IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders.
MEANING OF IFSC COMPANIES:
IFSC stands for “INTERNATIONAL FINANCIAL SERVICES CENTRES”. An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders. Some examples of Global Financial Centres are London, New York and Singapore. However, Shanghai and Dubai, are emerging IFSCs around the world and are aspiring to play a global role in the years to come. An expert panel headed by former World Bank economist Percy Mistry submitted a report on making Mumbai an international financial centre in 2007. However, the global financial crisis that unfolded in 2008 made countries including India cautious about rapidly opening up their financial sectors.
IFSC VIS-À-VIS SEBI
Securities and Exchange Board of India (SEBI) has approved the IFSC guidelines 2015 allowing Indian as well as foreign stock exchanges, clearing corporations and depositories to set up subsidiaries to undertake their business in IFSC. Under the IFSC guidelines that will regulate financial services relating to securities market in an International Financial Services Centre, SEBI relaxed the shareholding and net worth requirement norms for intermediaries setting up their subsidiaries.
Gujarat International Finance Tec-City (GIFT) would be the country’s first IFSC and the BSE and NSE have already signed MoUs for setting up international exchanges. The move is expected to capture an estimated Rs 1,334 crore per day or Rs 2 lakh crore per year worth of trading in rupee derivatives that currently goes to locations outside India.
The guidelines also permit issuance of depository receipts and debt securities in IFSC by domestic as well as foreign companies and also provide for listing and trading of equity shares issued by companies incorporated outside India. Non Resident Indian, foreign investors, institutional investors, and Resident Indian eligible under FEMA may participate in IFSC. Even mutual funds and Alternative Investment Funds set up in IFSC can invest in securities listed in IFSC, securities issued by companies incorporated in IFSC and securities issued by foreign issuers.
SEBI also strengthened the continuous disclosure norms. While all listed companies will now be required to disclose information related to all events to the stock exchanges within 24 hours, the board outcome will have to be disclosed within 30 minutes of the closure of board meeting.
SEBI also approved regulations for issuance and listing of debt securities by Municipality. The regulations state that the issuer shall only issue revenue bonds and the issuer’s contribution for each project shall not be less than 20 per cent of the project cost. While credit rating has been made mandatory, the minimum tenure has been fixed at 3 years.
WHAT DOES AN IFSC REQUIRE?
IFSCs such as Dubai International Financial Centre and Shanghai International Financial Centre, which are located within SEZs, have six key building blocks:
—Rational legal regulatory framework
—Sustainable local economy
—Stable political environment
—Developed infrastructure
—Strategic location
—Good quality of life
RELAXATIONS GIVEN BY GOVERNMENT (MINISTRY OF CORPORATE AFFAIRS) TO IFSC COMPANIES:
Government allows 39 modifications or exemptions for private firms licensed to set up businesses in international financial services centres from clauses in Companies Act. Some of which are as:
⇒ A specified IFSC private company will only be limited by shares.
⇒ All such companies have to suffix International Financial Services Centres or IFSC in their names.
⇒ Companies also have relaxation for filing their documents under the exemptions—the time given for submitting verification for registered addresses to the registrar of companies (ROC) for IFSC companies will be sixty days instead of thirty, filing copies of every resolution and agreement with the ROC can be done in sixty days.
⇒ For IFSC companies, an officer or any other person authorized by the company can authenticate documents and other contracts (under the Companies Act, for all other companies, only an officer of the company can do so).
⇒ IFSC companies can make private placement offers and will not be restricted by earlier offers which haven’t been completed or withdrawn.
⇒ An extract of the annual return of the company will not have to be included in the board’s report. IFSC companies will not have to comply with the secretarial standards prescribed by the Institute of Company Secretaries of India.
⇒IFSC companies only need internal audit if their articles of association provide for the same.
⇒ IFSC firms can make investments through more than two investment companies.
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