What is an international financial services company?
Is the Companies Act,
2013 applicable as it is to IFSCs?
J.Sriprasad
BC0160048
International Financial Service Centre (IFSC) serves to customers outside the jurisdiction of the
domestic economy to offer world class financial services to residents and non-residents, to the
level allowed under the current regulations, in a currency other than the domestic currency of the
place where the IFSC is situated. IFSCs are set up in special economic zones as a unit of SEZ or
as a special economic zone after approval from central government and deal with flows of
finance, financial products, and services across borders.
The various services provided by IFSC are: Fund-raising services for individuals, corporations
and governments; Asset management and global portfolio diversification undertaken by pension
funds, insurance companies and mutual funds; Wealth management; Global and regional
corporate treasury management operations that involve fund-raising, liquidity investment and
management and asset-liability matching; Risk management operations such as insurance and
reinsurance; Merger and acquisition activities among trans-national corporations.
IFSCs are classified into four types:
Global Financial Centers
Regional Financial Centers
Non-global and non-regional, ordinary international IFSCs
Offshore Financial Centers
The Companies Act, 2013 is applicable to IFSCs but there are certain exceptions. IFSCs are
exempted by the exercise of powers under the Section 462(1) of Companies Act, 2013, the
Ministry of Corporate Affairs has exempted the Companies which are licensed to operate by the
RBI or SEBI or IRDA from the IFSC located in an approved multi-services Special Economic
Zone set-up under the Special Economic Zones Rules, 2006. The exemption to IFSC Private
Company is provided by Notification GSR 9(E) on 04-04-2017 and IFSC Public Company is
provided by Notification GSR 8(E). The various exemptions are:
Sub-section 41 of Section 2- Financial year of such Company which is subsidiary of a
foreign company may same as financial year of its holding and approval of the Tribunal
will not be required.
Clause (a) of Sub-Section (1) of Section 4- It shall have a suffix “International Financial
Services Company” or “IFSC” as part of its name.
Clause (c) of sub-section (1) of Section 4- It shall state its object to do financial services
activities, as permitted under Special Economic Zones Act, 2005 read with Special
Economic Zones Act, 2006.
Sub-section (1) of Section 12- Can have registered office only in IFSC located in the
approved multi- services SEZ set up under Special Economic Zones Act, 2005 read with
Special Economic Zones Act, 2006.
Sub-section (2) and (4) of Section 12- It is 60 days instead of 30 days of its incorporation
period for intimating to Registrar for situation of registered office address and any change
in situation of registered office address.
Sub-section (3) & (7) of Section 42- This sub-section of section 42 relating to private
placement shall not apply.
Sub-section (6) of Section 42- The time frame for allotment of securities is 90 days from
the date of receipt of application money for such securities instead of 60 days.
Section 43 (kinds of share capital) and Section 47 (voting rights)- This section is already
not applicable to private Companies, where the memorandum or articles of association of
such company provides otherwise. This section shall not apply to IFSC public company
where the memorandum or articles of association of such company provides for it.
Clause (c) of sub-section (1) of Section 54- This clause of sub- section 1 of Section 54
relating to issue of sweat equity shares shall not apply.
Clause (a) of sub-section (1) of Section 62- Exemption is already available to private
companies. In IFSC public company the offer period for right issue can be lesser than
those specified in the section, if 90% of the members have given their consent in writing
or electronic mode.
Clause (a) to (e) of sub-section (2) of section 73- Exemption is already available to
private companies. It shall not apply to IFSC public company which accepts from its
members, monies not exceeding 0 % of aggregate of paid-up capital and free reserves and
such company shall file the details of monies so accepted to Registrar in such manner as
may be specified.
Sub-section (1) of Section 117- A copy of agreement or resolution (e-Form MGT-14) to
be filed within 60 days instead of 30 days.
Clause (g) sub-section (3) of section 117- Exemption is already available to private
companies. This clause, relating to filing of board resolutions with registrar shall not
apply to IFSC public company.
Sub-section (10) of section 118- Secretarial standards 1 and 2 shall not be applicable.
Section 135 (Corporate Social Responsibility)- Does not apply for a period of 5 years
from the commencement of business of such company.
Section 138 (Internal Audit)- This section shall apply if the articles provide for the same.
2nd proviso to sub-section (1) of Section 149- Not applicable to private companies. This
proviso relating to compulsory appointment of at least one woman director by such class
or classes of companies as may be prescribed shall not apply to IFSC public company.
Sub-section (4) to (11), Clause (i) of sub-section (12) and sub-section (13) of Section
149- This sub-sections are not applicable to IFSC Company.
Sub-section (1) of Section 173- It shall hold the first meeting of board of directors within
60 days of its incorporation and thereafter at least one meeting of board of directors in
each half of a calendar year.
Section 177 and 178; Section 196(4) and Section 197- These are not applicable to IFSC
Company.
Section 180- Not applicable to private companies. This section relating to restriction on
powers of the board shall apply to IFSC private company unless the articles of the
company provides otherwise.
2nd Proviso to Sub Section(1) of Section 188- Not Applicable to IFSC Companies
Section 197- Not applicable to private companies. This section relating to limit on
overall managerial remuneration and managerial remuneration in case of absence or
inadequacy of profits shall not apply to IFSC public companies.
