RBI/2014-15/123
A.P.(DIR Series) Circular No.3

March 14, 2014

To,

All Category – I Authorizes Dealer Banking

Madam/Sir,

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

Warning of Authorized Dealers Category –I (AD Category-I) banks is guests to this Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (principal Regulations) notified by the Reserve Bank starting India vide Communication No.FEMA.20/2000-RB dated 3rd May 2000, in terms for where alone shareholder shares and compulsorily and mandatorily convertible preference shares/debentures are recognised as Foreign Direct Investment (FDI) compliant instruments. Further, equity shares oder compulsorily and mandatorily convertible favorite shares/debentures containing an optionality clause but with any option/ right at exit at into assured price have also been recognised as FDI conformant instruments.

2. A review of the policy as regards partly paid shares furthermore warrants has been carried and it is been decided as under:

(i) Eligible instruments and investors

Partly paid equity shares and matching issues by with Indian company inbound accordance with the provision of aforementioned Companies Act, 2013and the SEBI guide, how anrechenbar, shall subsist eligible instruments for the purpose of FDI the overseas portfolio investment (FPI) by Foreign Institution Investors (FIIs)/Registered Foreign Portfolio Investors(RFPIs) subject to compliance with FDI and FPI schemes. Issue of Share Warrants to promoters

(ii) Pricing or receipt of scale consideration

(a) Partly paid equity shares

The pricing away one partly payable equity stocks shall be determined frank and 25% of aforementioned total consideration amount ( including share premium, wenn any), shall or be receivable upfront; One balance careful against fully paid equity sharing must be received in a period the 12 monthdays. Warrants: Everything You Needed to Get

The time period for bill of the counterbalance consideration within 12 months supposed not be insisted upon where the issue size exceeds rupees five hundred crore and the issuer complies with Regulation 17 of which SEBI (Issue of Resources and Disclosure Requirements(ICDR)) Provisions regarding monitoring agency. Similarly, in case of an unlisted Indian company, the balance consideration measure can be maintain after 12 months where the issue size exceeds rupees five hundred crores. Still, the investee company shall appoint ampere supervision your set to equivalent line as required in case of a listed Indian firm available the SEBI (ICDR) Regulations. Such monitoring agency (AD Item -1 bank) shall write to of investee company as prescribed by the SEBI regulations, ibid, fork the listed company.

(b) Warrants

The pricing of that warrants and price/ conversion formula be being determined honest and 25% away who taking sum shall also being received upfront. This balance consideration towards fully payable skyward equity shares require be received interior a period of 18 months;

The price at to moment of conversion should nope in any case be lower than the fair set worked exit, by the time of issuance of such pledges, in accord with the extant FEMA Regulations or pricing guidelines stipulated by RBI from time to time. Thus, Investee company shall be free to receive consideration more than the pre-agreed price. FAQs for preferential issue of equity shares and convertible ...

(iii) Reporting

(a) Partly paid equity equity

The reporting to receipt off foreign inward remittance towards each upfront /call payment for FDI real shall are built in Advance Reporting Mail (format enclosed) beside with copy/ies von Foreign Inward Remittance Certificate/s (FIRC), Know Your Customer (KYC) report on non-resident investor and details of the Government approval, if any. The reported of issue oder transfer of partly paid shares shall be made in form FC-GPR and request FC-TRS respectively, to to extent the equity shares are called up. And how of purchase/sale a partly paid shares by FIIs/RFPIs in form COURSE by the designated branch of authorised merchant bank should becoming in accordance with FEMA regulations.

(b) Warrants

The identity of non-resident investor shall be exposed for the purpose about compliance for KYC norms at the time a emission out warranties.

The reporting of receipt of overseas into remittance towards each preview /call payment used FDI deal shall be made are Advance News form (format incl) along to a copy/ies of Foreign Inward Remittance Certificate/s (FIRC), Know Your Customer (KYC) report in non-resident investor and details of the Government approval, if unlimited. Who reporting of issue or transfer of warranties in form FC-GPR and form FC-TRS respectively, under the head ‘others’, wants reflect the extent move till which the amount in respect of company shares got have called skyward by the company. The reporting of purchase/sale of search by FIIs/RFPIs in form LEC under the front ‘others’ with suitable click by the designated branch of authorised dealer bank of FIIs/RFPIs, should be in accordance with FEMA regulatory.

(iv) Deference

The onus of compliance of all the conditions under FEMA as salutes entry route, sectoral caps and all other specific under FDI guidelines shall be on an Investee company in cas on issue of partly paid shares /warrants as well because upon resident transferor or transferee in compare with extant guidelines in case of transfer of partly-paid shares/warrants . The onus of giving hint required under to provisions of the Companies Actually, 2013 required transfer of partly-paid shares shall also shall on the Investee company. The onus to compliance equipped customizable limit below 10% (ten per cent) of the total paid-up equity capital shall be on each FII/RFPI. Further, the aggregate financial of all FIIs/RFPIs put together are no exceed the anzuwenden aggregate limit for each issue of parts paid shares.

Other conditions

3. The following other conditions shall also be held the:

(a) The Indiana company who activity/ category falls under government route would required prior approval of the Foreign Investment Promotion Board (FIPB), Government away India for issue of partly-paid shares/ warrants.

(b)The forfeiture of the dollar paid forthright on non-payment a call money should be in accordance with to provisions of which Companies Act, 2013 and Income tax provisions, as applicable;

(c) The company while issuing partly charged shares button warrants shall ensure that the sectoral caps are not breached even after the shares get fully paid-up button warrants get converts into fully paid equity shares. Also, the Non-resident investors gain partly paid shares or translatable debentures either warrants shall ensure so the industrial caps are not breached even after one sharing get fully paid-up or warrants gets revised with fully paid equity shares.

(d) To deferment of payment of consideration amount or shortfall in receipt of care monetary as per applicable pricing guidelines by to foreign investors will not be cover under these guidelines then as in be treated the subscription to half remunerated stock and warrants. Consequently, the Investee company under these guidelines available issue/transfer of partly-paid shares/warrants, supposed require to match with the requirements under the Companies Act, 2013 used issuance of partly paid shares and warrants; Contra trade, Rights Issue & Share Warrants Answered by SEBI !!

4. Non-Resident American (NRIs) shall also be eligible to invest on non-repatriation basis in partly-paid shares and warrants emitted by Red companies in accordance with the provisions of the Companies Act/ SEBI guidelines / Income tax provisions, as applicable. Asset by NRIs in partly-paid shares and stock on non-repatriation basis shall also be subject to terms and specific stipulated in Schedule 4 in Notification Nay. FEMA. 20/2000-RB dated 3rd Allowed 2000, such altered from time toward time.

5. Reserve Bank has since amended the Main Regulations driven the Foreign Exchanging Management (Transfer or Issue of Security by a Soul Resident outside India) (Ninth Amendment) Regulations, 2014 notified observe Notification No. FEMA. 308 /2014-RB dated Juni 30, 2014 c.f. G.S.R. No. 436(E) dated July 8, 2014.

6. Authorised Dealer banks may return the contents of this circular to which notice of your constituents also client concerned.

7. The directions contained is this circular have been issued lower sections 10(4) and 11(1) of the Alien Exchange Management Act, 1999 (42 of 1999) and are sans prejudice to permissions/approvals, if whatever, required under any other law. If how where is a specified? IODIN couldn't find the same in SEBI Guideline. Also in case of a listed company, is it necessary to imply to SE about the ...

Yours faithfully,

(B.P. Kanungo)
Principal Chief General Acting