REGULATORY

1. MCA increases threshold limit for paid-up capital and turnover of small companies:-
Notification No. G.S.R 700 (E)

The definition has been revised by increasing the threshold for paid up Capital from “not
exceeding Rs. 2 crore” to “not exceeding Rs. 4 crore” and turnover from “not exceeding Rs. 20
crore” to “not exceeding Rs. 40 crore.

In view of amendment to section 2(85) regarding definition of Small Company, all small companies
having paid up capital less than Rs. 4 crores and Turnover less than Rs. 40 crores will have
following relexations effective September 15, 2022:

(a) Exemption from the preparation of the cash flow statement as part of financial statement.

(b) Advantage of preparing and filing an Abridged Annual Return (i.e. MGT-7A)

(c) Mandatory rotation of auditor not required.

(d) An Auditor of a small company is not required to report on the adequacy of the internal
financial controls and its operating effectiveness in the auditor’s report.

(e) Exemption from the requirement of holding of minimum 4 board meetings in a year. Only two
board meetings in a year with a minimum gap of ninety days between the two meetings.

(f) Annual Return of the company can be signed by the company secretary, or where there is no
company secretary, by a director of the company.

(g) Lesser penalties for small companies.

As a result, now more companies would fall under the ambit of Small companies. It is a
welcome move in improving the ease of doing business index. Revision in definition of small
companies will further benefit more companies in reducing their compliance burden.

2. Guidelines for implementation of IFSCA (FinTech Incentive) Scheme, 2022:- IFSCA

Circular F. No. 389/IFSCA/FIP/2021-22 dated 12 September, 2022

The International Financial Services Centres Authority (IFSCA), vide Gazette Notification number
IFSCA/2021-22/GN/022 dated 2nd February, 2022 notified IFSCA (FinTech Incentive) Scheme,
2022 with an objective to promote the establishment of a world class FinTech Hub, at GIFT
International Financial Services Centre (IFSC) India. Considering the importance of FinTech
entities in providing innovative solutions to promote safety, inclusiveness, efficiency, choice and
competition in the financial services market, IFSCA brought out a framework for authorization of
FinTechs vide Circular dated 27th April, 2022 (Referred to as the ‘FE Framework’). The IFSCA
vide this circular specified the detailed guidelines for implementation of the Scheme which are
stated as below:

1. Eligibility:
An FinTech Entity (FE) authorised under FE Framework, desirous of availing incentive, shall
meet the eligibility criteria and other requirements as specified under the Scheme. The Grants
contemplated under the Scheme shall be available to an FE: (1) Which is a part of the
Authority’s Regulatory or Innovative Sandbox; or (2) which is referred to the Authority under a
FinTech bridge arrangement with a Counterpart Regulator or (3) which has either participated or
is participating in any Accelerator or Cohort or Special Programme supported or recognised by
the Authority; or (4) which is referred to the Authority by an entity(ies) having Memorandum of
Understanding (MoU) or collaboration or special arrangement with it.

2. Fit and proper requirements:

The applicant and its directors/ partners/ designated partners and its key managerial personnel
have to meet the ‘fit and proper person' criteria, which includes: (i) integrity, reputation and
character, (ii) absence of convictions and restraint orders and (iii) competence, including
financial solvency. A person shall not be deemed to be a ‘fit and proper person’ if,- (i) such
person has been convicted by a court for any offence involving moral turpitude or any economic
offence, (ii) an order for winding up has been passed against such person for malfeasance, (iii)
such person has been declared insolvent and not discharged, (iv) an order, restraining,
prohibiting or debarring such person from accessing or dealing in financial products or financial
services has been passed by a competent authority, and a period of three years from the date
of the expiry of the period specified in the order has not elapsed, (v) such person has been
found to be of unsound mind by a court of competent jurisdiction and the finding is in force, (vi)
such person is financially not sound or has been categorized as a wilful defaulter, (vii) such
person has been declared a fugitive economic offender or (viii) such person suffers from any
other disqualification as may be specified by the Authority.

3. Mechanism for Implementation of the scheme:

A. Process for sanction of grant:

The applicant will submit an application form in the format specified in Annexure-1 to the
circular, along with a non-refundable application processing fee of USD 100, to IFSCA. On
receipt of duly filled application form alongwith the fees, the application will be processed in
terms of clause 7 of the Scheme.

B. Evaluation Committee:

The Evaluation Committee will be responsible for the technical evaluation, business evaluation,
market potential, etc. with respect to the applicant before making its recommendations for the
grant of incentive. The Committee may, if considered necessary, suggest additional conditions
to be complied with or documents/information etc. to be provided by the FE for processing of
application/grant of financial assistance. The Committee shall, after evaluation of the
application, recommend the amount to be sanctioned and/or stages of its disbursal to the FEs.

C. Internal Committee:

The Internal Committee will monitor post disbursement compliance, end use of grant, progress,
milestone achievements and perform such other functions as may be specified. The Internal
Committee will make recommendations to the Competent Authority with respect to eligible
expenses and disbursement of grant, subject to the satisfaction of conditions, compliances and
milestone achievements.

D. Disbursement of Grants:

The disbursement shall be done on ‘reimbursement’ basis after submission of necessary

documents, invoices, technical reports, etc. IFSCA shall normally release the disbursement
within 30 working days of submission of all the documents. The grant may be disbursed in
multiple tranches depending on the milestones achieved. The disbursement will be made only in
the bank account of the applicant.

4. Release of grants towards reimbursement of eligible expenses:

The eligible expenses of the FE shall be evaluated by the Internal Committee which after
satisfying itself that the invoices and supporting documents are complete, bonafide, appropriate
and in line with the FinTech’s needs to successfully develop/ commercialize the product, shall
recommend release of grant.

5. Corporate governance and regulatory requirements:

The FE shall develop a framework on Corporate Governance and Disclosure Requirements as

relevant to its business operations or as may be specified by IFSCA. The FE shall designate a
person as its Compliance Officer for ensuring compliance with all applicable laws including
these Guidelines and shall ensure that the information provided to stakeholders is timely,
accurate, relevant and is not misleading. The FE shall submit relevant data, utilization
certificate, business plan, financials (audited/provisional), etc. to IFSCA, as per the format and
on such frequency as may be desired by IFSCA. The FE shall ensure compliance with Know
Your Customer (KYC) and the Anti-Money Laundering/ Combating the Financing of Terrorism
(AML/CFT) norms, as applicable.

6. Additional conditions for grant:

The incentive granted to an FE under the PoC Grant, Start-up Grant or Sandbox Grant shall be
a one-time assistance given to it. In case of Accelerator Grant, following conditions shall be
complied with by the Applicant:
a. The minimum size of the cohort or accelerator shall be 10 (number of FinTechs).
b. The minimum tenure of the program shall be of 4 weeks.
c. The accelerator applicants are eligible for the following number of grant(s) in a year, per focus
area - i. One grant, for accelerator not based in IFSC. ii. Three grants, for accelerator based in
IFSC.

Preference shall be given to the FE having a tie-up or support with a Financial Institution.
Intellectual Property, if any, generated during the Sandbox tenor shall be owned by the FE. In
case of violation of any terms and condition of the grant by the FE, IFSCA will have the right to
register encumbrance over Intellectual Property generated by FE during the sandbox period.
However, no such encumbrance shall be registered in case of Listing Support Grant. FEs shall
adhere to the timelines proposed and approved while sanctioning the grant. However, if there
are genuine time overruns, IFSCA may grant extension of timeline on the basis of
recommendation made by the Internal committee. The IFSCA may, at its discretion, disclose the
details of the solution, product, etc. developed using the grants for the purposes of promotion of
IFSCA or showcasing the product.

3. Auditing Firms mandatory AQMM requirement W.E.F. 1st of APRIL 2023:- Centre For
Audit Quality Directorate The Institute of Chartered Accountants of India 13th September,
2022

W.e.f 1st of APRIL 2023, the firms auditing the following types of entities shall be mandatorily
required to undertake an evaluation of their audit quality maturity using the Audit Quality Maturity
Model Revised Version 1.0 (AQMM Rev v1.0).
a.) A listed entity
b.) Bank other than co-operative bank (except multi-state co-operative banks); or
c.) Insurance Company

The firms conducting only branch audits are not included.

What is AQMM?
Audit Quality Maturity Model (AQMM) is a tool for self-evaluation of audit firms & sole proprietors
towards technological driven mechanisms to increase the operational efficiency. Since the
business world is fast changing, it is imperative for the audit firms to adopt new technologies like
Data Analytics and Robotic processes. The recent development in technology has significantly
changed the way the audit is done these days. The focus of Audit Quality Maturity Matrix is to
ensure continuous improvement of audit firms.
Criteria on which the audit firms are evaluated are:
Section 1: Practice Management - Operations
Section 2: Human Resource Management
Section 3: Practice Management - Strategic / Functional

Earlier this model was recommendatory in nature.

How does the review under AQMM work?
The Scores and Results of review as per AQMM shall be subject to review by a Peer Reviewer
along with the normal Peer Review Cycle, which falls after 1st of April 2023.
Although it may be noted that the normal peer review cycle is of 3 Years, which means the firms
who have just got their peer review done, shall have to wait for 3 years to get their AQMM review.
However, the firm(s) may choose to get their scores reviewed by an AQMM reviewer before their
peer review cycle falls due. In case of firms whose last peer review cycle has been completed
and not a year has lapsed from the date of the last review, such firms may choose to get their
scores reviewed before their next peer review falls due by an AQMM reviewer. This option would
be beneficial for the firms that have undergone their peer review recently and will have to wait for
3 years to have their next cycle for review of their AQMM scores.
However, subsequent reviews shall necessarily be aligned to the peer review cycle and that the
period of review in no case be less than a year.
Who is the AQMM Reviewer?
AQMM Reviewer is a member of the Institute of Chartered Accountants of India and empaneled
as a peer reviewer. He is appointed by the Peer Review Board for conducting an AQMM review
any time before the peer review cycle of the firm falls due.
Hosting of the results and levels obtained by the firm on the website of ICAI.
The level of the firm arrived at, after being reviewed by the peer reviewer shall be hosted on the
website of the ICAI (www.icai.org) alongside the details of the peer review certificate.
The complete text of AQMM Rev v1.0 is available at:
https://resource.cdn.icai.org/71488caq57512.pdf

4. Exit Form submitted by NPS retiree must be considered as proposal form:- Circular
no. IRDAI/Life/CIR/MISC/188/09/2022, dated 13 September 2022

At present, NPS pensioners have to submit an exit form to Pension Fund Regulatory and
Development Authority (PFRDA) and then submit a detailed proposal form to the insurance
companies while selecting the desired annuity.

However, the regulating body for insurance observed that PFRDA's thorough exit gathers all the
information insurance companies require for the proposal form. Additionally, as permitted by the
Insurance Regulatory and Development Authority of India (IRDAI), NPS pensioners can now
submit life certificates digitally.

Considering the facts, IRDAI by virtue of a circular dated 13 September 2022 stated that the
insurance companies must accept the Exit Form provided by NPS retiree as a proposal form
when proposing an instant annuity product. Also, the current framework of Aadhar-based
authentication for life verification certification, such as Jeevan Praman, a Government of India
initiative on biometric enabled digital service for pensioners, should be adopted in order to
facilitate ease of living for all senior citizens who are receiving annuity payments.