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The International Financial Services Centres Authority amends the Framework for Ship Leasing to expand permissible activities and asset management support services for lessors. Finance companies and finance units registered in International Financial Services Centres must follow the revised permitted activities under Clause 3.E of the circular. Lessors may now undertake voyage charters, contracts of affreightment, shipping pool employment, and other legal commercial transactions. Asset management support services now extend to group entities of the lessor in International Financial Services Centres. A group entity includes a subsidiary, parent, joint venture, associate, related party, common brand name entity, or an entity with twenty percent and above equity share investment. The classification of a lease follows the Indian Accounting Standards on Leases.
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[Image omitted. See the official document.]
CIRCULAR
F. No. 496/IFSCA/FC/SLF/2022-23/002
March 22, 2023
To, All Finance Company / Finance Unit registered in the International Financial Services Centres Authority (IFSCs)
Subject: Amendment to the Circular titled ‘Framework for Ship Leasing’
Reference may be drawn to the Circular No. 496/IFSCA/FC/SLF/2022-23/001 dated August 16, 2022 (‘Circular’), issued by the International Financial Services Centres Authority (hereinafter referred to as ‘IFSCA’ or ‘the Authority’), inter-alia specifying ‘permissible activities under operating lease’.
Post issuance of the said Circular, IFSCA has received several representations from stakeholders inter-alia requesting enablement of voyage charter and other commercial transactions for employment of ships, as permissible activities under operating lease.
The matter was referred to the Directorate General of Shipping, India, which clarified that these activities are an integral part of the ecosystem and may be included as part of the shipping ecosystem in the IFSC, as at present many of the Indian players are going off-shore for availing these services.
Further, it has been decided that undertaking of ‘Asset Management Support Services’ may also be extended to ‘group entities' of lessor in IFSC instead of limiting it only to the wholly owned subsidiary (ies) of the lessor and its branch set up in IFSCs in India.
In view of the above, Clause 3.E of the said Circular stands substituted as under:
“A lessor in IFSCs shall be permitted to undertake all or any of the following activities:
Here the term ‘Group Entities’, shall mean an arrangement involving two or more entities related to each other through any of the relationships, viz. Subsidiary – parent (defined in terms of AS 21), Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23), a related party (defined in terms of AS 18), Common brand name and investment in equity
shares (of 20% and above).
Explanation: A transaction shall be classified as a lease if it is in accordance with the Indian Accounting Standards (Ind AS 116) on Leases.”
A copy of this circular is available on the website of the IFSCA at www.ifsca.gov.in/circular.
Yours faithfully,
R. Kumar
(General Manager – Banking)
rag.kumar@ifsca.gov.in
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