Financial Laws

1.
Real Estate
Regulatory
Act,2016
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○Registration with Regulatory Authority

◦Before booking , selling, or offering apartment
RERA,2016 for sale
◦Area- 500 Meters or 8 Apartments

○70 % of realization from allottees in a separate

Account.
◦Withdrawal can only be made after it is certified
by engineer, an architects, etc.
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○ Refund of amount in case of delay in handing over

the possession
RERA,2016 ◦ Return the amount received from allottee with
interest and principal amount
◦ This relief will be available prejudice to any
other available remedy

○ Restriction on Transfer and Assignment

◦ Without obtaining prior consent from two-
thirds of the allottee
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○ Bank cannot sanction loan without verification

◦ Mandatory for the developer to be RERA
RERA, 2016 registered
◦ Documents to be verified:
◦ RERA Certificate containing the
concerned project’s RERA registration
number.
◦ RERA verified Account Details of the
concerned project, duly signed and
stamped by the Developer on the
developer’s letterhead.
 2.
FEMA in
Foreign
Exchange
Market
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○ RBI circular RBI/2011-12/262 dated November 17,

FEMA in 2011
Foreign ○ A person resident in India may enter into currency
Exchange futures or currency options on a stock exchange
recognized under section 4 of the Securities
Market Contract (Regulation) Act, 1956
○ It is clarified that any person resident in India
collecting and effecting / remitting such payments
directly /indirectly outside India would make
himself/ herself liable to be proceeded against with
for contravention of FEMA, 1999 besides being
liable for violation of regulations relating to Know
Your Customer (KYC) norms / Anti Money
Laundering (AML) standards.
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FEMA in ○ One can trade within the brackets of USD-INR, YEN-

INR ,GBP- INR ,EUR-INR pairs
Foreign
Exchange
○ Such trades do not happen on a central exchange, they
Market happen Over the counter (OTC)

○ Reasons for such provisions:

◦ Creating Depth in the Market
◦ Increasing Market Volumes by Merchant
Transaction and Inter-Bank Transaction
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MERCHANT TRANSACTIONS INTER-BANK TRANSACTIONS

PRODUCTS
SPOT FORWARD CROSS
PRODUCT PRODUCT CURRENCY
QUOTATION

CURRENCY CURRENCY FOREX

OPTION OPTION SWAPS
PRODUCT PRODUCT
PROPREITORY
SWAPS
3. IRDA
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○ Why Insurance Companies are treated as Financial

IRDA Intermediaries?
◦ The first reason is that they receive funds from their
clients for further investment.
◦ Another reason is that these institutions place
invested assets of its clients in a series of
investments that will make them some money.

○ Power, Duties and Functions of IRDA are prescribed

under Section 14 of IRDA Act, 1999
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○ Reporting Requirements:
IRDA ◦ Financial statements on an annual basis duly
accompanied by the Auditors’ opinion
◦ Reports of valuation of assets,
◦ Valuation of liabilities
◦ Solvency margin
◦ Reinsurance plans on an annual basis
◦ Investment policy,
◦ Quarterly and annual returns on investments
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○ Solvency of Insurers:
IRDA ○ It has been made mandatory to the insurers to submit
solvency report on quarterly basis.
○ Even though the insurers are required to maintain a
minimum solvency ratio of 150% at all times, the
actual solvency margin maintained by insurers are
well above the required solvency margin leading to the
solvency margin ratio significantly higher than 150%
on average.
○ Higher requirements are placed for risky lines of
business compared to others posing less risk to the
insurers.
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○ Asset-Liability Management:
○ Insurer must provide the year wise projected cash
IRDA flows, in respect of both assets and liabilities.
○ Insurers must maintain mismatching reserves in case
of any mismatch between assets and liabilities as a
part of the global reserves.
○ In order to ensure a minimum level of security of
investments in line with Insurance Act Provisions, the
regulations prescribe certain percentages of the funds
to be invested in government securities and in
approved securities.
○ IRDA also lays down the certain limits for the
shareholding pattern for the group company, promoter
company etc.
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○ Reinsurance:
○ In order to minimize the counterparty risk, the re-insurers
IRDA with whom business is placed must have the minimum
prescribed rating by an independent credit rating agency
as specified in the regulations.

○ It also specifies the minimum capital Requirements

○ It has also prescribed that the insurance companies can

capitalize their operations only through ordinary shares
which have a single face value.
4. DEBENTURES
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○ Debentures:
○ A debenture is like a certificate of loan or a loan bond
DEBENTURES evidencing the fact that the company is liable to pay a
specified amount with interest
○ Section 2 (30) of companies Act, 2013 defines "debenture"
includes debenture stock, bonds or any other instrument of
a company evidencing a debt, whether constituting a charge
on the assets of the company or not.
○ The power to issue debentures can be exercised on behalf of
the Company as a meeting of the Board under the
provisions of Section 179 (3) of the Companies Act, 2013.
○ Further Section 71 of the Companies Act, 2013 deals with
the provisions relating to the issuance of debentures along
with the penalties for non compliance
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○ Further Rule 18 of the Companies (Share Capital and

DEBENTURES Debentures) Rules, 2014 ('2014 Rules') which prescribes
certain conditions to be fulfilled by a company in order
to issue secured debentures provides that:
○ An issue of secured debentures may be made, provided
the date of its redemption shall not exceed ten years
from the date of issue. Provided that a company engaged
in the setting up of infrastructure projects may issue
secured debentures for a period exceeding ten years but
not exceeding thirty years;
○ Such an issue of debentures shall be secured by the
creation of a charge, on the properties or assets of the
company, having a value which is sufficient for the due
repayment of the amount of debentures and interest
thereon;
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○ The company shall appoint a debenture trustee before the

issue of prospectus or letter of offer for subscription of its
debentures and not later than sixty days after the allotment
DEBENTURES of the debentures, execute a debenture trust deed to protect
the interest of the debenture holders; and
○ The security for the debentures by way of a charge or
mortgage shall be created in favour of the debenture trustee
on-
◦ any specific movable property of the company (not
being in the nature of pledge); or
◦ any specific immovable property wherever situate, or
any interest therein.
○ Procedure to issue Debentures under Section 56, 72, of the
Companies Act, 2013 read with Rule 18 and 19 of the
Companies (Share Capital and Debentures) Rules, 2014
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You can find me at @lovish.sardana1618@nmims.edu.in