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SEBI Presents a Detailed Framework 0n Beneficial Owners 0f Foreign Portfolio Investors.

Markets regulator Sebi on 10th April, 2018 presented a detailed framework in order to identify and verify beneficial owners of foreign portfolio investors. Beneficial owner includes the natural person, who ultimately owns or controls a foreign portfolio investor. Under the proposed framework the beneficial ownership of foreign portfolio investors having structure of company or trust should be identified on controlling ownership interest and control basis. As per Sebi beneficial ownership in case of partnership firm and unincorporated association of individuals should be identified on ownership or entitlement basis. Sebi also directed Category II and III of foreign portfolio investors to provide list of their beneficial owners in order to bring consistency. These foreign portfolio investors also need to disclose to Sebi about name and address of the beneficial owner; whether they are acting alone or together through one or more natural persons as group, with their name and address; tax residency jurisdiction; beneficial owner group's percentage shareholding capital or profit ownership in the foreign portfolio investor. According to Sebi, this list should be certified by foreign portfolio investor and such overseas investors should also certify that there are no other beneficial owners other than those referred in list. The existing foreign portfolio investors should provide the list of beneficial owner within six months. Sebi also directed that non-resident Indians and overseas citizen of India cannot be beneficial owners of foreign portfolio investors .Clarifying on KYC documentations required for high risk category III foreign portfolio investors, Sebi said that audited annual financial statement or a certificate from auditor certifying networth need to be obtained from such overseas investors. In case of new funds, companies, family offices, the audited financial statement of promoter person may be obtained. Further, since categories III Foreign Portfolio Investors are high risk investors, Sebi said that 'declaration on letter head' be provided by them. Such high risk investors have been exempted from furnishing certain supporting KYC documents depending on risk involved. Under the regime, Foreign Portfolio Investors have been divided into three categories as per their risk profile and the KYC (know your client) requirements, while other registration procedures have been made simpler for them.

The Payment of Gratuity (Amendment) Act, 2018 Comes Into Force.

The Payment of Gratuity (Amendment) Act, 2018 has received the Presidential assent on 28 March 2018 and has been notified by Ministry of Labour and Employment, Government of India on 29 March 2018. This Act ensures harmony amongst employees in the private sector and Public Sector Undertakings/Autonomous Organizations under Government who are not covered under CCS (Pension) Rules.

These employees will be entitled to receive higher amount of gratuity at par with their counterparts in Government sector. Before the implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling has been raised to Rs. 20 Lakhs.

The Government after considering the factors such as inflation and wage increase in case of employees engaged in private sector decided that the private sector employees shall also be entitled with revised gratuity. Accordingly, the Government initiated the process for amendment to Payment of Gratuity Act, 1972 to increase the maximum limit of gratuity to such amount as may be notified by the Central Government from time to time.

The amendment to the payment of gratuity law comes in the backdrop of Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks. So, it means the maternity leave of 26 weeks will be considered as continuation of service for the purpose of calculating the amount of gratuity also as per the new Act.

Under the Payment of Gratuity Act, 1972, the permanent workers were eligible to receive gratuity only after having completed five years with an organization and no contract workers were entitled to a gratuity However, for a first, with the new Gratuity Act, 2018, workers hired under fixed-term contracts will be entitled to gratuity at any time on leaving the job. As per the new rules, workers hired through a fixed-term contract will get all the statutory benefits that permanent workers in the same establishment are entitled to. This means that workers hired on contract basis will be entitled to gratuity from employers whenever their contract ends, irrespective of whether they have completed five years of continuous service.

18 April 2018
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