utilise his time and come out of slavery.
·      Start writing books
·      Start finding out/identifying your passion
·      Designing dresses, jewellery
·      Drawing painting
·      Teach mehndi design, cookery, bakery etc.
·      Developing variety of hair styles, makeup etc.
·      Finding out some outsourced work from companies as content writer
·      Helping start up in writing marketing plan
·      Writing business plan for new ventures
·      Helping companies in drafting legal work
·      Create website designs for companies
·      Start teaching new recipes for new food
·      Start writing books for children, adults
·      Start doing SEO/digital marketing for companies
·      Design brochure/pamphlets etc. for companies
·      Helping small companies with their HR work, accounting, legal work
·      Design logo etc. for new companies
·      Teach part-time with college or education companies
·      Take part time assignments from education companies
·      Software development
·      Procurement idea creator
·      Advertising ideas
·      Handle twitter, LinkedIn, Facebook accounts of companies
·      Become coach to students/professional in different fields
·      Interior decoration, etc.
Many activities are available. Think seriously that you don’t want to be corporate slave whole life and want to live life on your own terms. Be financial independent and live your life to the fullest.
"ONLY YOU CAN CHANGE YOUR LIFE, NO ONE ELSE CAN. SO DREAM BIG, EXECUTE STRATEGICALLY AND BECOME FINANACIAL INDEPENENT." 

Tuesday 18 April 2017

LATERAL THINKING & VERTICAL THINKING

When trying to solve a problem, it is very important to consider alternate solutions instead of moving forward with the first idea. Picking one idea and proceeding until a solution is reached is called vertical thinking and this is the type of thinking that is most often used by 99% people worldwide.
When thinking laterally, you continue to generate ideas even after a promising idea has been produced. A vertical thinker must always be moving usefully in some direction and must be correct at every step.
1.     A lateral thinker can wander in different directions to find creative solutions and often may be wrong in order to be right in the end. Lateral thinkers welcome and explore seemingly irrelevant facts or ideas, whereas vertical thinkers shut out all irrelevant data.
2.     Vertical thinking is analytical, lateral thinking is provocative.
3.     With vertical thinking one has to be correct at every step, with lateral thinking one does not have to be. 
4.     Vertical thinking is sequential, lateral thinking can make jumps. 
5.     With vertical thinking one uses the negative in order to block of certainty. With lateral thinking there is no negative.
6.     With vertical thinking on concentrates and excludes what is irrelevant, with lateral thinking one welcomes chance intrusions. 
7.     With vertical thinking categories, classifications and labels are fixed, with lateral thinking they are not. 
8.     Vertical thinking follows the most likely path; lateral thinking explores the least likely.
9.     Vertical thinking is a finite process; lateral thinking is a probabilistic one.

Friday 10 June 2016

LEGAL VALIDITY OF E-MAIL, SMS & MMS

The various categories of electronic evidence such as website data, social network communication, e-mail, SMS/MMS and computer generated documents poses unique problem and challenges for proper authentication and subject to a different set of views.
The information technology has brought into existence a new kind of document called the electronic record. This document can preserved in same quality and state for a long period of time through encryption processes reducing the chance of tampering of evidence. This document can be in various forms like a simple e-mail or short message or multimedia message or other electronic forms.
The Indian Evidence Act, 1872 and Information Technology Act, 2000 grants legal recognition to electronic records and evidence submitted in form of electronic records. According to Information Technology Act, 2000 “electronic record” means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche. The Act recognizes electronic record in a wide sense thereby including electronic data in any form such as videos or voice messages. The Information technology has made it easy to communicate and transmit data in various forms from a simple personal computer or a mobile phone or other kinds of devices. The Information Technology Amendment Act, 2008 has recognized various forms of communication devices and defines a “communication device”.

“communication device” means cell phones, personal digital assistance or combination of both or any other device used to communicate, send or transmit any text, video, audio or image.

The Indian IT Act 2000 lays down a blanket permission for records not to be denied their legal effect if they are in electronic form as long as they are accessible for future reference.

The evidentiary value of an electronic record totally depends upon its quality. The Indian Evidence Act, 1872 has widely dealt with the evidentiary value of the electronic records. According to section 3 of the Act, “evidence” means and includes all documents including electronic records produced for the inspection of the court and such documents are called documentary evidence. Thus the section clarifies that documentary evidence can be in the form of electronic record and stands at par with conventional form of documents.

The evidentiary value of electronic records is widely discussed under section 65A and 65B of the Evidence Act, 1872. The sections provide that if the four conditions listed are satisfied any information contained in an electronic record which is printed on paper, stored, recorded or copied in an optical or magnetic media, produced by a computer is deemed to be a document and becomes admissible in proceedings without further proof or production of the original, as evidence of any contacts of the original or any facts stated therein, which direct evidence would be admissible.

The four conditions referred to above are:

(1)    The computer output containing such information should have been produced by the computer during the period when the computer was used regularly to store or process information for the purpose of any activities regularly carried on during that period by the person having lawful control over the use of the computer.
(2)    During such period, information of the kind contained in the electronic record was regularly fed into the computer in the ordinary course of such activities.
(3)    Throughout the material part of such period, the computer must have been operating properly. In case the computer was not properly operating during such period, it must be shown that this did not affect the electronic record or the accuracy of the contents.
(4)    The information contained in the electronic record should be such as reproduces or is derived from such information fed into the computer in the ordinary course of such activities.

It is further provided that where in any proceedings, evidence of an electronic record is to be given, a certificate containing the particulars prescribed by 65B of the Act, and signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities would be sufficient evidence of the matters stated in the certificate.

The apex court in State Vs. Navjot Sandhu while examining the provisions of newly added  section 65B, held that in a given case, it may be that the certificate containing the details is not filed, but that does not mean that secondary evidence cannot be given. It was held by the court that the law permits such evidence to be given in the circumstances mentioned in the relevant provisions, namely, sections 63 and 65 of the Indian Evidence Act 1872.

Section 65 enables secondary evidence of the contents of a document to be adduced if the original is of such a nature as not to be easily movable. Hence, printouts taken from the computers/servers by mechanical process and certified by a responsible official of the service-providing company can be led in evidence through a witness who can identify the signatures of the certifying officer or otherwise speak of the facts based on his personal knowledge. Irrespective of the compliance with the requirements of section 65-B, which is a provision dealing with admissibility of electronic records, there is no bar to adducing secondary evidence under the other provisions of the Indian Evidence Act 1872, namely, sections 63 and 65.

The position of electronic documents in the form of SMS, MMS and E-mail in India is well demonstrated under the law and the interpretation provided in various cases. In State of Delhi v. Mohd. Afzal & Others, it was held that electronic records are admissible as evidence. If someone challenges the accuracy of a computer evidence or electronic record on the grounds of misuse of system or operating failure or interpolation, then the person challenging it must prove the same beyond reasonable doubt. The court observed that mere theoretical and general apprehensions cannot make clear evidence defective and inadmissible. This case has well demonstrated the admissibility of electronic evidence in various forms in Indian courts.


The basic principles of equivalence and legal validity of both electronic signatures and hand written signatures and of equivalence between paper document and electronic document has gained universal acceptance. Despite technical measures, there is still probability of electronic records being tampered with and complex scientific methods are being devised to determine the probability of such tampering. For admissibility of electronic records, specific criteria have been made in the Indian Evidence Act to satisfy the prime condition of authenticity or reliability which may be strengthened by means of new techniques of security being introduced by advancing technologies.