MCA wants accounts of CG Power and Industrial Solutions to be restated

The Ministry of Corporate Affairs (MCA) wants fraud-hit CG Power and Industrial Solutions to restate accounts of the past five fiscal years reflecting the actual financial position of the company, including receivables from companies linked to erstwhile promoter Gautam Thapar, sources said.
The new management of the company, soon after the fraud came to light, had on August 30 expressed desire to restate financial accounts for last five years and it will now expedite the process.

Sources said MCA has filed a petition before the Mumbai-bench of the National Company Law Tribunal (NCLT) seeking permission to re-open the books of account and recast the financial statements of CG Power and its subsidiary companies for the past five financial years beginning 2014-15.
It wants chartered accountants to re-open the books of account and recast the financial statements of the company and its subsidiary firms.
MCA had previously asked its Serious Fraud Investigation Office (SFIO) to probe the affairs of the company along with 15 other firms, including two subsidiaries CG Power Solutions Ltd and CG International BV.
CG Power, which has ousted its chairman over allegations of financial irregularities, had plans to re-examine its accounts over the past fiscal years to ascertain whether similar transactions may have escaped detection after an internal probe into current performance revealed nine such deals.
A recent investigation by the company revealed that the nine wrongful transactions caused the company to lose around Rs 3,300 crore.
It has asked companies linked to promoter Gautam Thapar, among others, to return the money and has initiated the second phase of the probe to fix responsibility for the alleged fraudulent transactions.
CG Power had in August stated that an investigation instituted by its board had found major governance and financial lapses, including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors." Also, some liabilities and advances to related and unrelated parties had been understated.
Following this, the firm has issued recovery notices to seven entities demanding repayment of Rs 1,314.78 crore owed by them to the company. Besides, its subsidiaries have sent 23 notices to recover Rs 2,095.64 crore, they said.
CG Power had previously in regulatory filings stated that a total of Rs 3,018.62 crore was receivable from "various promoter affiliate companies and connected parties".
This includes Rs 1,001.38 crore from Thapar's Avantha Holdings Ltd. Another Rs 287.75 crore was due from Blue Garden Estate Pvt Ltd and Rs 175 crore from Acton Global Pvt Ltd -- two firms which were classified as "promoter connected party".
Among parties related to the promoter group, Rs 552.33 crore was due from Ballarpur Graphics Paper Product Ltd, Rs 348.71 crore from Avantha International Assets BV and Rs 378.76 crore from Solaris Industrial Chemicals Ltd.
Blue Garden Estate Pvt Ltd also had Rs 320 crore of pending loan/advance. The board of CG Power had in August sacked Thapar as chairman and thereafter forced CEO K N Neelkant to resign as well.

Now, start-ups can issue shares with differential voting rights

Start-ups and technology companies will be able to issue shares with differential voting rights (DVRs) with the government amending the Companies Act provisions to help entrepreneurs retain control even as they raise equity capital from global investors.
The ministry of corporate affairs (MCA) has raised the existing cap of 26 per cent of the total post issue paid up equity share capital to 74 per cent of total voting power in respect of shares with DVRs of a company.
Such shares have rights disproportionate to their economic ownership. In June, the Securities and Exchange Board of India (Sebi) had issued a framework for filing shares with DVRs.
“Indian promoters have had to cede control of companies, which have prospects of becoming Unicorns, due to the requirements of raising capital through issue of equity to foreign investors,” an MCA statement said.
Another key change brought about is the removal of the requirement of distributable profits for three years for a company to be eligible to issue shares with DVRs. “These amendments are certainly a welcome step. This will surely help promoters, especially start- ups, in raising capital without diluting their control over the company,” said Ankit Singhi, partner, Corporate Professionals.
The MCA statement said the initiative was in response to requests from innovative tech companies and start-ups and “to strengthen the hands of Indian companies and their promoters who have lately been identified by deep pocketed investors worldwide for acquisition of controlling stake in them to gain access to the cutting edge innovation and technology development being undertaken by them.”

The government has also upped the time period within which Employee Stock Options can be issued by start-ups to promoters or directors holding over 10 per cent of equity shares, from 5 years to 10 years from the date of their incorporation.
Start-ups recognised by the department for promotion of industry and internal trade (DPIIT) will be able to avail of this provision. These steps are one of many taken by the government to woo start-ups. Recently, the income tax department has eased assessment norms for start-ups.
graph

MCA begins inspection of Deepak Kochhar's NuPower Renewables

The Ministry of Corporate Affairs (MCA) started an inspection on Friday into the filings made by Nupower Renewables, a company owned by Deepak Kochhar, since its inception in 2008, for violations of the Companies Act, if any.
The MCA’s Mumbai office has sought details of investments made into the company, including by Videocon, and sought valuation reports based on which it received investments from overseas.
The inspection of documents by MCA started after the Central Bureau of Investigation (CBI) started a preliminary enquiry into the company getting a Rs 640-million loan received from Videocon Industries after ICICI Bank extended a Rs 32-billion loan to the latter in 2012. The probe will cover all the entities related to NuPower and its promoter, including Pacific Capital Services, Pinnacle Trust and Supreme Energy. Deepak Kochhar is married to ICICI Bank MD and CEO Chanda Kochhar.
The investments by the Kanodia family of Datamatics into Nupower’s compulsorily cumulative convertible preference shares (CCPS) via a Mauritius-based entity is also under the scanner. The Kanodias invested Rs 3.25 billion in NuPower in 2011 and 2012, and exited two years later without making any profit or loss.
The Kanodias sold their shares in NuPower to Mauritius-based DH Renewables, which in turn, is owned by Accion Diversified Strategies Fund of Cayman Island. The ultimate investors of DH Renewables and Accion are not known to regulatory authorities. DH Renewables converted the CCPS into NuPower’s equity shares, based on a valuation done by Price Waterhouse in December 2016.
ALSO READ: ICICI board unaware of Kanodias' investment in Deepak Kochhar's NuPower
In a statement on March 28, the ICICI Bank board had given a clean chit to its MD. The board was, however, not informed about the investment made by Kanodia-owned Firstland Holdings of Mauritius, as it was not violating any conflict of interest guideline, a source close to the development said.
The NuPower matter is currently under investigation by multiple regulators. The market regulator, the Securities and Exchange Board of India (Sebi), is looking into possible lapses of disclosure and corporate governance norms by ICICI Bank. The regulator has sought documents from the bank on decisions of its board of directors on the loan.
The income-tax department has also written to the governments of Mauritius and Cayman Island, seeking details on the investors of NuPower. The Enforcement Directorate (ED) has started an enquiry into the loan sanctioned to the Videocon group and others by ICICI Bank, which was part of a consortium of lenders.
The ED has written to the Sebi, seeking information on the Videocon group. It also asked for details of the investigation into the group’s activities in the past few years — especially investments made by DH Renewables. The enforcement agency will also approach the Reserve Bank of India for details on disclosures by ICICI Bank about its dealings with Videocon.

ALSO READ: ICICI Bank loan case: CBI questions NuPower Renewables CFO Sunia Bhuta
Though media reports said the Reserve Bank of India has given a clean chit to Chanda Kochhar in 2016, the banking regulator has not made any public statement as yet.