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For discussion purposes only
Privileged and Confidential
Explanatory Note to the draft International Financial Services Centres Authority
(Amendment) Bill, 2026 for Variable Capital Companies
A. Introduction
Fund management in the International Financial Services Centre (IFSC) in India, has largely
evolved within trust structures, while limited liability partnerships and companies continue to be
sparingly adopted. Each of these structures serves as an adaptation rather than a framework made
exclusively for fund management activity.
Critical features, such as, segregation of assets and liabilities of different funds, flexibility in
alteration of capital, efficient mechanism for participation and exit of investors, payout of
dividend through capital, incorporation of varied investment strategies within one structure, are
conspicuously absent in the aforesaid legal structures, and are introduced either through specific
regulations or adopted contractually, to make them suitable for the business of fund management.
These structures do not provide a bespoke legal framework for fund management. As of
December 31st 2025, the schemes launched by fund management entities in IFSC have garnered
cumulative commitment of USD 32.13 billion and the cumulative funds raised stand at USD 17.34
billion. The growth of the fund management industry in IFSC demonstrates the need for a tailored
legal framework.
Variable Capital Company (VCC) is a structure that subsumes the aforesaid features, combining
the benefits of trusts, limited liability partnerships and companies, and limits their disadvantages.
VCC is emerging as a preferred option in various jurisdictions across the globe, including,
Singapore, United Kingdom, Luxembourg, Mauritius, Hong Kong and so on. Consequently, VCC
is proposed to be introduced in the IFSC.
B. Consultation
The International Financial Services Centres Authority (IFSCA) constituted an Expert Committee
under the chairmanship of Dr. KP Krishnan to examine the relevance and adaptability of the VCC
in the IFSC in India, which submitted its report on May 26, 2021. Subsequently, IFSCA
constituted another Expert Committee under the chairmanship of Dr. MS Sahoo for drafting a
legal framework for allowing VCC structure in the IFSCs, which submitted the report on October
12, 2022.
The Government recognised the need to provide a legal framework for governance of VCC in
IFSC. Accordingly, the Hon’ble Finance Minister made the announcement in the budget for FY
2024-25, ‘We will seek the required legislative approval for providing an efficient and flexible
mode for financing leasing of aircrafts and ships, and pooled funds of private equity through a
‘variable company structure’.’. In the above context, the Ministry of Finance has prepared a draft
International Financial Services Centres Authority (Amendment) Bill, 2026 (Bill) for introducing
and governing the structure of VCC in IFSC.
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While preparing the draft, relevant legislations in Singapore, Ireland, the United Kingdom,
Mauritius, and Luxembourg have also been examined in detail.
C. Drafting practices
The Bill lays down the foundational principles governing the legal structure of the VCC, while
matters relating to business governance and procedural aspects are proposed to be addressed
through delegated legislation. This drafting approach has been consciously adopted to facilitate
smooth operationalisation of the VCC framework, recognising that, as a novel structure, it may
require flexibility and expeditious regulatory adjustments in response to evolving market and
operational needs.
Given that the VCC is a hybrid structure drawing selectively from both trust and corporate
models, certain provisions take inspiration from the Companies Act, 2013. However, these
references are calibrated and shall be suitably adapted through delegated legislation to ensure a
simplified and proportionate framework tailored for VCCs, without replicating the compliance
intensity.
The Bill has been drafted in a plain and simple language. It uses illustrations where necessary to
further clarify the intent of a section. This explanatory note provides a brief overview of the Bill
to facilitate public consultation.
D. Disclaimer
This explanatory note is intended to facilitate public consultation. It is not a part of the Bill. The
explanatory note shall not be considered for legal interpretation of the provisions of the Bill.
E. Summary of the Bill
Structure of Variable Capital Companies
VCC is a body corporate and is a separate legal entity. It has the capacity to contract, sue and be
sued in its own name, have perpetual succession and liability of its members is limited. It operates
through a two-tier structure, with VCC as the first tier and one or more sub-funds being
constituted under it.
The funds shall be pooled at the sub-fund level and not at VCC level. No asset, liability, income
or expenditure shall be held to the account of VCC, and shall be either attributed to a particular
sub-fund or apportioned amongst multiple sub-funds.
VCC can have structural arrangements in the nature of holding and subsidiary. For certain classes
of holding VCCs, regulations may specify restrictions on the number of permissible layers of
subsidiaries.
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Sub-fund
Sub-funds shall be constituted under VCC and shall not be a separate legal entity. Accordingly,
VCC shall execute contracts for and on behalf of its sub-funds. Sub-funds shall be launched by a
fund management entity, akin to schemes or funds as prevalent under extant fund management
regime in IFSC. Subject to regulations, sub-funds can be of various kinds and may be converted
into other kinds of sub-funds.
The assets and liabilities of sub-funds shall be segregated and assets of one sub-fund should not
be used for meeting the liability of another, including in the course of winding up the VCC or
another sub-fund. Obligations arising on account of insolvency proceedings or litigation against
one sub-fund of a VCC, should not cast liability against the other sub-fund of such VCC. Each
sub-fund shall be treated as a separate person for the purpose of taxation.
A sub-fund may invest in another sub-fund of the same VCC. Such cross sub-fund investment
shall not be treated as a buy-back, even though the VCC purchases its own participating shares
from one sub-fund on behalf of another sub-fund.
Incorporation
A separate Registrar shall be designated for the purpose of VCC by IFSCA, who shall be an
officer of IFSCA.
Any person can incorporate a VCC by filing an application along with requisite documents
including charter documents with the Registrar. The charter documents shall be confidential and
not be available for public inspection.
Capital
Capital can be issued in the form of management shares, participating shares and debentures.
Management share capital shall be issued at the VCC level to the persons who incorporate the
VCC or subscribe to the memorandum, who control the VCC or to whom the management shares
may be transferred. Management share capital cannot be redeemed but can be bought back and
shall have restricted transferability. Management shares shall carry only voting rights and no
economic rights, unless otherwise specified in the regulations. However, a management
shareholder may derive economic benefits only by investing in participating share capital. The
vote of a management shareholder shall be in proportion to the paid-up value of the management
shares held by such person.
Participating share capital shall be issued at sub-fund level to the investors, wherein an investor
can be any person who pools money in the sub-fund, including a management shareholder.
Various class and sub-class of participating shares can be issued under a single sub-fund,
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facilitating creation of different rights within the same sub-fund. Participating share capital can
be altered as frequently as in the case of an open-ended fund, subject to regulations, investment
strategy of the sub-fund and without prejudice to the interest of participating shareholders of such
sub-fund. Participating share capital shall carry economic rights and limited voting rights only in
case of variation of rights. The vote of a participating shareholder shall be in proportion to its
share in the net asset value of the participating share capital of the sub-fund, however, differential
voting rights are allowed. Dividend can be paid out of profits or paid-up participating share
capital.
Redeemable debentures can be issued by VCC on behalf of a sub-fund, wherein debentures shall
not carry voting rights. Additionally, a VCC can also borrow funds for the purposes of sub-funds.
Governance
The governance matrix of VCC shall predominantly include, management shareholders, board of
directors, fund management entity, fund manager, and compliance officer.
There shall be a common board of directors at the VCC level for all sub-funds, and the directors
shall be appointed by the management shareholders. The board of directors shall be akin to
fiduciaries under the extant fund management regime in the IFSC.
The board of directors of VCC shall pass a resolution to appoint a fund management entity as
well as the fund manager. The fund management entity shall be registered with IFSCA as per
extant legal framework. The fund manager shall be an officer of the fund management entity and
will perform such functions as may be necessary for managing funds of the VCC. The fund
manager shall be designated as key managerial personnel for the VCC for clear allocation of
responsibility. The fund manager along with the fund management entity shall be collectively
responsible for carrying the fund management activities for a VCC and shall be accountable to
the members and the board of directors of VCC. Separate fund managers may also be appointed
or designated for each of the sub-funds, if required.
A compliance officer shall be appointed or designated at the VCC level for legal compliance and
investor grievance redressal. In order to keep the administrative cost low, there is no embargo in
designating the officer of a fund management entity as the compliance officer or fund manager
of a VCC, provided such officers meet the criteria as may be provided by IFSCA in the
regulations.
Critical corporate governance norms are provided in order to ensure that the interests of investors
are adequately protected, details of which shall be provided in the regulations. To avoid complex
structures, a framework is provided to restrict the number of layers of VCCs or sub-funds through
which investments may be made.
Confidentiality
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Confidentiality of information associated with VCC, sub-funds and the investors is a crucial
aspect of VCC and such information can only be disclosed in accordance with regulations.
Management and administration
The management and administrative requirements shall be set out through regulations. Anchors
are provided for critical corporate governance norms, including disclosure of beneficial interest,
beneficial ownership and significant beneficial ownership.
Financial statements, audit and valuation
Norms governing financial reporting and audit requirements shall be set out through regulations.
Specific anchors have been provided for maintenance of books of accounts, financial statements
and annual returns of the VCC and its sub-funds, and for the appointment of an auditor. IFSCA
may notify the valuer who may be eligible for conducting valuation required for a VCC.
Adjudication and appeal
The power of the National Company Law Tribunal (NCLT) to adjudicate is limited to specific
matters and its jurisdiction shall be limited only to such cases. The NCLT shall exercise its powers
in accordance with the relevant provisions of the Companies Act, 2013. However, the Central
Government shall prescribe the conditions, form and manner, and fee for the application to be
made to the NCLT.
The appeal against the orders of the NCLT shall lie with the National Company Law Appellate
Tribunal, and thereafter to the Supreme Court on questions of law.
Compromise and arrangements
VCCs can enter into compromises and arrangements with its creditors or members. These
arrangements are under the oversight of the National Company Law Tribunal. In contrast, merger
and amalgamation between two or more sub-funds or a holding VCC and its wholly-owned
subsidiary shall be under the supervision of IFSCA.
Winding up, insolvency, and removal of name from the register
Subject to rules made by the Central Government, IFSCA is empowered to initiate the winding-
up of VCCs and sub-funds in non-insolvency situations, and recourse to the National Company
Law Tribunal is limited to specified circumstances, including public interest concerns, fraud, or
threats to sovereignty or security.
Sub-funds may be wound up solely by IFSCA in non-insolvency situations to allow timely and
orderly exits at the sub-fund level, while reserving judicial oversight for situations warranting
heightened scrutiny, as stated above.
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In case of defaults in payment of debt the application of the Insolvency and Bankruptcy Code,
2016 may trigger and for this purpose the VCC and its sub-funds shall be notified as financial
service providers. Further, the Registrar may, on its own or on an application made by the VCC,
remove the name of the VCC from the register and dissolve it.
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THE INTERNATIONAL FINANCIAL SERVICES CENTRES
AUTHORITY (AMENDMENT) BILL, 202[X]
A
BILL
further to amend the International Financial Services Centres Authority
Act, 2019
Be it enacted by Parliament in the [X] Year of the Republic of India as
follows:—
1. (1) This Act may be called the International Financial Services Short title
Centres Authority (Amendment) Act, 202[X]. and
commencem
ent.
(2) It shall come into force on such date as the Central Government may,
by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of
this Act and any reference in any such provision to the commencement of
this Act shall be construed as a reference to the coming into force of that
provision.
50 of 2019. 2. In Chapter III of the International Financial Services Centres Authority Insertion of
Act, 2019 (hereinafter, “the principal Act”), the following Chapter shall be new Chapter
inserted, namely:— III-A.
“Chapter III-A
VARIABLE CAPITAL COMPANIES
13A. (1) In this chapter, unless the context otherwise requires,— Definitions.
(a) “articles” means the articles of association of a variable capital
company, as originally framed or altered from time to time or
applied in pursuance of this Chapter;
(b) “beneficial interest” in relation to a share of variable capital
company includes, directly or indirectly, through any contract,
arrangement or otherwise, the right or entitlement of a person
alone or together with any other person, to exercise or cause to be
exercised, any or all of the rights attached to such share, including
the right to receive dividend or other distribution, if any;
(c) “beneficial owner” means a person who holds or acquires
beneficial interest in a share of a variable capital company,
wherein, such share is not registered in his name;
(d) “Board” in relation to a variable capital company, means the
collective body of the directors of the variable capital company;
(e) “body corporate” includes such entities, whether incorporated
within India or outside India, as may be specified by regulations;
(f) “charge” means an interest or lien created on the property or
assets of a variable capital company as security;
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(g) “compliance officer” means such officer appointed or
designated under sub-section (7) of section 13W;
(h) “debenture” means an instrument issued by a variable capital
company evidencing a debt, whether constituting a charge on the
assets of the variable capital company or not;
(i) “director” means a director appointed to the Board of the
variable capital company;
(j) “fund management entity” means such entity registered with the
Authority as a fund management entity in the manner specified by
regulations;
(k) “fund manager” means any individual who is appointed or
designated by the fund management entity to manage
investments made by the variable capital company on behalf of its
sub-funds;
(l) “holding variable capital company”, in relation to one or more
variable capital companies, means a variable capital company of
which such variable capital companies are subsidiaries;
Explanation.— For the purposes of this clause, the expression
“variable capital company” includes any body corporate;
(m) “key managerial personnel”, in relation to variable capital
company means,—
(i) fund manager; and
(ii) such other persons as may be specified by regulations;
(n) “management shareholder” means a person incorporating the
variable capital company or a subscriber to the memorandum of
the variable capital company or any other person in control of the
variable capital company or any other person to whom such
management shares are transferred,
Explanation.— In case of fund management entity and the fund
manager appointed by such fund management entity, only the
fund management entity shall be eligible to hold management
shares;
(o) “memorandum” means the memorandum of association of a
variable capital company as originally framed or as altered from
time to time in pursuance of this Chapter;
(p) “member”, in relation to a variable capital company, means,—
(i) a subscriber to the memorandum, who shall be deemed
to have agreed to become member of the variable capital
company, and on its registration, shall be entered as
member in its register of members;
(ii) every other person who agrees in writing to become a
member of the variable capital company and whose name
is entered in the register of members of the variable capital
company; and
(iii) such other person as may be specified by regulations;
(q) “participating shareholder” means,—
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(i) a person, other than management shareholder, who has
subscribed to or acquired participating shares in the sub-
fund of the variable capital company; and
(ii) such management shareholder, who either voluntarily
holds or is required to hold participating shares in the sub-
fund of the variable capital company, in accordance with
such conditions and such manner as may be specified by
regulations;
(r) “Registrar” or “Registrar of variable capital companies” means
a Registrar, an Additional Registrar, a Joint Registrar, a Deputy
Registrar or an Assistant Registrar, as may be appointed or
designated by the Authority by notification;
(s) “related party” means a director or his relative, key managerial
personnel or his relative or such other person as may be specified
by regulations;
(t) “relative” means any person related to another in such manner
as may be specified by regulations;
(u) “significant beneficial owner” shall mean any individual, who
acting alone or together, or through one or more persons or trust,
including a trust and persons resident outside India, holds
beneficial interest of not less than ten per cent or such other higher
or lower percentage as may be specified by regulations, in shares
of a variable capital company or its sub-fund, or the right to
exercise or the actual exercising of significant influence or control
over the variable capital company or its sub-fund,
Explanation.— For the purpose of this clause, "significant
influence" means the power to participate, directly or indirectly, in
the financial and operating policy decisions of the variable capital
company, but is not in control or joint control of those policies;
(v) “subsidiary”, in relation to any other variable capital company,
that is to say the holding variable capital company, means a
variable capital company in which the holding variable capital
company,—
(i) controls the composition of the Board; or
(ii) exercises or controls more than one-half of the total
voting power exercisable by the management
shareholders, either at its own or together with one or more
of its subsidiaries:
Provided that such class or classes of holding variable capital
company, as may be specified by regulations, shall not have layers
of subsidiaries beyond such numbers, as may be specified by
regulations,
Explanation.— For the purposes of this clause,—
(a) a variable capital company shall be deemed to be a
subsidiary of the holding variable capital company even if
the control referred to in sub-clause (i) or sub-clause (ii) is
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of another subsidiary of the holding variable capital
company;
(b) the composition of a variable capital company’s Board
shall be deemed to be controlled by another variable
capital company if that other variable capital company by
exercise of some power exercisable by it at its discretion
can appoint or remove all or a majority of the directors;
(c) the expression “variable capital company” includes any
body corporate; and
(d) “layer” in relation to a holding variable capital company
means its subsidiary or subsidiaries;
(w) “sub-fund” means a scheme or fund that is constituted under a
variable capital company and launched as such under section 13L
of this Act,
Explanation.— For the purpose of this Chapter, a scheme or a
fund shall be in the nature of an investment fund;
(x) “National Company Law Tribunal” for the purposes of this
Chapter, means the National Company Law Tribunal constituted
under section 408 of the Companies Act, 2013;
(y) “valuer” means a person, as may be notified by the Authority,
who shall conduct valuation under this Chapter;
(z) “Variable capital company” means a body corporate referred to
in section 13B and incorporated as such under section 13E.
18 of 2013. (2) In the context of provisions of Companies Act, 2013 referred to in this
Chapter, following words and phrases used therein shall have the
meanings assigned to them below,—
(i) “company” or “company limited by shares” shall be construed
as a reference to “variable capital company”;
(ii) “control” shall have the meaning assigned to it in sub-section
18 of 2013. (27) of section (2) of the Companies Act, 2013;
(iii) “Registrar” shall be construed as a reference to “Registrar of
variable capital companies”; and
(iv) “this Act” shall mean “this chapter of the Act, rules and
regulations hereunder”.
13B. A variable capital company,— Variable
Capital
Company.
(a) shall, from the date of incorporation, be a body corporate
having perpetual succession, with power to acquire, hold and
dispose of property, to contract and to sue and be sued, in its name
and/or on behalf of its sub-funds, and the liability of the members
of the variable capital company shall be limited to the amount
unpaid on their shares, if any;
(b) shall have one or more sub-funds;
(c) shall, as its main object, carry on the business of investment of
funds through its sub-funds, or any other business as may be
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notified by the Central Government, and may carry on such other
objects, as are ancillary to the main object; and
(d) may alter participating share capital at any time as per the
investment strategy of each sub-fund, wherein such alteration
shall not be disadvantageous to the participating shareholders of
such sub-fund.
Illustration.
A variable capital company has launched sub-fund A. As per the
investment strategy of sub-fund A, the fully paid-up participating share
capital of sub-fund A can be altered by several ways including, further
issuance, conversion, buy-back and redemption, without obtaining prior
approval of the members of sub-fund A. Further, at any time, the variable
capital company can issue and buy-back fully paid-up participating shares
at its discretion and redeem or convert the same at the discretion of the
investors. On January 1, 2025, variable capital company issued 50,000
class A1 participating shares under sub-fund A, of which 10,000 were
subscribed by Investor X. On January 2, 2025, variable capital company
further issued 50,000 class A2 participating shares under sub-fund A. On
January 3, 2025, Investor X raised a request to redeem 5,000 class A1
participating shares and convert remaining class A1 participating shares
into class A2 participating shares. The variable capital company honoured
the request by redeeming and converting the said shares at the prevailing
net asset value. Further, on May 1, 2025, variable capital company bought
back remaining classes A1 and A2 participating shares at the prevailing
net asset value.
13C. (1) A sub-fund of a variable capital company is not a legal person Sub-fund.
separate from the variable capital company:
Provided that,—
(a) assets and liabilities of sub-funds shall stand segregated such
that,—
(i) the assets of a sub-fund cannot be used to discharge
any liability of the variable capital company that is not
allocated or apportioned to such sub-fund under sub-
section (3), including in the winding up of either the variable
capital company or any other sub-fund; and
(ii) any liability of a sub-fund, including any liability that is
allocated or apportioned to such sub-fund under sub-
section (3), shall be discharged solely out of the assets of
that sub-fund, including in the winding up of the variable
capital company or any other sub-fund;
(b) sub-fund may sue or be sued through its variable capital
company and a variable capital company may exercise rights of
set-off, if any, as between its sub-funds as if each sub-fund were
a separate legal person;
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(c) the property of a sub-fund is subject to orders of a tribunal, a
court, the Central Government, the Authority including the
Registrar, or any other authority constituted under any other law
for the time being in force, as the case may be, as it would have
been if the sub-fund were a separate person; and
(d) each sub-fund shall be treated as a separate person for the
purposes of taxation.
Illustration.
A variable capital company executed a loan agreement on behalf of sub-
funds A and B, pursuant to which it borrowed an amount of USD 100,000
for each of the sub-funds. However, no borrowing was made for the
purpose of sub-fund C. In order to repay the said borrowings made on
behalf of sub-fund A and B, assets of sub-fund C cannot be utilised.
Further, in order to repay the borrowing allocated to sub-fund A, only the
assets of sub-fund A can be utilised. For avoidance of doubt, assets of
sub-fund B cannot be utilised for repayment of loan availed on behalf of
sub-fund A.
(2) A variable capital company shall make such disclosures and take such
actions, as may be specified by regulations, to maintain the segregation
of assets and liabilities of its sub-funds.
(3) A variable capital company shall,—
(a) allocate any of its incomes, expenses, assets or liabilities that
it holds or incurs for the purpose of any of its sub-funds or in order
to enable the operation of any of its sub-funds and that are
attributable to a sub-fund, to such sub-fund; and
(b) apportion any of its incomes, expenses, assets, or liabilities,
that are not attributable to any particular sub-fund, amongst all
sub-funds in a manner that it considers fair to the members of the
sub-funds, subject to such requirements as may be specified by
regulations.
(4) Notwithstanding anything contained in sub-section (3) of section 13S,
a variable capital company may, for the account of any of its sub-funds,
acquire by subscription or transfer for consideration, participating shares
of any class or sub-class that are issued in respect of other sub-funds of
the same variable capital company, in accordance with such conditions
and such manner as may be specified by regulations.
13D. (1) The Registrar shall register the variable capital company and Registrar of
exercise such other powers and discharge such other functions as are variable
conferred on the Registrar under this Chapter or rules or regulations made capital
thereunder. companies.
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Provided that any order of the Registrar passed in exercise of powers and
discharge of functions under this Chapter shall be deemed to be an order
passed by the Authority.
(2) The terms and conditions of service, including the salaries payable to
the Registrar, shall be such as may be specified by regulations.
13E. (1) An application seeking incorporation of a variable capital Incorporation
company shall be filed with the Registrar, along with the memorandum, of variable
articles, and such other information and documents, in such form, such capital
manner and subject to such requirements, as may be specified by company.
regulations.
(2) The Registrar, on being satisfied that the requirements mentioned in
sub-section (1) have been complied with, shall issue a certificate of
incorporation in such form and such manner, as may be specified by
regulations.
(3) A variable capital company may be formed by one or more persons by
subscribing their names to a memorandum and complying with the
requirements under this Chapter and the regulations made thereunder.
13F. (1) The memorandum of a variable capital company shall state,— Memorandu
m.
(a) the name of the variable capital company, shall have the suffix
“VCC (IFSC) Ltd.” in its name;
(b) the International Financial Services Centre, in which the
registered office of the variable capital company is to be situated;
(c) the main object in accordance with clause (c) of sub-section (1)
of section 13B and such other objects as are ancillary to the main
object;
(d) that the liability of its members is limited to the amount unpaid,
if any, on the shares held by them;
(e) the amount of management share capital with which the
variable capital company is to be registered and the division
thereof into management shares of a fixed amount, and the
number of management shares which the subscribers to the
memorandum agree to subscribe, which shall not be less than one
management share;
(f) the number of management shares each subscriber to the
memorandum intends to take, indicated opposite his name; and
(g) such other matters as may be specified by regulations.
(2) The memorandum shall be in such form and its copies may be
provided to such persons in such manner, as may be specified by
regulations.
13G. (1) The articles of a variable capital company shall contain bye-laws Articles.
for management of the variable capital company and such other matters,
as may be specified by regulations:
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Provided that nothing contained in this sub-section shall be deemed to
prevent a variable capital company from including such additional matters
in its articles as may be considered necessary for its management.
(2) The articles may contain provisions for entrenchment to the effect that
specific provisions of the articles may be altered, only if conditions or
procedures that are more restrictive than those applicable under section
13H, are met or complied with.
(3) The articles shall be in such form and its copies may be provided to
such persons in such manner, as may be specified by regulations:
Provided that a variable capital company may adopt all or any of the bye-
laws contained in the model articles, as may be specified by regulations:
Provided further that in so far as the registered articles of such variable
capital company do not exclude or modify the bye-laws contained in the
specified model articles, those bye-laws shall, so far as applicable, be the
bye-laws of that variable capital company in the same manner and to the
extent as if they were contained in the duly registered articles of the
variable capital company.
13H. A variable capital company may alter the provisions of memorandum Alteration of
and articles, with the consent of the members, holding not less than three- memorandu
fourth of the management share capital, and in accordance with such m and
other conditions and such manner as may be specified by regulations: articles.
Provided that where such alteration of memorandum or articles results in
variation of rights of participating shareholders, sub-section (3) of section
13O shall apply.
13I. (1) Save as otherwise expressly provided in this Act,— Act to
override
memorandu
m, articles,
etc.
(a) the provisions of this Act shall have effect notwithstanding
anything to the contrary contained in the memorandum or articles
of a variable capital company, or in any agreement executed by it,
or in any resolution passed by the variable capital company in
general meeting or by its Board, as the case may be; and
(b) any provision contained in the memorandum, articles,
agreement or resolution shall, to the extent to which it is repugnant
to the provisions of this Act, become or be void, as the case may
be.
13J. (1) Subject to the provisions of this Act, the memorandum and Effect of
articles shall, when registered, bind the variable capital company and the memorandu
members thereof to the same extent as if they respectively had been m and
signed by the variable capital company and by each member, and articles.
contained covenants on its and his part to observe all the provisions of the
memorandum and the articles.
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(2) All monies payable by any member to the variable capital company
under the memorandum or articles shall be a debt due from such member
to the variable capital company.
13K. (1) A variable capital company shall, at all times, have a registered Registered
office in an International Financial Services Centre, in accordance with the office of
conditions as may be specified by regulations. variable
capital
company.
(2) The registered office of a variable capital company shall be capable of
receiving and acknowledging all communications and notices, as may be
addressed to it.
(3) The documents, required to be maintained by a variable capital
company under this Act, shall be kept at the registered office, in such
manner and subject to such conditions, as may be specified by
regulations.
(4) A variable capital company may change its registered office from one
International Financial Services Centre to another, after the date of
incorporation, in accordance with such conditions as may be specified by
regulations.
13L. (1) A variable capital company shall, through the fund management Launch of
entity, apply to the Authority, for launching of sub-fund, in such manner sub-fund.
as may be specified by regulations.
(2) In case of change in information provided to the Authority at the time
of launching of sub-fund, a variable capital company shall disclose such
change to the Authority within such period and in such manner, as may
be specified by regulations.
13M. (1) A variable capital company shall launch such kinds of sub-funds Kinds of sub-
or any combination thereof, as may be specified by regulations. funds and
conversion.
(2) Sub-fund of a particular kind may be converted into any other kind of
sub-fund, subject to such conditions and in such manner as may be
specified by regulations:
Provided that the variable capital company shall provide an exit offer to
such members of the sub-fund who dissent to such conversion:
Provided further that where such conversion results in variation of rights
of the members of such sub-fund or any other sub-fund, sub-section (3)
of section 13O of this Act shall be applicable:
Provided also that such conversion shall not affect any debts, liabilities,
obligations or contracts incurred or entered into, on behalf of such sub-
fund before conversion and such debts, liabilities, obligations and
contracts may be enforced in the manner as if such conversion had not
been done.
18 of 2013. 13N. The provisions of sub-section (1) of section 19 of Companies Act, Subsidiary
2013 shall apply, mutatis mutandis, to a subsidiary of a holding variable not to hold
capital company. shares in its
holding
15For discussion purposes only
Privileged and Confidential
variable
capital
company.
13O. (1) The share capital of variable capital company shall be of two Share
kinds, namely:— capital.
(a) management share capital; and
(b) participating share capital.
Explanation.— For the purposes of this Chapter,—
(a) “management share capital” means that part of the share
capital, which is issued by the variable capital company to the
management shareholders, in such form and such manner as may
be specified by regulations, wherein management shareholders
shall,—
(i) have the right to vote in general meeting of members in
accordance with sub-section (1) of section 13P;
(ii) not have the right to receive dividend;
(iii) not have the right to receive refund, including a refund
from proceeds of realisation of the assets of the variable
capital company, except in accordance with such
conditions as may be specified by regulations.
Provided that the amount of refund to the management
shareholder shall not exceed the amount paid-up in lieu of
subscription or purchase of management shares;
(iv) not have the right to redemption, but may have
restricted right to transfer and limited eligibility for buy-back
and reduction of management shares, subject to such
conditions and in accordance with such manner as may be
specified by regulations; and
(v) be entitled to such other rights or comply with such
other restrictions, as may be specified by regulations.
(b) “participating share capital” means that part of the share
capital, which is issued by the variable capital company on behalf
of sub-fund, to the participating shareholders, in such form and
such manner as may be specified by regulations, wherein
participating shareholders,—
(i) shall not have the right to vote in a general meeting of
members, except as provided in sub-section (2) of Section
13P, which shall be subject to such conditions and such
manner as may be specified by regulations;
(ii) may receive dividend out of profits or paid-up
participating share capital of the relevant sub-fund, in the
manner as may be specified by regulations;
(iii) may receive refund, including a refund from proceeds
of realisation of the assets attributable to a sub-fund,
subject to such conditions as may be specified by
regulations;
16For discussion purposes only
Privileged and Confidential
(iv) may be entitled to redemption, transfer, buy-back and
reduction of the participating shares, in accordance with
such conditions and in such manner as may be specified
by regulations; and
(v) may be entitled to such other rights or comply with such
other restrictions, as may be specified by regulations.
Illustration.
A variable capital company is incorporated with sub-funds A and B.
Management shares shall be issued by the variable capital company to:
(i) Ms. X, who has incorporated the variable capital company and is a
subscriber to the memorandum, and (ii) Y Ltd., which is the fund
management entity of the variable capital company. Management shares
will not be issued on behalf of the sub-funds A and B but directly by the
variable capital company. However, management shareholders Ms. X and
Y Ltd. shall manage the affairs of the variable capital company as well as
its sub-funds A and B. No dividend shall be payable to management
shareholders. In lieu of managing the investments, Y Ltd. will receive
management fee only. Ms. X may invest in participating shares issued by
sub-funds A and B and shall then be entitled to economic benefits
accruing on account of such participating shares held by her. Y Ltd. which
is the fund management entity as well as management shareholder may
also invest in participating shares issued by sub-funds A and B, subject to
regulations and consequently, become entitled to economic benefits
attached to such participating shares.
(2) A variable capital company may, subject to such conditions as may be
specified by regulations, issue different classes of participating shares,
corresponding to different rights and interests in sub-funds and may
further issue different sub-classes of participating shares corresponding
to different rights and interests under each such class.
Illustration.
A variable capital company has three sub-funds A, B and C. It issued class
A1 participating shares to those who wished to acquire rights and interests
in sub-fund A, classes B1 and B2 participating shares to those who wished
to acquire rights and interests in sub-fund B and classes C1, C2 and C3
participating shares to those who wished to acquire rights and interests in
sub-fund C. The variable capital company further issued sub-class A1.1
to those who wished to acquire specific rights and interests in class A1
participating shares, sub-classes B1.1 and B2.1 to those who wished to
acquire specific rights and interests in classes B1 and B2 participating
shares, respectively, and sub-classes C1.1 and C1.2 to those that wished
to acquire specific rights and interests in class C1 participating shares.
(3) Where the share capital of a variable capital company is divided into
different classes or sub-classes of participating shares, the rights attached
to participating shares of any class or sub-class, as the case may be, may
be varied with the written consent of the members holding not less than
three-fourth of the issued participating shares of that class or sub-class
17For discussion purposes only
Privileged and Confidential
and subject to a requirement to provide an exit offer to a dissenting
shareholder and such other conditions, as may be specified by
regulations:
Provided that where the holders of not less than fifteen per cent of the
issued participating shares of a class or sub-class do not consent to such
variation, then provisions of sub-sections (2), (3) and (4) of section 48 of
18 of 2013. Companies Act, 2013 shall, mutatis mutandis, apply for the purpose of
cancellation of variation of rights of the class or sub-class of participating
shareholders:
Provided further that if variation in rights of one class or sub-class of
participating shares affects the rights attached to any other class or sub-
class of participating shares, the consent of members holding not less
than three-fourth of such other class or sub-class of participating shares,
as the case may be, shall also be obtained and the provisions of this
section shall apply to such variation.
(4) Participating shares of one class or sub-class may be converted into
another class or sub-class of participating shares, subject to such
conditions as may be specified by regulations:
Provided that the variable capital company shall provide exit offer to such
members who dissent to such conversion:
Provided further that where such conversion results in variation of rights
of holders of participating shares of such class or sub-class or any other
class or sub-class, sub-section (3) of this section shall apply.
(5) Shareholders shall have no interest in the property of the variable
capital company.
13P. (1) Subject to section 13O, sub-section (3) of section 13Q, voting Voting rights.
restrictions specified in the regulations for related party transactions under
sub-section (11) of section 13W, such other conditions, and in accordance
with such manner, as may be specified by regulations, every member
holding management share capital of a variable capital company shall
have a right to vote on every resolution placed before the variable capital
company and his vote shall be in proportion to his share in the paid-up
management share capital of the variable capital company.
(2) Every member holding participating share capital attributable to a
particular sub-fund of the variable capital company, shall have the right to
vote only on such resolutions, which involve variation of rights of such
member, including winding up of the variable capital company or the sub-
fund to which such participating share capital is attributable, or such other
matter as may be specified by regulations, and subject to sub-section (2)
of section 13O, his vote shall be in proportion to his share in the net asset
value of the participating share capital of the sub-fund.
(3) Subject to sub-section (2) of section 13O, the total voting power shall
be calculated as an aggregate of paid-up management share capital and
aggregate net asset value of the holders of the participating share capital
who are entitled to vote.
18For discussion purposes only
Privileged and Confidential
Illustrations.
(a) Management shareholders MA and MB hold fully paid-up
management shares A and B in the variable capital company, bearing
paid-up amount of USD 10,000 each. Participating shareholders PA and
PB hold fully paid-up participating shares A1 and B1 in sub-fund A of the
variable capital company, bearing net asset value of USD 100,000 each.
A resolution is put to vote which involves variation of rights of participating
shareholders of sub-fund A. For the purpose of calculating the majority of
votes, the total share capital of USD 220,000 will be considered.
(b) Management shareholders MA and MB hold fully paid-up
management shares A and B in the variable capital company, bearing
paid-up amount of USD 10,000 each. Participating shareholders PA and
PB hold fully paid-up class A participating shares and class B participating
shares within sub-fund A. The vote count of class A participating shares
is equivalent to net asset value whereas the vote count for class B
participating shares is two times the net asset value. Net asset value for
both class A and class B is USD 100,000, respectively. A resolution is put
to vote which involves variation of rights of participating shareholders of
sub-fund A. For the purpose of calculating the majority of votes, the total
share capital of USD 320,000 will be considered.
13Q. (1) Where any further calls are made on the participating shares of Calls on
a class or sub-class, such calls shall be made on a uniform basis on all participating
participating shares falling under that class or sub-class: shares.
Provided that a variable capital company may excuse or exclude certain
participating shareholders from further investing in the sub-fund, subject
to such conditions as may be specified by regulations.
(2) A variable capital company may, if so authorised by its articles, accept
from any member the whole or part of the amount remaining unpaid on
any participating shares held by him, even if no part of that amount has
been called up.
(3) A member of the variable capital company shall not be entitled to any
voting rights in respect of the amount paid by him under sub-section (2)
until that amount has been called up.
13R. (1) A variable capital company may issue redeemable debentures or Debentures
borrow money, with an option to convert such debentures or borrowings and
into shares either wholly or partly, subject to such conditions and in such borrowings.
manner, as may be specified by regulations:
Provided that a variable capital company shall not issue debentures or
borrow money for a purpose that is not directly attributable to a sub-fund,
without receiving approval of the members, in such manner as may be
specified by regulations.
(2) A variable capital company shall not issue debentures carrying voting
rights.
19For discussion purposes only
Privileged and Confidential
(3) A variable capital company may at the option of the debenture holders
redeem the debentures, or buy-back debentures, in such manner and in
accordance with such conditions as may be specified by regulations.
(4) A variable capital company shall appoint debenture trustee prior to
issuance of debentures under sub-section (1), if the appointment is
warranted by the conditions as may be specified by regulations, wherein
such debenture trustee shall be appointed in accordance with and
undertake such roles and responsibilities, as may be specified by
regulations.
(5) A contract with the variable capital company to take up and pay for any
debentures of the variable capital company may be enforced by a decree
for specific performance.
13S. (1) In case of failure of the variable capital company to redeem Redemption,
participating share capital or pay dividend, if any, on the participating reduction
share capital, as per the terms of the sub-fund, sub-section (3) of section and buy-
18 of 2013. 55 of Companies Act, 2013 shall apply, mutatis mutandis, to the back.
unredeemed participating share capital and unpaid dividend thereon.
(2) In case of failure of the variable capital company to redeem debentures
on the date of maturity or to pay interest when it is due, as per the terms
18 of 2013. of the sub-fund, sub-section (10) of section 71 of Companies Act, 2013
shall apply, mutatis mutandis, to the unredeemed debentures and unpaid
interest thereon.
(3) In the event of buy-back or redemption of shares, or reduction of share
capital, such shares must be cancelled and the amount of the issued
share capital of the variable capital company must be reduced by the
amount of the consideration paid by the variable capital company.
13T. (1) The shares and debentures of variable capital company shall be Transfer and
movable property. transmission
of shares
and
debentures.
(2) If the variable capital company, without sufficient cause, refuses to
register the transfer of, or the transmission by operation of law of, the right
to any securities or interest of a member in the variable capital company,
the transferee may appeal to the National Company Law Tribunal within
such period and in such manner as may be prescribed, and sub-section
18 of 2013. (5) of section 58 of Companies Act, 2013 shall apply, mutatis mutandis, in
respect of order to be made by the National Company Law Tribunal.
13U. A variable capital company may list securities on a recognised stock Listing.
exchange in accordance with such conditions as may be specified by
regulations.
13V. (1) A variable capital company may either on its own or on behalf of Charges.
its sub-funds, create a charge, within or outside India, on its property or
assets, if permitted as per its articles:
Provided that where a variable capital company proposes to create a
charge to secure a liability that is not directly attributable to a sub-fund, it
shall take approval of the members in such manner as may be specified
20For discussion purposes only
Privileged and Confidential
by regulations, and the charge over the assets of a sub-fund shall be
limited to cover only such liability that is apportioned to the sub-fund in
accordance with sub-section (3) of section 13C.
(2) Where a charge is created under sub-section (1), the variable capital
company shall register such charge with the Registrar within thirty days of
its creation, in such form, upon payment of such fees and in such manner,
as may be specified by regulations.
(3) Upon receipt of intimation by the Registrar, from the variable capital
company or otherwise of the payment or satisfaction in full of any charge
registered under sub-section (1), in such form, such manner and within
such time period as may be specified by regulations, the Registrar may,
after following such procedure, record the modification or satisfaction of
charge in the register of charges and inform the affected parties within
such period, as may be specified by regulations.
(4) In relation to charges created against property of variable capital
company, sections 78, 79, 80, sub-section (1) of section 81 and section
18 of 2013. 84 of Companies Act, 2013 shall apply, mutatis mutandis, subject to such
form, manner, fee, and other matters, as may be specified by regulations.
13W. (1) A variable capital company shall constitute a Board, wherein Governance
individuals shall be appointed as directors by the management of a variable
shareholders in a general meeting of members. capital
company.
Illustration.
A variable capital company has launched sub-funds A, B and C.
Management shareholders, X and Y, who are members of the variable
capital company, have appointed Mr. Z and Ms. W as the directors of the
variable capital company. Mr. Z and Ms. W shall exercise powers and
functions for the benefit of the variable capital company as well as sub-
funds A, B and C.
(2) The Board shall be entitled to exercise all such powers, and to do all
such acts and things, as the variable capital company is authorised to
exercise and do:
Provided that the Board shall not exercise any power or do any act or thing
which is directed or required, whether under this Act or by the
memorandum or articles of the variable capital company or otherwise, to
be exercised or done by the variable capital company in general meeting
of members.
(3) The Authority shall specify by regulations, the kind and number of
directors to be appointed, their qualifications, fit and proper criteria, duties
and powers, code of conduct and obligations, conditions and manner of
appointment, resignation, retirement, loss of office, vacation and removal,
and any other conditions as the Authority may deem necessary with
respect to the Board:
21For discussion purposes only
Privileged and Confidential
Provided that where no provision is made in the articles for the
appointment of first director, the subscribers to the memorandum shall be
deemed to be the first directors of the variable capital company, until the
directors are duly appointed in the general meeting of members in
accordance with the regulations.
(4) The Board shall pass a resolution for the appointment or designation
of the fund management entity and every key managerial personnel of a
variable capital company.
(5) The Authority shall specify by regulations, the fit and proper criteria,
qualifications, duties and powers, code of conduct and obligations,
conditions and manner of appointment, designation, resignation, removal,
and any other conditions as the Authority may deem necessary with
respect to the fund management entity and the key managerial personnel
of a variable capital company.
(6) Without prejudice to sub-section (5), the fund management entity and
the fund manager shall be responsible for management of investments
made by the variable capital company on behalf of its sub-funds, and shall
at all times act in a fiduciary capacity towards the members of the variable
capital company and shall be accountable to the Board.
(7) The compliance officer shall be such officer who shall report to the
Board, is capable of understanding financial statements and the
requirements for legal and regulatory compliance under this Act, shall
have such other qualifications and eligibility criteria, shall be appointed or
designated, be removed, or resign in such manner and in accordance with
such conditions as may be specified by regulations.
(8) The compliance officer appointed or designated under sub-section (7)
shall be responsible for compliance with all legal and regulatory
requirements applicable to the variable capital company, redressal of
investor grievances and performance of such other functions as may be
specified by regulations.
(9) The Board shall call and conduct meetings of the Board and such
committees thereof, if any, in such manner as may be specified by
regulations.
(10) Every director shall make disclosures of such interest, in such form
and manner and subject to such conditions, as may be specified by
regulations.
(11) No variable capital company shall advance any loan or provide any
guarantee or security against any loan, in connection with a director,
except in accordance with such conditions as may be specified by
regulations.
22For discussion purposes only
Privileged and Confidential
(12) No variable capital company shall enter into any contract or
arrangement with a related party, except in accordance with such
conditions as may be specified by regulations.
(13) All investments of the variable capital company shall be made or held
by it in its own name and the name of the sub-fund, except in accordance
with such conditions as may be specified by regulations.
(14) No variable capital company shall make investment through more
than such number of layers of such variable capital companies or sub-
funds, except in accordance with such conditions and in such manner, as
may be specified by regulations.
(15) No variable capital company shall enter into an arrangement involving
the directors for consideration other than cash, except in accordance with
such conditions as may be specified by regulations.
(16) Any information pertaining to the variable capital company or its sub-
fund, including information related to its shareholders, investments,
financial statements or securities in which investment has been made,
shall not be disclosed by the Registrar or any other person in possession
of such information, except in such circumstances, to such persons and in
accordance with such conditions, as may be specified by regulations.
13X. (1) A variable capital company shall call meetings of members Management
including annual general meetings, extraordinary general meetings, and and
such other meetings at such frequency and in such manner as may be administratio
specified by regulations. n.
(2) Every variable capital company shall keep and maintain the following
registers in such form and manner as may be specified by regulations,
namely:—
(a) a register of its members containing therein, inter alia, details
of beneficial owners;
(b) a register of debenture holders;
(c) a register of charges; and
(d) such other registers, as may be specified by regulations.
Explanation. —
(i) For the purposes of rectification of register of members,
sub-sections (1), (2) and (3) of section 59 of Companies
18 of 2013. Act, 2013 shall apply, mutatis mutandis, subject to such
form, manner, and other matters, as may be prescribed.
23For discussion purposes only
Privileged and Confidential
(3) Beneficial interest, beneficial ownership and significant beneficial
ownership in a variable capital company shall be disclosed and enforced
in such manner, as may be specified by regulations.
13Y. (1) A variable capital company shall, for itself and each of its sub- Books of
funds, prepare the following records, in such form and such manner as accounts,
may be specified by regulations:— annual
returns,
financial
statements,
board
reports, etc.
(a) books of accounts and other relevant books and papers;
(b) financial statements, including consolidated financial
statements, in accordance with the applicable accounting
standards;
(c) annual return containing the particulars as they stood on the
close of the financial year; and
(d) such other documents, as may be specified by regulations.
(2) The Board shall prepare a report for the variable capital company and
each of its sub-funds, to provide a true and fair view of the operations of
the variable capital company and its sub-funds, containing such details as
may be specified by regulations.
(3) The financial statements of the variable capital company, report of the
Board or an abridged summary thereof and other documents prepared
pursuant to sub-sections (1) and (2) above, shall be provided to the
Authority and such other persons, in such manner and within such time
as may be specified by regulations.
(4) A variable capital company shall not re-open its books of accounts and
not recast its financial statements, unless an application is made by the
Central Government or any other statutory regulatory body or authority or
any person concerned, in such form and such manner as may be
prescribed, to the National Company Law Tribunal or a court of competent
jurisdiction, and the provisions of section 130 of Companies Act, 2013
18 of 2013. shall apply, mutatis mutandis, for the purpose of this sub-section.
(5) If it appears to the directors of a variable capital company that the
financial statements of the variable capital company or the report of the
Board does not comply with the requirements specified in the regulations,
they may prepare a revised financial statement or a revised report in
respect of any of the three preceding financial years, after obtaining
approval of the National Company Law Tribunal in such manner, and
subject to such conditions, as may be prescribed.
24For discussion purposes only
Privileged and Confidential
13Z. (1) Every variable capital company shall, at the general meeting of Audits and
members, appoint an individual or a firm as an auditor, who shall fulfil such auditors.
eligibility criteria, have such qualifications, hold office for such period, and
shall be appointed in such manner and subject to such other conditions
as may be specified by regulations.
(2) The variable capital company shall file a notice of appointment of the
auditor with the Registrar in such manner as may be specified by
regulations, within thirty days of the meeting in which the auditor is
appointed.
(3) The Authority shall specify by regulations, the powers, duties,
remuneration, and the conditions and manner of removal and resignation
of auditors.
13ZA. Where a valuation is required for a variable capital company in Valuation.
respect of any, stocks, shares, debentures, securities or any other assets
or net worth of sub-funds of a variable capital company or its liabilities
under this Chapter, the Board of the variable capital company shall
appoint a valuer who shall conduct valuation in such manner and in
accordance with such standards as may be specified by regulations.
13ZB. (1) Where a compromise or arrangement is proposed between,— Power to
compromise
or make
arrangement
s with
creditors and
members.
(a) a variable capital company and its creditors or any class of
them; or
(b) a variable capital company and its members or any class or
sub-class of them,
the National Company Law Tribunal may, on an application made by the
variable capital company or of any creditor or member of the variable
capital company, or a liquidator appointed under section 13ZC or under
31 of 2016. the Insolvency and Bankruptcy Code, 2016, in such manner as may be
prescribed, order a meeting of the creditors or class of creditors, or of
members or class or sub-class of members, as the case may be, to be
called, held and conducted in such manner as the National Company Law
Tribunal directs.
(2) Where, at the meeting held pursuant to sub-section (1), majority of
persons representing three-fourth in value of the creditors, or class of
creditors or of members or class or sub-class of members, as the case
may be, voting in person or by proxy or by postal ballot, agree to any
compromise or arrangement, and if such compromise or arrangement is
sanctioned by the National Company Law Tribunal by way of an order,
25For discussion purposes only
Privileged and Confidential
such order shall be binding on the variable capital company, all the
creditors, or class of creditors or, members or class or sub-class of
members, as the case may be, or in case of a variable capital company
being wound up, on the liquidator, and the contributories of the variable
capital company:
Provided that the National Company Law Tribunal shall not sanction a
scheme of compromise or arrangement unless,—
(a) the scheme provides an exit offer to any dissenting member if
the compromise or arrangement is one proposed under clause (b)
of sub-section (1); and
(b) the scheme meets such conditions as may be prescribed.
(3) If an acquirer, or a person acting in concert with such acquirer, or a
person or group of persons acquire such percentage of shares as may be
specified by regulations, in accordance with sub-section (1) and sub-
section (2) of this section, then such acquirer or person acting in concert
with such acquirer or a person or group of persons shall notify the variable
capital company of their intention to buy the remaining minority shares of
the variable capital company, in such manner and subject to such
conditions as may be specified by regulations.
(4) Notwithstanding anything contained in this section, a scheme of merger
or amalgamation may be entered into between,—
(a) two or more sub-funds; or
(b) between a holding variable capital company and its wholly-
owned subsidiary,
18 of 2013. in accordance with section 233 of Companies Act, 2013, which shall apply,
mutatis mutandis, to such schemes of merger or amalgamation.
Explanation.—
(i) For the purposes of this section, except sub-section (4),
18 of 2013. sections 231, 232, 234 and 240 of Companies Act, 2013
shall apply, mutatis mutandis, to a variable capital
company, subject to such form, manner, and other matters,
as may be prescribed.
(ii) For the purposes of this section, the expressions
“acquirer” and “person acting in concert” shall mean the
variable capital company or such persons as set out under
the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011,
as amended from time to time.
(iii) For the purposes of sub-section (4), the Authority shall
exercise the powers and functions of the Central
Government under section 233 of the Companies Act,
18 of 2013. 2013, in such form and manner as may be prescribed.
26For discussion purposes only
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13ZC. (1) A variable capital company may be wound up by the National Winding up
Company Law Tribunal, on an application made by the Authority or such of a variable
persons as may be prescribed, in the following circumstances,— capital
company or
sub-fund.
(a) a resolution has been passed by the members, holding not less
than three-fourth of the total share capital of the variable capital
company, to wind up the variable capital company by the National
Company Law Tribunal;
(b) the variable capital company has acted against the interests of
the sovereignty and integrity of India, the security of the State,
friendly relations with foreign States, public order, decency or
morality;
(c) the affairs of the variable capital company have been
conducted in a fraudulent manner or the variable capital company
was formed for fraudulent and unlawful purpose or the persons
concerned in the formation or management of its affairs have been
guilty of fraud, misfeasance or misconduct in connection therewith
and that it is proper that the variable capital company be wound
up;
(d) the variable capital company has made a default in filing with
the Registrar its financial statements or annual returns for
immediately preceding five consecutive financial years; or
(e) the National Company Law Tribunal is of the opinion that it is
just and equitable that the variable capital company be wound up.
(2) The provisions of sub-section (1) shall apply, mutatis mutandis, for the
purpose of winding up of a sub-fund by the National Company Law
Tribunal.
(3) Without prejudice to sub-section (1) and (2), a sub-fund may be wound
up by the Authority, in the following circumstances, in such manner as
may be specified by regulations,—
(a) the tenure of the sub‑fund expires;
(b) a resolution has been passed by members, holding not less
than three-fourth of the share capital issued under such sub-fund;
(c) upon occurrence of an event, pursuant to which, the articles of
the variable capital company require the sub‑fund to be wound up;
or
(d) upon issuance of direction by the Authority to the fund
management entity, to wind up the sub-fund in the interest of
shareholders and for orderly development of the financial market.
(4) Notwithstanding anything contained under this Chapter or any other
law, a sub-fund may be wound up in accordance with this section as if it
27For discussion purposes only
Privileged and Confidential
were a separate variable capital company and a variable capital company
shall be wound up after each of its sub-funds has been wound up.
Explanation- For the purpose of winding up of a variable capital company
or its sub-funds by the National Company Law Tribunal, sections 273 to
288, 290 to 302, 324, and 326 to 365 of Companies Act, 2013, shall apply,
18 of 2013. mutatis mutandis, subject to such form, manner, and other matters, as may
be prescribed.
13ZD. Where any variable capital company on account of its sub-funds Applicability
commits a default under section 3(12) of the Insolvency and Bankruptcy of Insolvency
31 of 2016. Code, 2016, the provisions of Insolvency and Bankruptcy Code, 2016 and
31 of 2016. shall apply, in such manner as may be prescribed. Bankruptcy
Code, 2016.
Explanation.— For the purposes of this section,—
(i) a variable capital company and its sub-funds shall be a
financial service provider under section 3(17) of the
31 of 2016. Insolvency and Bankruptcy Code, 2016; and
(ii) each sub-fund of a variable capital company shall be
treated as a separate legal person.
13ZE. The Registrar may, on its own motion, or on an application made Removal of
by the variable capital company, remove the name of the variable capital name of the
company from the register of variable capital companies and dissolve the variable
variable capital company. capital
company
from the
register.
Explanation.— For the purposes of this section, sections 248 to 251 of
18 of 2013. Companies Act, 2013 shall apply, mutatis mutandis, subject to such form,
manner, and other matters, as may be prescribed.
13ZF. (1) Without prejudice to the powers and functions of the Authority, Tribunal for
where any provision of this Chapter provides for the adjudication of a adjudication
matter by the National Company Law Tribunal, such matter shall be under this
adjudicated by the National Company Law Tribunal having territorial Chapter.
jurisdiction over the place where the registered office of the variable
capital company is located.
(2) The National Company Law Tribunal shall exercise all powers
18 of 2013. conferred under Chapter XXVII of the Companies Act, 2013 for the
purposes of adjudicating on any matter arising under the provisions of this
Chapter.
(3) An application to the National Company Law Tribunal in relation to any
matter that may arise under the provisions of this Chapter shall be made
in such conditions, form and manner and accompanied with such fee as
may be prescribed.
28For discussion purposes only
Privileged and Confidential
13ZG. (1) Notwithstanding anything to the contrary contained under the Appeal to
18 of 2013. Companies Act 2013, any person aggrieved by the order of the National National
Company Law Tribunal under this Chapter may prefer an appeal to the Company
National Company Law Appellate Tribunal constituted under section 410 Law
18 of 2013. of the Companies Act, 2013. Appellate
Tribunal.
(2) Every appeal under sub-section (1) shall be filed before the National
Company Law Appellate Tribunal within a period of forty-five days from
the date on which a copy of the order of the National Company Law
Tribunal is made available to the person aggrieved and the appeal shall
be in such form and manner and accompanied by such fees, as may be
prescribed.
Provided that the National Company Law Appellate Tribunal may entertain
an appeal after the expiry of the said period of forty-five days from the date
aforesaid, but within a further period not exceeding forty-five days, if it is
satisfied that the appellant was prevented by sufficient cause from filing
the appeal within that period.
13ZH. (1) Any person aggrieved by an order of the National Company Law Appeal to
Appellate Tribunal may file an appeal to the Supreme Court on a question Supreme
of law arising out of such order under this Chapter within sixty days from Court.
the date of receipt of such order:
Provided that the Supreme Court may, if it is satisfied that a person was
prevented by sufficient cause from filing the appeal within the said period,
allow it to be filed within a further period not exceeding sixty days.”
3. In Chapter VI of the principal Act, after section 21, the following section
shall be inserted, namely:—
“21A. (1) The Central Government may, from time to time, notify legal Power of
forms through which financial institutions may undertake their business in Central
the IFSC, in the Third Schedule of this Act. Government
to notify legal
forms for
financial
institutions.
(2) A draft of every notification proposed to be issued under sub-section
(1), shall be laid before each House of Parliament, while it is in session,
for a total period of thirty days which may be comprised in one session or
in two or more successive sessions.
(3) If both Houses agree in disapproving the issue of the notification or
both Houses agree in making any modification in the notification, the
notification shall not be issued or shall be issued only in such modified
form as may be agreed upon by both the Houses, as the case may be.
29For discussion purposes only
Privileged and Confidential
(4) The period of thirty days referred to in sub-section (2) shall not include
any period during which the house referred to in sub-section (3) is
prolonged or adjourned for more than four consecutive days.”
******
30THIRD SCHEDULE
[see section 21A]
1. Variable Capital Company for launching of schemes by Fund Management Entities.
1PROFORMA FOR COMMENTS
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