Conversion of External Commercial Borrowing and Lumpsum Fee/Royalty into Equity

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..... ed, subject to meeting all applicable tax liabilities and compliance with the procedures prescribed. 2. The matter has been further reviewed by the Government of India, Ministry of Finance vide Press Release dated September 29, 2004 (copy enclosed). Accordingly, it has been decided to grant General Permission for conversion of ECB into equity subject to the following conditions: i. The activity of the company is covered under the Automatic Route for FDI or they had obtained Government approval for foreign equity in the company, ii. The foreign equity after such conversion of debt into equity is within the sectoral cap, if any, iii. Pricing of shares is as per SEBI and erstwhile CCI guidelines/regulations in the case of listed/unl .....

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..... m ECB-2 clearly differentiating the converted portion from the unconverted portion. The words 'ECB partially converted to equity' shall be indicated on top of the ECB-2 form. In the subsequent months, the outstanding portion of ECB shall be reported in ECB-2 form to DESACS as per the instructions contained in AP (DIR Series) Circular no. 60 dated January 31, 2004. 5. Conversion of Lumpsum fee/Royalty into equity: We also invite your attention to paragraph 2 of the Circular mentioned above. As regards issue of equity/preference shares by conversion of lumpsum fee or royalty, the details thereof shall be reported in form FC-GPR to the concerned Regional Office of Reserve Bank. 6. Necessary amendments to Foreign Exchange Management (T .....

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..... keovers ) Regulations, 1997, falls within the sectoral cap and also complies with prescribed pricing guidelines. b) Conversion of ECB/Loan into equity provided the activity of the company is covered under automatic route, the foreign equity after such conversion falls within the sectoral cap and also complies with prescribed pricing guidelines. c) Cases of increase in foreign equity participation by fresh issue of shares as well as conversion of preference shares into equity capital provided such increase falls within the sectoral cap in the relevant sectors, are within the automatic route and also complies with prescribed pricing guidelines. In respect of the procedural simplifications given at para 1 above, the onus of complying .....

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