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TMI BlogPurchase by a person resident outside India of equity/preference/convertible preference shares and convertible debentures issued by an Indian company - SCHEDULE IX X X X Extracts X X X X X X X X Extracts X X X X ..... ule, may issue 60 [shares or convertible debentures or warrants] to a person resident outside India, subject to the limits prescribed in Annex B to this schedule, in accordance with the Entry Routes specified therein and the provisions of Foreign Direct Investment Policy, as notified by the Ministry of Commerce industry, Government of India, from time to time. 68 [Provided that a. In the sectors/activities mentioned in the Annex B to the Schedule, foreign investment upto the limit indicated against each sector/activity is allowed subject to the conditions of the extant policy on specified sectors and applicable laws/regulations; security and other conditionalities. In sectors/activities not listed therein, foreign investment is permitted upto 100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities. b. Wherever there is a requirement of minimum capitalization it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Schedule may issue 61A [shares or convertible debentures or warrants] out of fresh capital proposed to be issued by it for the purpose of financing expansion programme, up to the extent indicated in Annex B, subject to compliance with the provisions of this paragraph.] [16] (old 2)**** 30 [ (2) A company which is an Micro and Small Enterprise (MSE) (earlier Small Scale Industrial Unit) including an Export Oriented Unit or a Unit in a Free Trade Zone or in an Export Processing Zone or in a Software Technology Part or in an Electronic Hardware Technology Park, and which is not engaged in any activity/sector mentioned in Annex A to this schedule may issue 62 [shares or convertible debentures or warrants ] to a person resident outside India referred to in paragraph 1, subject to the limits prescribed in Annex B to this schedule, in accordance with the Entry Routes specified therein and the provision of Foreign Direct Investment Policy, as notified by the Ministry of Commerce Industry, Government of India, from time to time.] 31 [ (3) Any Industrial undertaking, with or without Foreign Direct Investment, which is not an MSE, having an industrial license under the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pricing guidelines etc. as amended by Reserve Bank of India, from time to time; ii. The issue of equity shares under this provision shall be subject to tax laws as applicable to the funds payable and the conversion to equity should be net of applicable taxes.] Provided , that the foreign equity in the company after the conversion of Royalty/Lumpsum fee/ECB into equity is within the sectoral cap notified, if any.] 71 [(v) by way of swap of shares, provided the company in which the investment is made is engaged in an automatic route sector, subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the home country. Note: A company engaged in a sector where foreign investment requires Government approval may issue shares to a non-resident through swap of shares only with approval of the Government.] 73 [(5). A wholly owned subsidiary set up in India by a non-resident entity, operating in a sector where 100 per cent foreign investment is allowed in the automatic route and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nex B to this Schedule ; or 72 [ (c) ***] (d) proposes to issue shares to a person resident outside India against import of capital goods/machinery/equipment ( 34 ['excluding second-hand machinery]) subject to compliance with the conditions specified by the Government of India and the Reserve Bank from time to time; or (e) proposes to issue shares to a person resident outside India against preoperative/pre-incorporation expenses (including payments of rent etc.), subject to compliance with the conditions specified by the Government of India and the Reserve Bank from time to time. ]] 66 [Para 4 4A and 4B deleted] 26 [5. Issue price Price of shares issued to persons resident outside India under this Schedule, shall not be less than- (a) the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India; 49 [b. the valuation of shares done as per any internationally accepted pricing methodology for valuation of shares on arm s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker where the shares of the company are not listed on any recognised stock ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly paid equity shares, the period of 180 days shall be reckoned from the date of receipt of each call payment.] 39 [9. Reporting of issuance of shares of Indian company.-(1) An Indian company issuing 53 [shares or convertible debentures or warrants] in accordance with these Regulations shall submit through AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, (A) not later than 30 days from the date of receipt of the amount of consideration received by Indian company for issue of 54 [shares or convertible debentures or warrants], 55 [report in Advance Reporting Form as specified by Reserve Bank from time to time] along with a copy/ies of Foreign Inward Remittance Certificate/s (FIRC), Know Your Customer (KYC) report on the non-resident investor and details of the Government approval, if any. 56 [Explanation: An Indian company issuing partly paid equity shares, shall furnish a report not later than 30 days from the date of receipt of each call payment.] (B) not later than 30 days from 57 [the date of issue of shares or convertible debentures or warrants], 43 [a report in the form FC-GPR as specified by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted by its branches, to the Reserve Bank in the form and manner stipulated by Reserve Bank, Foreign Exchange Department, Central Office, from time to time. (iv) The sale consideration in respect of 64 [shares or convertible debentures or warrants ] remitted into India through normal banking channels, shall be subjected to a KYC check by the remittance receiving AD bank at the time of receipt of funds, in case, the remittance receiving AD bank is different from the AD bank handling the transfer transaction, the KYC check shall be carried out by the remittance receiving bank and the KYC report shall be submitted by the customer to the AD bank for carrying out the transaction along with the form FC-TRS. (v) In case prior approval of the Reserve Bank is granted for transfer of shares or convertible debentures, from a resident to the non-resident on deferred payment of consideration, the same shall be reported in form FC-TRS, duly certified by the AD bank, within 60 days from the date of receipt of the full and final amount of consideration. ] 42 [11.] Permission for retaining share subscription money received from persons resident outside India in a foreign currency account Reserve B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substitution it was read as: (1) An Indian company which is not engaged in any activity, or in manufacturing of item included in Annexure 'A' to this Schedule, may issue shares or convertible debentures to a person resident outside India, referred to in paragraph 1 upto the extent specified in Annexure B, subject to compliance with the provisions of the Industrial Policy and Procedures as notified by Secretariat for Industrial Assistance (SIA) in the Ministry of Commerce and Industry, Govt. of India, from time to time. Provided that: i. the activity of the issuer company does not require an industrial licence under the provisions of the Industries (Development Regulation) Act, 1951 or under the locational policy notified by Government of India under the Industrial Policy of 1991 as amended from time to time. ii. the shares or convertible debentures are not being issued by the Indian company with a view to acquiring existing shares of any Indian company. Explanation : A company which proposes to embark on expansion programme to undertake activities or manufacture items included in Annexure B to this schedule may issue shares or debentures out of fresh capital proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsoring company shall comply with the provisions of the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued thereunder by the Central Government from time to time; iv) the sponsoring company shall furnish full details of such issue in a form specified in Annexure C to the Foreign Investment Division, Exchange Control Department, Reserve Bank of India, Central Office, Mumbai within 30 days from the date of closure of the issue. 21. Has been omitted vide Notification No. 179/2008 dated 22/08/2008 , before omission it was read as, 3 [5A. Issue price of ADRs/GDRsPrice of ADRs/GDRs to be issued to a person resident outside India may be decided by the Indian company- a. where the issue is on public offer basis, in consultation with the Lead Manager to the issue; and b. in other cases , as provided in paragraph 5 above.] 22. Substituted vide Notification No. 179/2008 dated 22/08/2008 , before substitution it was read as, [6. Dividend Balancing Where a company is engaged in any of the industries in the consumer goods sector, specified in Annexure E, or in any other activity where the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Venture Capital Funds registered with. SEBI; investment by multinational., financial institutions; or where in the existing joint-venture investment by either of the parties is less than 3% or where the existing joint Venture/ collaboration is defunct or sick or for transfer of shares of an Indian company engaged in Information Technology sector or in the mining sector, if the existing joint- venture or technology transfer/trade mark agreement of the person to Whom the shares are to be transferred are also in the information Technology sector or in the mining sector or in the mining sector for same area/mineral 28. Inserted vide Notification No. FEMA 229/2012-RB, Dated 23-4-2012 29. Substituted vide Notification No. FEMA 229/2012-RB, Dated 23-4-2012 before it was read as;- An Indian company intending to issue shares to a person resident outside India in accordance with these Regulations shall obtain prior approval of the Foreign Investment Promotion Board of Government of India if the company; (a) is engaged or proposes to engage, in arty activity given in Annex A (A) to this schedule; or (b) falls under the FIPB route as stipulated under the column Entry Route in Annex B to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 26th day of September 2012 36. Inserted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 2nd day of May 2011 37. Inserted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 1st day of April, 2003 38. Substituted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 2nd day of May, 2011, before it was read as, debit to NRE/FCNR(B) account 39. Substituted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 30th day of May 2008, before it was read as, 9. Report by the Indian company (1) An Indian company issuing shares or convertible debentures in accordance with these Regulations shall submit to Reserve Bank, A. not later than 30 days from the date of receipt of the amount of consideration, a 23 [report in form specified in Annex C to this schedule] indicating: i) Name and address of the foreign investors ii) Date of receipt of funds and their rupee equivalent iii) Name and address of the authorised dealer through whom the funds have been received, and iv) Details of the Government approval, if any. B. not later than 30 days from the date of issue of shares, 33 [a report in the form F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not being issued by the Indian company with a view to acquire existing shares of any Indian company. 47. Substituted vide NOTIFICATION 307/2014-RB, Mumbai, the 26th May, 2014 , before it was read as, a report titled Annual Return on Foreign Liabilites and Assets in the form specifed in Annex E to this Schedule . 48. Deleted vide NOTIFICATION 307/2014-RB, Mumbai, the 26th May, 2014 , before it was read as, (3) Reserve Bank may, by notification, modify from time to time, the format of report titled Annual Return on Foreign Liabilities and Assets specified in Annex E to this Schedule. 49. Substituted vide Notification No. FEMA.306/2014 -RB dated May 23, 2014 , before it was read as, (b) the fair valuation of shares done by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India; and 50. Omitted vide Notification No. FEMA.306/2014 -RB dated May 23, 2014 , before it was read as, (c) the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 57. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, the date of issue of shares 58. Inserted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 59. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 60. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 61. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 61A. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or debentures 62. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 63. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 64. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible deben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares are purchased on a recognized stock exchange; ii) the Indian company has issued ADRs/GDRs; iii) the shares are purchased with the permission of Custodian of the ADRs/GDRs of the concerned Indian company and are deposited with the Custodian; iv) the number of shares so purchased shall not exceed ADRs/GDRs converted into underlying shares and shall be subject to sectoral caps as applicable; v) the non-resident investor, broker, Custodian and the overseas depository comply with the provisions of the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued thereunder by the Central Government from time to time.] 20 [4B Sponsoring an issue of ADRs/GDRs by Indian Company An Indian company may sponsor an Issue of ADRs/GDRs with an overseas depository against Shares held by its shareholder at a price to be determined under the provisions of the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Government of India and the reporting requirements as directed by Reserve Bank, from time to time. ..... 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