INTRODUCTION

In these Regulations, unless the context requires otherwise, —
(a) ‘Act’ means, the Foreign Exchange Management Act, 1999 (42 of 1999);
(b) “Drawal” means drawal of foreign exchange from an authorised person and includes
opening of Letter of Credit or use of International Credit Card or International Debit
Card or ATM card or any other thing by whatever name called which has the effect of
creating foreign exchange liability.
(c) ‘Schedule’ means a schedule to these Regulations;
(d) ‘Transferable Development Rights’ means certificates issued in respect of category of
land acquired for public purpose either by Central or State Government in
consideration of surrender of land by the owner without monetary compensation,
which are transferable in part or whole;
(e) The words and expressions used but not defined in these Regulations shall have
the same meanings respectively assigned to them in the Act.

Asset Reconstruction Company (ARC)” means a company registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).]

“capital” means equity shares, preference shares, convertible preference shares, and convertible debenture

Restriction on issue or transfer of security by a person resident outside India.

– Save as otherwise provided in the Act, or rules or regulations made thereunder, no person resident outside India shall issue or transfer any security:

Provided that a security issued prior to, and held on, the date of commencement of these Regulations, shall be deemed to have been issued under these regulations and shall accordingly be governed by these regulations:

Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons, permit a person resident outside India to issue or transfer any security, subject to such conditions as may be considered necessary

Restriction on an Indian entity to issue security to a person resident outside India or to record a transfer of security from or to such a person in its books.–

Save as otherwise provided in the Act or Rules or Regulations made thereunder, an Indian entity shall not issue any security to a person resident outside India or shall not record in its books any transfer of security from or to such person:

Provided that the Reserve Bank may, on an application made to it and for sufficient reasons, permit an entity to issue any security to a person resident outside India or to record in its books transfer of security from or to such person, subject to such conditions as may be considered necessary.

Acquisition of right shares.–

(1) A person resident outside India may purchase equity or preference shares or convertible debentures offered on right basis by an Indian company which satisfies the conditions specified in sub-regulations.

(2) An Indian company which satisfies the following conditions, may offer to a person resident outside India, equity or preference shares or convertible debentures on right basis, namely:

(i) the offer on right basis does not result in increase in the percentage of foreign equity already approved, or permissible under the Foreign Direct Investment Scheme in terms of these regulations;

(ii) the existing non-resident shareholders may apply for issue of additional shares, and the investee company may allot the same subject to the condition that the overall issue of shares to non-residents in the total paid-up capital does not exceed the sectoral cap;]

(iii) the existing shares or debentures against which shares or debentures are issued by the company on right basis were acquired and are held by the person resident outside India in accordance with these regulations;

(iv) The offer on right basis to the persons resident outside India shall be:

(a) in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company;

(b) in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders.]

(3) The right shares or debentures purchased by the person resident outside India shall be subject to same conditions including restrictions in regard to repatriability as are applicable to the original shares against which right shares or debentures are issued:

Provided that the amount of consideration for purchase of right shares or debentures is paid by way of inward remittance in foreign exchange through normal banking channels or by debit to NRE/FCNR account, when the shares or debenture are issued on repatriation basis:

Provided further that in respect of shares or debentures issued on non-repatriation basis, the amount of consideration may also be paid by debit to NRO/NRSE/NRNR account.

Transfer of [shares or convertible debentures or warrants of an Indian company or units of an Investment Vehicle]of an Indian company by a person resident outside India.–

(1) Subject to the provisions of sub-regulation (2), a person resident outside India holding the [shares or convertible debentures or warrants of an Indian company or units of an Investment Vehicle] of an Indian company in accordance with these regulations, may transfer the [shares or convertible debentures or warrants of an Indian company or units of an Investment Vehicle] so held by him, in compliance with the conditions, specified in the relevant Schedule of these regulations.

[Further, subject to minimum lock-in period of one year or minimum lock-in period as prescribed under Annex-B of Schedule 1 whichever is higher, a person resident outside India holding the [shares or convertible debentures or warrants] of an Indian company containing an optionality clause in accordance with these Regulations and exercising the option/right, may exit without any assured return, subject to the following conditions:

In case of listed company, at the market price determined on the floor of the recognized stock exchanges;

(ii) In case of equity shares of unlisted company, at a price not exceeding that arrived on the basis of Return on Equity (RoE) as per latest audited balance sheet. Any agreement permitting return linked to equity as above shall not be treated as violation of FDI policy.

(iii) In case of Preference [shares or convertible debentures or warrants], at a price worked out as per any internationally accepted pricing methodology at the time of exit, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker. The guiding principle would be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreements and shall exit at the price prevailing at the time of exit, subject to lock in period requirement.]

[(2)(i) A person resident outside India, not being a non-resident Indian or an overseas corporate body, may transfer by way of sale or gift the[shares or convertible debentures or warrants of an Indian company or units of an Investment Vehicle] held by him or it to any person resident outside India.

Remittance of sale proceeds.–

(1) No remittance of sale proceeds of an Indian security held by a person resident outside India shall be made, otherwise than in accordance with these regulations and the conditions, specified in the relevant Schedule.

(2) An authorized dealer may allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident out side India:

Provided

(a) the security was held by the seller on repatriation basis;

(b) either the security has been sold on a recognised stock exchange in India through a stock broker at the ruling market price as determined on the floor of the exchange, or the Reserve Bank’s approval has been obtained in other cases for sale of the security and remittance of the sale proceeds therefore, and

(c) a no objection/tax clearance certificate from the Income-tax authority has been produced.

Pledge of shares of company incorporated in India – (i) Any person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowing, may pledge the shares of the borrowing company or that of its associate resident companies for the purpose of securing the external commercial borrowing (ECB) raised by the borrowing company:

(ii) A bank which is an authorized dealer may grant ‘no objection’ for pledge of shares under clause (i) after satisfying itself of the following :

(a) the underlying ECB is strictly in compliance with the extant ECB guidelines,

(b) the loan agreement has been signed by both the lender and the borrower,

(c) there exists a security clause in the Loan Agreement requiring the borrower to create charge on financial securities, and

(d) the borrower has obtained Loan Registration Number (LRN) from the Reserve Bank : (Amendment) Rules, 2009

Sectors Prohibited for FDI

FDI is prohibited in:

(a) Lottery Business including Government/ private lottery, online lotteries, etc.

(b) Gambling and Betting including casinos etc.

(c) Chit funds.

(d) Nidhi company.

(e) Trading in Transferable Development Rights (TDRs).

(f) Real Estate Business or Construction of FArm Houses.

(g) Manufacturing of Cigars, Cheroots, cigarillos and cigarettes, of tobacco substitutes.

(h) Activities/ sectors not open to private sector investment e.g. (I) Atomic energy and (II) Railway operations (other than permitted activities mentioned in entry 18 of Annex B.)

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on Facebook, Twitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge