Committee report of the Working Group on Financial Reporting and Capital Structure of IFS

International Financial Services Centres Authority (IFSCA or Authority) has issued committee report of the Working Group on Financial Reporting and Capital Structure of IFSC companies in Freely Convertible Foreign Currency (FCFC) dated November 7, 2022 with respect to identification of provisions of the Companies Act, 2013 and Rules made thereunder, requiring amendments/ modifications to enable IFSC Companies to issue securities in FCFC, and related matters.

Background – IFSCA has requested Ministry of Corporate Affairs (MCA) to provide certain carveouts under the Companies Act 2013 to prepare and present financial statements and various other reports envisaged under Companies Act 2013 in foreign currency. Accordingly, Working Group was formed by MCA and has made its recommendations with a view to facilitate capital structure of IFSC companies in foreign currency and promote ease of doing business.

Objective – To rationalize the requirement of capital structure for IFSC companies and to permit IFSC Companies to issue their share capital in FCFC and use of such currency as currency of disclosures in the books of accounts, financial statements/ other documents and for various filing,

The key recommendations of the Working Group are as under:

• A provision may be inserted in Schedule I & III of share capital related provisions of Companies Act 2013 enabling IFSC companies to use FCFC for issue of share capital.
• The thresholds/ limits in Companies Act 2013 and Rules may continue to be in INR and there is a need to have a general provision requiring conversion of FCFC amount to INR amounts for IFSC companies, for the purposes of reckoning these thresholds.
• MCA may facilitate filings by IFSC companies in FCFC through its e-portal system by way of relevant modifications in the structure of such forms. It is also recommended that USD may be taken as base currency for reporting by IFSC companies.
• The necessary legal framework be notified whereby the existing IFSC companies may be allowed to convert their share capital from INR to USD by way of a capital restructuring plan.
• The transition of IFSC companies may be kept optional. However, no existing IFSC Company may be permitted to issue any further share capital (including rights, bonus etc.) without converting their share capital into FCFC (USD).

Source category: IFSC Insurance Office