Thursday, August 14, 2014

Issue of Partly Paid Shares and Warrants by Indian Company to Foreign Investors permitted


  • Eligible instruments and investors

Partly paid equity shares and warrants issued by an Indian company in accordance with the provision of the Companies Act, 2013 and the SEBI guidelines, as applicable, shall be eligible instruments for the purpose of FDI and foreign portfolio investment (FPI), Foreign Institutional Investors (FIIs)/Registered Foreign Portfolio Investors (RFPIs) subject to compliance with FDI and FPI schemes.

  • Partly paid equity shares

The pricing of the partly paid equity shares shall be determined upfront and 25% of the total consideration amount (including share premium, if any), shall also be received upfront. The balance
consideration towards fully paid equity shares shall be received within a period of 12 months. The time period for receipt of the balance consideration within 12 months shall not be insisted upon where the issue size exceeds rupees five hundred crore. However, the investee company shall appoint a monitoring agency on the same lines as required in case of a listed Indian company under the SEBI (ICDR) Regulations.
  • Warrants
The pricing of the warrants and price/conversion formula shall be determined upfront and 25% of
the consideration amount shall also be received upfront. The balance consideration towards fully
paid up equity shares shall be received within a period of 18 months. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such warrants, in accordance with the extant FEMA Regulations and pricing guidelines stipulated by RBI from time to time. Thus, Investee company shall be free to receive consideration more than the pre-agreed price. The reporting of issue or transfer of partly paid shares shall be made in form FC-GPR and form FC-TRS respectively. Non-Resident Indians (NRIs) shall also be eligible to invest on non-repatriation basis in partly-paid shares and warrants issued by Indian companies in accordance with the provisions of the Companies Act/ SEBI guidelines / Income tax provisions, as applicable. Investments by NRIs in partly-paid shares and warrants on non- repatriation basis shall also be subject to terms and conditions stipulated in Schedule 4 to Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time.


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