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TMI BlogMaster Circular on Foreign Investment in IndiaX X X X Extracts X X X X X X X X Extracts X X X X ..... ) Chief General Manager-in-Charge INDEX Part - I Foreign Investments in India--Schematic Representation Section - I: Foreign Direct Investment 1. Foreign Direct Investment in India 2. Entry routes for investments in India 3. Eligibility for Investment in India 4. Type of instruments 5. Pricing guidelines 6. Mode of Payment 7. Foreign Investment limits, Prohibited Sectors and investment in MSEs 8. Modes of Investment under Foreign Direct Investment Scheme. 8.A. Issuance of fresh shares by the company 8.B Acquisition by way of transfer of existing shares by person resident outside India 8.C. Issue of Rights / Bonus shares 8.D. Issue of shares under Employees Stock Option Scheme (ESOPs) 8.E Conversion of ECB / Lumpsum Fee / Royalty / Import of capital goods by SEZs in to Equity/ Import payables / Pre incorporation expenses 8.F. Issue of shares by Indian Companies under ADR / GDR 8.G. FDI-through issue / transferof 'participating interest / right' in oil fields to a NR 9. Foreign Currency Account and Escrow Account 10. Acquisition of shares under Scheme of Merger / Amalgamation 11. Remittance of sale proceeds 12. Remittance on winding up/liquidation of Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y basis on March 31 of each year (since 2010) elaborating the policy and the process in respect of FDI in India. The latest "Consolidated FDI Policy Circular" dated April 5, 2013 is available in public domain and can be downloaded from the website of Ministry of Commerce and Industry, Department of Industrial Policy and Promotion - * http://www.dipp.nic.in/English/Policies/FDI_Circular_01_2013 governed by the provisions of the Foreign Exchange Management Act (FEMA), 1999. FEMA Regulations which prescribe amongst other things the mode of investments i.e. issue or acquisition of shares / convertible debentures and preference shares, manner of receipt of funds, pricing guidelines and reporting of the investments to the Reserve Bank. The Reserve Bank has issued Notification No. FEMA 20 /2000-RB dated May 3, 2000 which contains the Regulations in this regard. This Notification has been amended from time to time. 2. Entry routes for investments in India Under the Foreign Direct Investments (FDI) Scheme, investments can be made in shares, mandatorily and fully convertible debentures and mandatorily and fully convertible preference shares of an Indian company by non-residents through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Reserve Bank of India. ADs should also ensure that OCBs do not maintain any account other than NRO current account in line with the instructions as per A.P. (DIR Series) Circular No. 14 dated September 16, 2003. Further, this NRO account should not be used for any fresh investments in India. Any fresh request for opening of NRO current account for liquidating previous investment held on non-repatriation basis should be forwarded by the AD bank to Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. However, ADs should not close other category of accounts (NRE / FCNR / NRO) for OCBs which are in the adverse list of the Reserve Bank of India. These accounts are to be maintained by the respective AD banks in the frozen status. 4. Type of instruments (i) Indian companies can issue equity shares, fully and mandatorily convertible debentures and fully and mandatorily convertible preference shares subject to the pricing guidelines / valuation norms and reporting requirements amongst other requirements as prescribed under FEMA Regulations. (ii) Issue of other types of preference shares such as non-convertible, optionally convertible or partially convertib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn national, NRI, FII) would be at a:-; (a) negotiated price for shares of companies listed on a recognized stock exchange in India which shall not be less than the price at which the preferential allotment of shares can be made under the SEBI guidelines, as applicable, provided the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares. The price per share arrived at should be certified by a SEBI registered Merchant Banker or a Chartered Accountant. (b) negotiated price for shares of companies which are not listed on a recognized stock exchange in India which shall not be less than the fair value to be determined by a SEBI registered Merchant Banker or a Chartered Accountant as per the Discounted Free Cash Flow(DCF) method. Further, transfer of existing shares by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI, FII) to Resident shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident as given above. • The pricing of shares / convertible debentures / preference shares should be deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany which is reckoned as Micro and Small Enterprise (MSE) (earlier Small Scale Industrial Unit) in terms of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, including an Export Oriented Unit or a Unit in Free Trade Zone or in Export Processing Zone or in a Software Technology Park or in an Electronic Hardware Technology Park, and which is not engaged in any activity/sector mentioned in Annex 2 may issue shares or convertible debentures to a person resident outside India (other than a resident of Pakistan and to a resident of Bangladesh under approval route), subject to the prescribed limits as per FDI Policy, in accordance with the Entry Routes and the provision of Foreign Direct Investment Policy, as notified by the Ministry of Commerce & Industry, Government of India, from time to time. Any Industrial undertaking, with or without FDI, which is not an MSE, having an industrial license under the provisions of the Industries (Development & Regulation) Act, 1951 for manufacturing items reserved for the MSE sector may issue shares to persons resident outside India (other than a resident/entity of Pakistan and to a resident/entity of Bangladesh with prior appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any An Indian company may issue fresh shares /convertible debentures under the FDI Scheme to a person resident outside India (who is eligible for investment in India) subject to compliance with the extant FDI policy and the FEMA Regulation. B. Acquisition by way of transfer of existing shares by person resident in or outside India Foreign investors can also invest in Indian companies by purchasing / acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents / NRIs for acquisition of shares by way of transfer in the following manner: 8 B.I Transfer of shares by a Person resident outside India a. Non Resident to Non-Resident (Sale / Gift): A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift, shares or convertible debentures to any person resident outside India (including NRIs but excluding OCBs). Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the Reserve Bank of India. b. NRI to NRI (Sale / Gift): NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI. c. Non Reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd documentation requirements as specified by the Reserve Bank of India from time to time. c) where the pricing guidelines under FEMA,1999 are not met provided that: i) the resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization,etc.),reporting requirements, documentation, etc.; ii) The pricing for the transaction is compliant with specific/explicit , extant and relevant SEBI regulations(such as IPO, book building, block deals, delisting, open/ exit offer,substantial acquisition/SEBI(SAST); and iii) CA Certificate to the effect that compliance with relevant SEBI regulations as indicated above is attached to the Form FC-TRS to be filed with the AD bank. d) where the investee company is in the financial services sector provided that: i). No Objection Certificates(NOCs) are obtained from the respective regulators/regulators of the investee company as well as the transferor and transferee entities and such NOCs are filed along with the Form FC-TRS with the AD bank; and ii). The FDI policy and FEMA Regulations in terms of sectoral caps, conditionalities(such as minimum capitalizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of debentures / each mutual fund scheme. c) The applicable sectoral cap limit in the Indian company is not breached. d) The transferor (donor) and the proposed transferee (donee) are close relatives as defined in Section 6 of the Companies Act, 1956, as amended from time to time. The current list is reproduced in Annex - 5. e) The value of security to be transferred together with any security already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 50,000 per financial year. f) Such other conditions as stipulated by the Reserve Bank in public interest from time to time. (iii) Transfer of shares from NRI to NR requires the prior approval of the Reserve Bank of India. 8.B.V - Escrow account for transfer of shares AD Category - I banks have been given general permission to open and maintain non-interest bearing Escrow account in Indian Rupees in India on behalf of residents and non-residents, towards payment of share purchase consideration and / or provide Escrow facilities for keeping securities to facilitate FDI transactions relating to transfer of shares. It has also been decided to permit SEBI author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty/ Import payables / Pre incorporation expenses (i) Indian companies have been granted general permission for conversion of External Commercial Borrowings (ECB) into shares / convertible debentures, subject to the following conditions and reporting requirements: a) The activity of the company is covered under the Automatic Route for FDI or the company has obtained Government's approval for foreign equity in the company; b) The foreign equity after conversion of ECB into equity is within the sectoral cap, if any; c) Pricing of shares is determined as per SEBI regulations for listed company or DCF method for unlisted company; d) Compliance with the requirements prescribed under any other statute and regulation in force; e) The conversion facility is available for ECBs availed under the Automatic or Approval Route and is applicable to ECBs, due for payment or not, as well as secured / unsecured loans availed from non-resident collaborators. (ii) General permission is also available for issue of shares / preference shares against lump-sum technical know-how fee, royalty due for payment/repayment, under automatic route or SIA / FIPB route, subject to pricing guidelines of RBI/SE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry/ equipment and Pre-operative / pre - incorporation expenses: (a) All requests for conversion should be accompanied by a special resolution of the company; (b) Government's approval would be subject to pricing guidelines of RBI and appropriate tax clearance. (vi) Issue of shares to a non-resident against shares swap i.e., in lieu for the consideration which has to be paid for shares acquired in the overseas company, can be done with the approval of FIPB. (vii) The reporting guidelines are given in Section V of the Master Circular. 8.F. Issue of shares by Indian Companies under ADR / GDR Depository Receipts (DRs) are negotiable securities issued outside India by a Depository bank, on behalf of an Indian company, which represent the local Rupee denominated equity shares of the company held as deposit by a Custodian bank in India. DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg, London, etc. DRs listed and traded in the US markets are known as American Depository Receipts (ADRs) and those listed and traded elsewhere are known as Global Depository Receipts (GDRs). In the Indian context, DRs are treated as FDI. i) Indian companies can raise foreign currency r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Scheme shall be as per the provisions of Companies Act, 1956 and in a manner in which restrictions on voting rights imposed on ADR/GDR issues shall be consistent with the Company Law provisions. Voting rights in the case of banking companies will continue to be in terms of the provisions of the Banking Regulation Act, 1949 and the instructions issued by the Reserve Bank from time to time, as applicable to all shareholders exercising voting rights. viii) Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy / sell or deal in securities by SEBI will not be eligible to subscribe to ADRs / GDRs issued by Indian companies. ix) The pricing of ADR / GDR issues including sponsored ADRs / GDRs should be made at a price determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time. x) A limited two-way fungibility scheme has been put in place by the Government of India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout approval of the Reserve Bank, Escrow account for securities. The Escrow account would also be subject to the terms and conditions as stipulated in A.P. (DIR Series) Circular No. 58 dated May 2, 2011. Further, the Escrow account would be maintained with AD Category I bank or SEBI Authorised Depository Participant (in case of securities account). These facilities will be applicable to both, issue of fresh shares to the non-residents as well as transfer of shares to the non-residents as well as transfer of shares from / to the non-residents. 10. Acquisition of shares under Scheme of Merger / Amalgamation Mergers and amalgamations of companies in India are usually governed by an order issued by a competent Court on the basis of the Scheme submitted by the companies undergoing merger/amalgamation. Once the scheme of merger or amalgamation of two or more Indian companies has been approved by a Court in India, the transferee company or new company is allowed to issue shares to the shareholders of the transfer or company resident outside India, subject to the conditions that : (i) the percentage of shareholding of persons resident outside India in the transferee or new company doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) there exists a security clause in the Loan Agreement requiring the borrower to create charge on financial securities, and iii) the borrower has obtained Loan Registration Number (LRN) from the Reserve Bank: and the said pledge would be subject to the following conditions : i). the period of such pledge shall be co-terminus with the maturity of the underlying ECB; ii). in case of invocation of pledge, transfer shall be in accordance with the extant FDI Policy and directions issued by the Reserve Bank; iii). the Statutory Auditor has certified that the borrowing company will be utilized / has utilized the proceeds of the ECB for the permitted end use/s only. c) Non-resident holding shares of an Indian company, can pledge these shares in favour of the AD bank in India to secure credit facilities being extended to the resident investee company for bonafide business purpose, subject to the following conditions: * in case of invocation of pledge, transfer of shares should be in accordance with the FDI policy in vogue at the time of creation of pledge; * submission of a declaration/ annual certificate from the statutory auditor of the investee company that the loan proceeds wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d include shares held by SEBI registered FII/ SEBI approved sub accounts of FII under the PIS (by way of purchases made through a registered broker on a recognized stock exchange in India or by way of offer/private placement) as well as shares acquired by SEBI registered FII under the FDI scheme. (b) Total holdings of all FIIs / SEBI approved sub accounts of FIIs put together shall not exceed 24 per cent of the paid-up capital or paid-up value of each series of convertible debentures. This limit of 24 per cent can be increased to the sectoral cap / statutory limit, as applicable to the Indian company concerned, by passing of a resolution by its Board of Directors, followed by a special resolution to that effect by its General Body which should necessarily be intimated to the Reserve Bank of India immediately as hitherto, along with certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Investment Policy, as amended from time to to time have been complied with. B. NRIs (a) NRIs are allowed to invest in shares of listed Indian companies in recognised Stock Exchanges unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited with the sale proceeds of shares / debentures, dated Government securities, Treasury Bills, etc. Such credits are allowed, subject to the condition that the AD Category - I bank should obtain confirmation from the investee company / FII concerned that tax at source, wherever necessary, has been deducted from the gross amount of dividend / interest payable / approved income to the share / debenture / Government securities holder at the applicable rate, in accordance with the Income Tax Act. The SNRR A/c may be debited for purchase of shares / debentures, dated Government securities, Treasury Bills, etc., and for payment of fees to applicant FIIs' local Chartered Accountant / Tax Consultant where such fees constitute an integral part of their investment process. B. NRIs NRIs can approach the designated branch of any AD Category - I bank (which has been authorised by the Reserve Bank to administer the PIS) for permission to open a single designated account (NRE/NRO account) under the PIS for routing investments. Payment for purchase of shares and/or debentures on repatriation basis has to be made by way of inward remittance of foreign exchange through normal banking channels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, on such foreign sovereign securities; and c. to liquidate such foreign sovereign securities, if the need arises. Clearing Corporations have to report, on a monthly basis, the balances of foreign sovereign securities, held by them as non-cash collaterals of their clearing members to the Reserve Bank. The report should be submitted by the 10th of the following month to which it relates. b) Equity Segment: The above guidelines are also applicable to the equity segment. Further, domestic Government Securities (subject to the overall limits specified by SEBI from time to time, the current limit being USD 25 billion and investments in Corporate bonds can also be kept as collateral with the recognised Stock Exchanges in India, in addition to cash and foreign sovereign securities with AAA rating for their transactions in cash segment of the market. However, cross-margining of Government Securities (placed as margins by the FIIs for their transactions in the cash segment of the market) shall not be allowed between the cash and the derivative segments of the market. Custodian banks are allowed to issue Irrevocable Payment Commitments (IPCs) in favour of Stock Exchanges / Clearing Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person resident in India or outside India without prior approval of the Reserve Bank. However, NRIs can transfer shares acquired under PIS to their relatives as defined in Section 6 of Companies Act, 1956 or to a charitable trust duly registered under the laws in India. 9. Monitoring of investment position by RBI and AD banks The Reserve Bank monitors the investment position of FIIs/NRIs in listed Indian companies, reported by Custodian/designated AD banks, on a daily basis, in Forms LEC (FII) and LEC (NRI). However, the respective designated bank (NRIs) / Custodian bank (FIIs) should monitor: * the individual limit of NRI / FII to ensure that it does not breach the prescribed limits. * that the trades are not undertaken in the prohibited sectors when the same is reported to them. * that all trades are reported to them by monitoring the transactions in the designated account. The onus of reporting of FII and NRI transactions lies on the designated custodian/AD bank, depository participant as well as the FII/NRI making these investments. 10. Prior intimation to Reserve Bank of India An Indian company raising the aggregate FII and/or NRI investment limit should necessaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... QFIs: (i) Definition - QFIs shall mean a person who fulfills the following criteria : (a) Resident in a country that is a member of Financial Action task Force (FATF) or a member of a group which is a member of FATF; and (b) Resident in a country that is a signatory to IOSCO's MMoU (Appendix A Signatories) or a signatory of a bilateral MoU with SEBI PROVIDED that the person is not resident in a country listed in the public statements issued by FATF from time to time on jurisdictions having a strategic AML/CFT deficiencies to which counter measures apply or that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies; PROVIDED that such person is not resident in India; PROVIDED FURTHER that such person is not registered with SEBI as a Foreign Institutional Investor (FII) or Sub-Account of an FII or Foreign Venture Capital Investor (FVCI). Explanation - For the purposes of this clause: (1) "bilateral MoU with SEBI" shall mean a bilateral MoU between SEBI and the overseas regulator that, inter alia, provides for information sharing arrangements. (2) Member of FATF shall not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. These limits shall be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India. Further, wherever there are composite sectoral caps under the extant FDI policy, these limits for QFI investment in equity shares shall also be within such overall FDI sectoral caps. The onus of monitoring and compliance of these limits shall remain jointly and severally with the respective QFIs, QDPs and the respective Indian companies (receiving such investment). (vi) KYC - QDPs will ensure KYC of the QFIs as per the norms prescribed by SEBI. AD Category-I banks will also ensure KYC of the QFIs for opening and maintenance of the single non- interest bearing Rupee accounts as per the extant norms. (vii) Permissible currencies - QFIs will remit foreign inward remittance through normal banking channel in any permitted currency (freely convertible) directly into single non- interest bearing Rupee Account of the QDP maintained with AD Category-I bank. (viii) Pricing - The pricing of all eligible transactions and investment in all eligible instruments by QFIs shall be in accordance with the relevant and applicable SEBI guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and conditions. (v) A SEBI registered FVCI can acquire / sale securities (as given in (iii) above) by way of public offer or private placement by the issuer of such securities and /or by way of private arrangement with a third party at a price that is mutually acceptable to the buyer and the seller. (vi) AD Category - I banks can offer forward cover to FVCIs to the extent of total inward remittance. In case the FVCI has made any remittance by liquidating some investments, original cost of the investments has to be deducted from the eligible cover to arrive at the actual cover that can be offered. (vii) The investments made by FVCI under Schedule I of Notification No. FEMA 20 / 2000- RB dated May 3, 2000, as amended from time to time, would be governed by the norms as stated therein. Section - IV: Other Foreign Investments 1. Purchase of other securities by NRIs (i) On non-repatriation basis (a) NRIs can purchase shares / convertible debentures issued by an Indian company on non-repatriation basis without any limit. Amount of consideration for such purchase shall be paid by way of inward remittance through normal banking channels from abroad or out of funds held in NRE / FC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invest, purchase, hold and transfer IDRs of eligible companies resident outside India and issued in the Indian capital market, subject to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No. FEMA 20 / 2000-RB dated May 3, 2000, as amended from time to time. Further, NRIs are allowed to invest in the IDRs out of funds held in their NRE / FCNR(B) account, maintained with an Authorised Dealer / Authorised bank. c) A limited two way fungibility for IDRs (similar to the limited two way fungibility facility available for ADRs/GDRs) has been introduced which would be subject to the certain terms and conditions. Further, the issuance, redemption and fungibility of IDRs would also be subject to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time as well as other relevant guidelines issued in this regard by the Government, the SEBI and the RBI from time to time. d) IDRs shall not be redeemable into underlying equity shares before the expiry of one year period from the date of issue of the IDRs. e) At the time of redemption / conversion of IDR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach tranche of scheme of Security Receipts shall not exceed 10% of the issue and total holdings of all FIIs put together shall not exceed 49% of the paid up value of each tranche of scheme / issue of Security Receipts issued by the ARCs. Further, Sub -account of FIIs are not allowed to invest in the Security Receipts issued by ARCs b) The total holding by a single FII / sub-account in each issue of Perpetual Debt Instruments (Tier I) shall not exceed 10% of the issue and total holdings of all FIIs / sub-account put together shall not exceed 49% of the paid up value of each issue of Perpetual Debt Instruments. c) Purchase of debt instruments including Upper Tier II instruments by FIIs are subject to limits notified by SEBI and the Reserve Bank from time to time. The present limit for investment in Corporate Debt Instruments like non-convertible debentures / bonds by FIIs, QFIs and Long Term Investors registered with SEBI comprising Sovereign Wealth Funds (SWFs), Multilateral Agencies, Pension/Insurance/Endowment Funds and Foreign Central Banks is USD 51 billion. The eligible investors may invest in Commercial Paper upto a limit of USD 3.50 billion within the overall limit of USD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l by the bank from FIIs / NRIs are required to be reported in the prescribed format within 30 days of the issue to the Reserve Bank. (iv) Investment by FIIs in Rupee denominated Upper Tier II Instruments raised in Indian Rupees will be within the limit prescribed by SEBI for investment in corporate debt instruments. However, investment by FIIs in these instruments will be subject to a separate ceiling of USD 500 million. (v) The details of the secondary market sales / purchases by FIIs and the NRIs in these instruments on the floor of the stock exchange are to be reported by the custodians and designated banks respectively, to the Reserve Bank through the soft copy of the Forms LEC (FII) and LEC (NRI). 6. Qualified Foreign Investors (QFIs) investment in the units of Domestic Mutual funds Non- resident investors (other than SEBI registered FIIs/FVCIs) who meet the KYC requirements of SEBI, were permitted to purchase on repatriation basis rupee denominated units of equity schemes of SEBI registered domestic MFs as Qualified Foreign Investors' (QFIs), in accordance with the terms and conditions as stipulated by the SEBI and the RBI from time to time in this regard. QFIs may inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime. (iii) The eligible instruments are Foreign Currency & Rupee denominated Bonds and Rupee denominated Units; (iv) The facility of Foreign exchange hedging would be available to non-resident IDF investors, IDFs as well as infrastructure project companies exposed to the foreign exchange/ currency risk. 8. Purchase of other securities by QFIs QFIs can invest through SEBI registered Qualified Depository Participants (QDPs) (defined as per the extant SEBI regulations) in eligible corporate debt instruments, viz. listed Non-Convertible Debentures (NCDs), listed bonds of Indian companies, listed units of Mutual Fund debt Schemes and "to be listed" corporate bonds (hereinafter referred to as 'eligible debt securities') directly from the issuer or through a registered stock broker on a recognized stock exchange in India. However, in case of non-listing of "to be listed" corporate bonds, the provisions relating to FIIs would be applicable. Further, QFIs shall also be permitted to sell 'eligible debt securities' so acquired by way of sale through registered stock broker on a recognized stock exchange in India or by way of buyback or redemption by the issuer. Section - V: Reporting gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of shares (a) After issue of shares (including bonus and shares issued on rights basis and shares issued on conversion of stock option under ESOP scheme)/ convertible debentures / convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, through it's AD Category I bank, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website http://www.rbi.org.in. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. (b) Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorised Dealer of the company, who will forward it to the concerned Regional Office of the Reserve Bank. The following documents have to be submitted along with Form FC-GPR: (i) A certificate from the Company Secretary of the company certifying that : * all the requirements of the Companies Act, 1956 have been complied with; * terms and conditions of the Government's approval, if any, have been complied with; * the company is eligible to issue shares under these Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /customers together with the statement of inflows/outflows on account of remittances received/made in connection with transfer of shares, by way of sale, to IBD/FED/or the nodal office designated for the purpose by the bank in the enclosed proforma (which is to be prepared in MS-Excel format). The IBD/FED or the nodal office of the bank will consolidate reporting in respect of all the transactions reported by their branches into two statements inflow and outflow statement. These statements (inflow and outflow) should be forwarded on a monthly basis to Foreign Exchange Department, Reserve Bank, Foreign Investment Division, Central Office, Mumbai in soft copy (in MS- Excel) by e-mail. The bank should maintain the FC-TRS forms with it and should not forward the same to the Reserve Bank of India. (vi) The transferee/his duly appointed agent should approach the investee company to record the transfer in their books along with the certificate in the Form FC-TRS from the AD branch that the remittances have been received by the transferor/payment has been made by the transferee. On receipt of the certificate from the AD, the company may record the transfer in its books. (vii) On receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be submitted till the entire amount raised through ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant Reserve Bank guidelines. 6. Reporting of FII investments under PIS scheme (i) FII reporting: The AD Category - I banks have to ensure that the FIIs registered with SEBI who are purchasing various securities (except derivative and IDRs) by debit to the Special Non-Resident Rupee Account should report all such transactions details (except derivative and IDRs) in the Form LEC (FII) to Foreign Exchange Department, Reserve Bank of India, Central Office by uploading the same to the ORFS web site (https://secweb.rbi.org.in/ORFSMainWeb/Login.jsp). It would be the banks responsibility to ensure that the data submitted to RBI is reconciled by periodically taking a FII holding report for their bank. (iii) The Indian company which has issued shares to FIIs under the FDI Scheme (for which the payment has been received directly into company's account) and the Portfolio Investment Scheme (for which the payment has been received from FIIs' account maintained with an AD Category - I bank in India) should report these figures separately under item no. 5 of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de India other than NRIs / PIO may make an application and seek prior approval of Reserve Bank, for making investment by way of contribution to the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India. 4. Restrictions An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business (i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom) or engaged in Print Media. Annex - 12 Appendix List of Important Circulars/Notifications which have been consolidated in the Master Circular on Foreign Investments in India and investments in proprietory / partnership firms Notifications Sl.No. Notification Date 1. No. FEMA 32/2000-RB December 26, 2000 2. No. FEMA 35/2001-RB February 16, 2001 3. No. FEMA 41/2001-RB March 2, 2001 4. No. FEMA 45/2001-RB September 20, 2001 5. No. FEMA 46/2001-RB November 29, 2001 6. No. FEMA 50/2002-RB February 20, 2002 7. No. FEMA 55/2002-RB March 7, 2002 8. No. FEMA 76/2002-RB November 12, 2002 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 3, 2003 21. A.P.DIR(Series) Circular No.39 December 3, 2003 22. A.P.DIR(Series) Circular No.43 December 8, 2003 23. A.P.DIR(Series) Circular No.44 December 8, 2003 24. AP (DIR Series) Circular No.53 December 17, 2003 25. A.P.DIR(Series) Circular No.54 December 20, 2003 26. A.P.DIR(Series) Circular No.63 February 3, 2004 27. A.P.DIR(Series) Circular No.67 February 6, 2004 28. A.P.DIR(Series) Circular No.89 April 24, 2004 29. A.P.DIR(Series) Circular No.11 September 13, 2004 30. A.P.DIR(Series) Circular No.13 October 1, 2004 31. A.P.DIR(Series) Circular No.15 October 1, 2004 32 A.P.DIR(Series) Circular No.16 October 4, 2004 33. AP (DIR Series) Circular No. 04 July 29, 2005 34. A.P. (DIR Series) Circular No. 06 August 11, 2005 35. A.P. (DIR Series) Circular No. 07 August 17, 2005 36. A.P. (DIR Series) Circular No. 08 August 25, 2005 37. A. P. (DIR Series) Circular No. 10 August 30, 2005 38. A.P. (DIR Series) Circular No. 11 September 05, 2005 39. A.P. (DIR Series) Circular No.16 November 11, 2005 40. A.P.( DIR Series) Circular No. 24 January 25, 2006 41. A.P.( DIR Series) Circular No. 4 July 28, 2006 42. A.P.( D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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