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Tuesday, Aug 04, 2009
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Business Daily from THE HINDU group of publications Tuesday, Aug 04, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Our Bureau New Delhi, Aug. 3 The Centre has taken one more step towards enabling private trusts to invest in listed shares and specified debt securities. The Finance Minister, Mr Pranab Mukherjee, on Monday introduced a Bill in the Lok Sabha that seeks to amend the Indian Trusts Act, 1882 to empower the Government to notify a class of securities as eligible for investment by private trusts. The Bill seeks to do away with the requirement of case-to-case approval by the Government of the security in which trust money can be parked. All references to outdated and obsolete securities are proposed to be deleted from the Indian Trusts Act, 1882. Once this Bill is enacted into law, the Centre is likely to specify that private trusts can adopt the investment pattern for non-government provident funds, as spelt out by the Finance Ministry in August 2008. However, for private trusts to invest in listed shares or any class of specified securities (other than Government securities), it has been stipulated in the Bill that the written consent of the beneficiary (who is competent to contract) is mandatory. The proposed amendments will particularly benefit trusts whose deeds do not expressly specify the pattern of investments to be adopted in situations where trust money cannot be applied immediately or at an early date to the purposes of the trust.
In August 2008, non-government provident as well as superannuation and gratuity funds were allowed greater exposure to the stock market. From April 1, they could directly invest up to 15 per cent of their investible funds in shares or companies on which derivatives are available in the Bombay Stock Exchange or National Stock Exchange. Meanwhile, the objects and reasons of the Indian Trusts (Amendment) Bill, 2009 said that greater autonomy and flexibility are proposed to be given to the trustees to take decisions on investment of trust money based on their assessment of the risk return trade-off and the relevant provisions of the trust deed. This would also be consistent with the current economic environment and the present shift from a merit-based regulatory regime to a disclosure regulatory regime, according to the Finance Ministry. The proposed amendments to the Indian Trust Act, 1882 — to clean up the provisions relating to investments (Section 20) — have been on the cards for long, according to informed sources. The suggestions for amending the Act, especially in regard to provisions on investments and references to English joint stock companies, were made by the Law Commission. In December 2007, the Union Cabinet approved the amendment. In October 2008, it again considered this issue and approved amendments. But these could not be passed by Parliament. Bill on private trust investments Trusts may get to invest in shares More Stories on : Financial Markets | Investments | Policy
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