The business regulatory ecosystem consists of 1,536 acts and rules and over 69,000 compliance obligations. Before businesses can even start operations, they must obtain requisite licenses, permissions, approvals, etc., from appropriate authorities. These licenses must be acquired in various phases, such as the ‘setting up’ stage, ‘pre-commissioning’ stage, ‘post-commissioning’ stage, and the ‘post-production stage.
n a conversation with FinancialExpress.com, Rishi Agrawal, CEO and Co-Founder, Teamlease RegTech talked about various licenses that are required for operating a fintech company in India. “Enterprises are required to obtain registrations and certificates under the Contract Labour (Regulation and Abolition) Act, 1970 and consequent State rules; Employees State Insurance Act, 1948 & Employees State Insurance (General) Regulations, 1950 & Employees State Insurance (Central) Rules, 1950; Central Goods and Services Tax Act, 2017 and Central Goods and Services Tax Rules, 2017; and State Goods and Services Tax Act, 2017 and Rules, among others,” he said.
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“In addition, any fintech accepting deposits and lending is required to acquire the appropriate banking or non-banking licence from RBI. In addition, dependent on its financial offerings, fintechs must also obtain prior approvals and licences from RBI, SEBI or IRDAI to commence operations. Under the Guidelines for Payment Aggregators and Payment Gateways issued by RBI, payment aggregators are also required to obtain a license. Businesses engaged in peer-to-peer lending or cross-border payment processing for current account transactions must obtain corresponding licenses from RBI. In the event that the business is employing the usage of intellectual property (IP) in its offerings, it must obtain the license for its usage from the patent holder, unless the business is the patent holder,” Rishi Agrawal added.
Here are edited excerpts from the interaction…
How should fintech companies disclose their financial health and risks to stakeholders in compliance with regulatory norms?
Publicly traded fintech companies must abide by the disclosure and listing regulations set by SEBI. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations) is a critical part of the regulatory framework for listed entities in India. The disclosure requirements ensure that the sectoral regulators, investors and shareholders of a company are aware of material events and information that can affect the valuation and market reputation of the company.
Under Regulation 30 of SEBI LODR Regulations, a listed entity shall disclose to stock exchange(s) all material events or information not later than 24 hours from the occurrence of event or information. Further, Regulation 30(4) provides the criteria to verify whether the event or information is material. Regulation 30(6) further requires the listed entities to disclose all material information to the stock exchanges first, with decisions taken in board meetings needed to be communicated within 30 minutes of the end of the meeting.
Regulation 29(2) requires the company to inform the exchange at least 2 days before the meeting. If the agenda is to discuss the financial results, the intimation must be sent 5 days before the meeting. Regulation 29(3) states the requirement of intimating the exchange 11 days before a meeting to alter the nature or form of the securities already issued and amendment to the payment date of interests or redemption amount. Regulation 23(9) requires listed companies to file disclosures on related-party transactions to the exchange every six months.
How can fintech companies stay updated with regulatory changes and ensure continuous compliance?
Companies must conduct compliance applicability assessments to determine the extent of regulations that are applicable to their business. They must keep track of circulars, directions, advisories, notices, orders, etc. issued by sectoral regulators such as RBI, the Ministry of Corporate Affairs to stay updated with regulatory changes. However, this can be a complex task as these companies must also adhere to other regulatory requirements under labour law, environment law, finance and taxation regulations, to name a few. Businesses in India are subject to 1,536 acts and rules and 69,233 compliances. Furthermore, they must keep track of over 2200 government websites that publish regulatory updates.
