You are on page 1of 33


Dhanapal & Associates
Practising Company Secretaries Chennai


Foreign Direct Investment is freely permitted in almost all sectors except those sectors specifically prohibited/restricted. Under the Foreign Direct Investments (FDI) Scheme, investments can be made by non-residents in the shares / both convertible or non convertible debentures / preference shares of an Indian company, through two routes; the Automatic Route and the Government Route. Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. Under the Government Route, prior approval of the Government of India, Ministry of Finance, and Foreign Investment Promotion Board (FIPB) is required. FDI Policy is formulated by the Government of India. The Ministry of Commerce and Industry, Department of Industrial Policy and Promotion has issued a “Consolidate FDI Policy Circular” dated March 31,2010 elaborating the policy and the process in respect of FDI in India, which is available in public domain FEMA Regulations prescribe the mode of investments i.e. manner of receipt of funds, issue of shares / convertible debentures and preference shares and reporting of the investments to the Reserve Bank.

Foreign Direct Investment (FDI) in India is governed by the FDI Policy announced by the Government of India and the provisions of the Foreign Exchange Management Act (FEMA), 1999. 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.

Prohibition on investment in India Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as, Trusts) which is engaged or proposes to engage in the following activities:

(a) Business of chit fund, or (b) Nidhi company, or
Copy Right @2010 SD Associates S.Dhanapal, B.Com, BA.BL, A.C.S Managing Partner

S.Dhanapal & Associates
Practising Company Secretaries Chennai

(c) Agricultural or plantation activities, or (d) Real estate business, or construction of farm houses, or (e) Trading in Transferable Development Rights (TDRs).

Investment in the form of FDI is also prohibited in certain sectors such as (a) Retail Trading (except single brand product retailing) (b) Atomic Energy (c) Lottery Business including Government / private lottery, online lotteries, etc. (d) Gambling and betting including casinos, etc (e) Business of chit fund (f) Nidhi company (g) Trading in Transferable Development Rights (TDRs) (h) Activities / sectors not opened to private sector investment (i) Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to

Eligibility for Investment in India (i) A person resident outside India (other than a citizen of Pakistan) or an entity incorporated outside India, (other than an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy of the Government of India. A person who is a citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Scheme, with the prior approval of the FIPB.

(ii) Overseas Corporate Body (OCB) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by NonResident Indians and includes overseas trust in which not less than sixty per cent beneficial interest is held by Non- Resident Indians, directly or indirectly, but irrevocably. OCBs have been de-recognised as a class of investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under adverse notice of the Reserve Bank can make fresh investments under the FDI Scheme as incorporated nonresident entities, with the prior approval of the Government of India if the investment is through the Government Route; and with the prior approval of the Reserve Bank if the investment is through the Automatic Route.
Copy Right @2010 SD Associates S.Dhanapal, B.Com, BA.BL, A.C.S Managing Partner

S.Dhanapal & Associates
Practising Company Secretaries Chennai

A corporate shall be eligible to issue NCDs with original or initial maturity up to one year and issued by way of private placement; if it fulfills the following criteria, namely, a) the corporate has a tangible net worth of not less than Rs.4 crore, as per the latest audited balance sheet; b) the corporate has been sanctioned working capital limit or term loan by bank/s or all-India financial institution/s; and c) the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s. Basic Requirements a. NCDs shall not be issued for maturities of less than 90 days from the date of issue. b. Every corporate issuing NCDs shall appoint a Debenture Trustee (DT) for each issuance of the NCDs. c. The exercise date of option (put/call), if any, attached to the NCDs shall not fall within the period of 90 days from the date of issue. d. The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument. e. NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh. f. The aggregate amount of NCDs issued by a corporate shall be within such limit as may be approved by the Board of Directors of the corporate or as indicated by the Credit Rating Agency, whichever is lower. Procedure for Issuance i. The corporate shall disclose to the prospective investors, its financial position as per the standard market practice. ii. The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate. iii. The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate. iv. The Debenture Certificate shall be issued within the period prescribed in the Companies Act, 1956 or any other law as in force at the time of issuance. v. NCDs may be issued at face value carrying a coupon rate or at a discount to face value as zero coupon instruments as determined by the corporate.
Copy Right @2010 SD Associates S.Dhanapal, B.Com, BA.BL, A.C.S Managing Partner

S Managing Partner .Dhanapal.BL.C. NCDs. etc) FIIs NRIs. PIO Foreign Venture Capital Investments SEBI regd. BA. A.Dhanapal & Associates Practising Company Secretaries Chennai WHO CAN DO FOREIGN INVESTMENT IN INDIA? Foreign Investments Foreign Direct Investments Automatic Route Government Route Persons Resident outside India Foreign Portfolio Investments FIIs NRIs.S. FVCIs VCF IVCUs Other Investments (G sec.Com. B. PIO Investments on nonrepatriable basis NRIs PIO Copy Right @2010 SD Associates S.

C.Dhanapal. payment applicable taxes.Place of business Foreign India companies in various in India matters in India _________________ _________________ --Does not undertake _________________ commercial/industrial -.S.S Managing Partner .Dhanapal & Associates Practising Company Secretaries Chennai SOME HIGHLIGHTS ON PROVISION RELATING TO ESTABLISHMENT OF BRANCH/ LIASION /PROJECT OFFICE IN INDIA BY FOREIGN ENTITIES PARTICULARS BRANCH OFFICE LIASION OFFICE PROJECT OFFICE MEANING --Represent parent /other the company -. B.Execution of project in India freely remittable from India.Profit earned by /trading Branch offices activity is directly or indirectly -. A. India processing activities _________________ directly/indirectly _________________ --Expenses of such offices are to be met --Not allowed to entirely through undertake Retail inward remittances of exchange Trading activities of foreign Copy Right @2010 SD Associates S. _________________ subject to _________________ of -channel of _________________ communication between Head Office --Not allowed to carry abroad and parties in out manufacturing.BL.Place of business of Company in foreign -. BA.Com.

office for Development.S. from the central of approval.S Managing Partner . given general _________________ permission to foreign companies establishing for --Permission to set up such offices is branch/unit in Special initially granted for a Economic Zones period of 3 years and (SEZ5) to undertake this may be extended manufacturing service activities.Reserve Bank has Bank of India. Offices in India only fulfilled.BL. B.Dhanapal & Associates Practising Company Secretaries Chennai any nature in India from the Head Office outside India ENTRY ROUTE -- Both under --Foreign Insurance -- Reserve Bank has Automatic Route and companies Government Route _________________ establish can granted Liaison permission to general foreign Offices in India only companies to establish after obtaining Project Offices in India. Copy Right @2010 SD Associates S. from the provided they have --Foreign banks do approval not require separate Insurance Regulatory secured a contract from approval under and Development an Indian company to execute a project in India FEMA.In case the criteria for of the Banking establish Liaison establishment are not Regulation Act. and from time to time by an AD Category I bank. for opening Authority branch office in India but has to obtain _________________ _________________ necessary approval under the provisions --Foreign banks can -.Dhanapal. BA. _________________ Operations Development Reserve (DBOD). Department Banking and Reserve Bank.Com. 1949.C. -. the foreign entity from Department of after Banking & Operations approval obtaining has to approach the RBI. A.

or three _________________ immediately preceding immediately five preceding financial years in the financial years in the -.S. remittance/s. B.the project has been home country home country cleared by an appropriate authority. subject to the following: Copy Right @2010 SD Associates S.The project is funded directly by inward remittance from abroad A profit making track A profit making track or record during the record during by a bilateral or the multilateral International Financing Agency.Com.a company or entity in India contract awarding has the been granted Term Loan by a Public Financial Institution or a bank in India for the project. .No-objection / Tax up/ completion of the Clearance Certificate Clearance Certificate project provided they are from authority Income-Tax from for the authority Income-Tax satisfied with the for the bonafide of the transaction.AD Category — I bank can permit intermittent remittances by Project Offices pending winding -. or _________________ -.Dhanapal & Associates Practising Company Secretaries Chennai TRACK RECORD/ CRITERIA -.S Managing Partner remittance/s. A. --Copy CLOSURE Reserve of the --Copy Bank’s Reserve of the --The Foreign currency Bank’s accounts have to be permission/ approval permission/ approval closed on completion on from the sectoral from the sectoral projects for regulator(s) for regulator(s) establishing the BO / establishing the BO / _________________ LO _________________ --Auditor’s certificate LO _________________ --Auditor’s certificate -.Dhanapal.No-objection / Tax -.BL.C. BA.

B.S Managing Partner .Com. shortfall of funds for of meeting any liability in winding up of the winding up of the India will be met by Office in India Office in India inward remittance from abroad. approval.Report from the the Project Office that the Registrar of Registrar of remittance will not.BL.Dhanapal & Associates Practising Company Secretaries Chennai _________________ _________________ _________________ --Applicant/parent company --Applicant/parent company a) The Project Office submits an Auditors’ / confirmation that no confirmation that no Chartered Accountants’ legal proceedings in legal proceedings in Certificate to the effect any Court in India are any Court in India are that sufficient provisions pending and there is pending and there is have been made to meet no legal impediment no legal impediment the liabilities in India to the remittance to the remittance including Income Tax. _________________ _________________ _________________ b) An undertaking from -. in any Companies regarding Companies regarding way. BA. Companies of 1956. affect the compliance with the compliance with the completion of the Project provisions Companies 1956. A. Reserve whose jurisdiction Project Office is situated. _________________ _________________ _________________ -.Inter-Project transfer of funds -Any other -Any requires of prior the Office of Bank the under the other permission specified Regional Document specified Document by RBI while granting by RBI while granting concerned approval.S.C. in case of the provisions Act. etc. Copy Right @2010 SD Associates S. in case of the in India and that any Act.Report from the -.Dhanapal.

Com.BL. BA. A.S.C.Dhanapal. B.Dhanapal & Associates Practising Company Secretaries Chennai ENTRY ROUTES IN INDIA THROUGH FOREIGN INVESTMENT Copy Right @2010 SD Associates S.S Managing Partner .

BA.S Managing Partner .C.BL.Com.Dhanapal & Associates Practising Company Secretaries Chennai ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA NON RESIDENT INDIAN (NRI) Purchase of Immovable property A NRI can acquire any Immovable property by way of purchase (Other than Agricultural land/ Plantation property/ Farm house) in India 2) A NRI may transfer any immovable property to an Indian citizen or a PIO resident outside India (Other than Agricultural land/ Plantation property/ Farm house) 1) Fund received in India through normal banking channels by way of inward remittance from any place outside India/ by debit to his NRE/ FCNR(B) / NRO account _________________ Transfer of immovable property Payment for acquisition of immovable property Other aspects 1) A NRI may transfer any immovable property in India to a person resident in India. B.Dhanapal. A.S. _________________ NRIs can make payment for acquisition of No documents to be filed if a NRI immovable property (Other purchases than Agricultural land/ Plantation property/ Farm house) out of: _________________ Residential or commercial property under general permission 2) Such payments cannot be made either by traveler’s cheque/ foreign currency notes/ by other mode except those specifically mentioned Copy Right @2010 SD Associates S.

banking channels by in India/ a person by way of sale or gift way of inward resident outside to a person resident in remittance from any India who had India.S.C. Farm house) commercial immovable _________________ out of: property property in India 2) He may transfer _________________ under by way of Agricultural land/ 1) Fund received in general inheritance from Plantation property/ India through normal permission a person resident Farm house in India.Dhanapal.BL.Dhanapal & Associates Practising Company Secretaries Chennai PERSON OF INDIAN ORIGIN Purchase of Immovable property A PIO can acquire any Immovable property by way of purchase (Other than Agricultural land/ Plantation property/ Farm house) in India Gift/ Inheritance Of Immovable Property Payment for Other acquisition of aspects immovable property 1) A PIO may 1) A PIO can transfer A PIO can make No acquire any any property in India payment for documents property in India by way of gift by way of sale to a acquisition of to be filed from a person person resident in immovable property if a PIO resident in India/ NRI/ PIO India Other than (Other than purchases ______________ Agricultural land/ Agricultural land/ Residential 2) A PIO may Plantation property/ Plantation property/ or acquire any Farm house. person of Indian origin those specifically resident outside India mentioned Transfer of immovable property Copy Right @2010 SD Associates S.Com. who is a currency notes/ by acquisition of the citizen of India or to a other mode except property. A. BA.S Managing Partner . who is a citizen place outside India/ acquired the of India by debit to his NRE/ property in _________________ FCNR(B) / NRO accordance with 3) He may transfer account the provisions of residential/commercial _________________ the foreign property in India by 2) Such payments exchange law in way of gift to a person cannot be made force or FEMA resident in India/ to a either by traveler’s regulations. at person resident cheque/ foreign the time of outside India. B.

provided that all applicable laws. A. excluding a Liaison office. PERSON RESIDENT OUTSIDE INDIA FOR CARRYING ON A PERMITTED ACTIVITY A person resident outside India who has established a Branch. regulations or directions for the time acquired in pursuance of clause (a) being in force are duly complied with. borrowing. B. 2000 may - Clause (a) Acquire any immovable property in India. Transfer by way of mortgage to an which is necessary for or incidental to carry on Authorised Dealer as a security for any such activity.Dhanapal. The consideration for acquisition of Ministry of External Affairs is obtained for such immovable property in India is paid out of purchase/ sale funds remitted from abroad through the normal banking channels.BL.Com.2 ) not later than 90 days from the date of such acquisition Copy Right @2010 SD Associates S. Foreign Embassies/ Diplomats/ Consulate Generals may purchase/ sell immovable property (Other than Agricultural land/ Plantation property/ Farm house) in India provided: Clearance from the government of India. and the person files with the RBI a declaration in the form IPI (Annex .S. the immovable property rules. BA. for carrying on in India any activity in accordance with the foreign exchange management (Establishment in India of Branch or Office or other place of business) Regulations. Office or other place of business.S Managing Partner .C.Dhanapal & Associates Practising Company Secretaries Chennai FOREIGN EMBASSIES/ DIPLOMATS/ CONSULATE GENERALS In regulation 5A of the Foreign Exchange Management (Acquisition and Transfer of Immovable property in India) Regulations 2000.

S Managing Partner . Technology transfers involving payments above these limits required prior permission of the Government of India (Project Approval Board. The GOI reviewed the extant policy with regard to liberalization of foreign technology agreement and it was decided to permit. 2010 AD category –I banks may permit drawal of foreign exchange by persons for payment of royalty and lump sum payment under Technical Collaboration Agreements without the approval of Ministry of Commerce and Industry.2009. prior approval of the Ministry of Commerce and Industry. Government of India. BA. is required for drawing foreign exchange for remittances under technical collaboration agreements where payment of royalty exceeds 5% on local sales and 8 % on exports and lump sum payment exceeds USD 2 million.BL. without any approval of the Government of India.P.52 DATED MAY 13. In addition. Department of Industrial Policy and Promotion). Government of India. royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route on use of trademarks and brand names of the foreign collaborator. where there is no technology transfer involved. Copy Right @2010 SD Associates S.Com. payments for royalty.S.2009. RECENT AMENDMENT – A. A.e according to Rule 4 of the Foreign Exchange management (Current Account Transactions) Rules 2000. (DIR SERIES) CIRCULAR NO. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules.e.Dhanapal & Associates Practising Company Secretaries Chennai CURRENT ACCOUNT TRANSACTIONS –LIBERLISATION FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCUNT TRANSACTION) RULES. Accordingly. lump sum fee for transfer of technology and payments for use of trademark/ brand name on the automatic route i. with immediate effect. GOI issue a press note on 16.12.Dhanapal.12.C. B.ITEM 8 OF SCHEDULE II The existing policy of Government of India on the payment of royalties under Foreign Technology Collaboration provides for automatic approval for foreign technology transfers involving payment of lumpsum fee of US$ 2 million and payment of royalty of 5% on domestic sales and 8% on exports. 2000 as amended from time to time. Hence the rule shall be deemed to have come into force with retrospective effect from 16. i.No person will be adversely affected by giving retrospective effect to these rules. 2000 .

optionally convertible or partially convertible preference shares) availed of from non-resident lenders with a minimum average maturity of 3 years. Housing Finance Companies and NonBanking Financial Companies are eligible to raise ECB.g. financial institutions. securitized instruments (e. viz(i) Automatic Route and (ii) Approval Route PARTICULARS AUTOMATICE ROUTE • APPROVAL ROUTE ECB beyond 50 per cent funds of the by owned financial ELIGIBLE BORROWERS • Corporate Infrastructure Finance Companies except financial institutions which are classified Infrastructure Companies as Finance are intermediaries.Dhanapal & Associates Practising Company Secretaries Chennai EXTERNAL COMMERCIAL BORROWINGS External Commercial Borrowings (ECB) refer to commercial loans in the form of bank loans. • ECB with minimum average maturity of 5 years by Non-Banking Financial Companies Copy Right @2010 SD Associates S. suppliers’ credit. non-convertible.S Managing Partner . BA. A. • considered on a case to case basis. floating rate notes and fixed rate bonds. Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government • Units in Special Economic Zones (SEZ) are allowed to raise ECB for their own requirement. Individuals. Trusts and Non-Profit making organizations are not eligible to raise ECB. B. buyers’ credit. such as banks.S.C.Com.Dhanapal.BL. ECB can be accessed under two routes.

as defined in the extant ECB policy • Corporate which have violated the extant ECB policy • Cases falling outside the purview of the automatic route limits RECOGNISED LENDERS (a) Borrowers can raise ECB from (a) Borrowers can raise ECB internationally recognized sources such from internationally recognised as (i) international banks. they cannot transfer or on-lend ECB funds to sister • • Infrastructure Companies Foreign Convertible Finance Currency Bonds concerns or any unit in the Domestic Tariff Area. ADB. (ii) International capital markets. Copy Right @2010 SD Associates S. B. BA. (iii) multilateral financial institutions (such as IFC.Dhanapal.S.Com. A. etc) sources international such as (i) (N) banks. (FCCB5) by Housing Finance Companies satisfying the minimum criteria • Non-Government Organizations • • activities are eligible to avail of ECB • Special Vehicles Multi-State operative Societies SEZ avail developers of ECBs can for CoPurpose (NGO5) engaged in micro finance providing infrastructure facilities within SEZ. international capital markets.Dhanapal & Associates Practising Company Secretaries Chennai However. ADB.C. (Ni) multilateral financial institutions (such as IFC.BL. CDC.S Managing Partner .

the proposed ECB not exceeding four times the direct foreign equity holding) a) The maximum amount of ECB which Corporate can avail of ECB of AMOUNT MATUIRITY & can be raised by a corporate other than an additional amount of USD those in the hotel. USD 500 million under the hotels.S.Dhanapal & Associates Practising Company Secretaries Chennai (iv) export credit agencies.exceeds 4:1 (i.Com. equity holders (other than erstwhile OCB5). million or its equivalent in a financial year for meeting foreign currency and/ or Other ECB criteria. during a allowed to avail of ECB up to USD 100 financial year. (v) suppliers of equipments. (v) suppliers’ (vi) of foreign (vii) Foreign equity holders (other than collaborators and (v) foreign erstwhile Overseas Corporate Bodies). BA. hospitals and software sector are automatic route.).BL. (iv) export credit agencies. (ii) For ECB more than USD 5 million minimum paid-up equity of 25 per cent held directly by the lender and debtequity ratio not exceeding 4:1 (i. S. under the approval route.e. (vi) foreign collaborators and CDC. such as Rupee Copy Right @2010 SD Associates capital expenditure for end-use. equipment.S Managing Partner . hospital and software 250 million with average sectors is USD 500 million or its maturity of more than 10 years equivalent during a financial year. A. recognized lender. direct foreign equity holding). (b) A “foreign equity holder” to be eligible as “recognized lender” under the (b) From ‘foreign equity holder’ automatic route would require minimum where the minimum paid-up holding of paid-up equity in the borrower equity held directly by the company as set out below: foreign equity lender is 25 per cent but ECBs: equity ratio (i) For ECB up to USD 5 million .Dhanapal. etc.e. B. over and above the existing limit of b) Corporate in the services sector viz. the proposed minimum paid-up equity of 25 per cent ECB exceeds four times the held directly by the lender.C.

BA. The proceeds of etc.Dhanapal & Associates Practising Company Secretaries Chennai permissible end-uses.BL. The borrower must obtain a Loan Exchange Foreign Department.S Managing Partner . Registration Number (LRN) from the Reserve Bank of India. Borrowers PROCEDURE may enter into loan Applicants are required to agreement complying with the ECB submit an application in form guidelines with recognised lender for ECB through designated AD raising ECB under Automatic Route bank to the Chief General without the prior approval of the Reserve Manager-in-Charge. the ECBs should not be used for Prepayment acquisition of land. would not be permissible for such ECB c) ECB up to USD 20 million or its up to a period of 10 years. Designated AD bank has to ensure that at the time of drawdown the forex exposure of the borrower is fully hedged.C. e) NGOs engaged in micro finance activities can raise ECB up to USD 5 million or its equivalent during a financial year. in a financial maturity year of with three average d) ECB above USD 20 million or equivalent and up to USD 500 million or its equivalent with a minimum average maturity of five years.Dhanapal.S. however.Com. and call/put options. B. Bank. equivalent minimum years. f) ECB up to USD 20 million or equivalent can have call/put option provided the minimum average maturity of three years is complied with before exercising call/put option. need to be complied with. External Commercial Copy Right @2010 SD Associates S. Central Reserve Bank of India before drawing Office.. A.

Mumbai — 400 001. initially. BA. new of investment [such as import of capital goods (as classified by DGFT in the Foreign Trade projects. Policy). subject to the following conditions: Copy Right @2010 SD Associates S.Dhanapal & Associates Practising Company Secretaries Chennai down the ECB. under the approval PSU route. b) Overseas direct investment in Joint Ventures Subsidiaries existing (JV)/ (WOS) Wholly subject on Indian Owned to (b) Overseas direct investment in Joint Ventures. programme of successful refinanced with a long-term ECB.C. by to the be shares in the disinvestment process and Rupee also in the mandatory second stage offer to the public under the Government’s disinvestment shares.Dhanapal. Investment in JV/ WOS abroad. WOS abroad. B. a) ECB can be raised for investment (a) ECB can be raised only for END-USE [such as import of capital goods (as classified by DGFT in the Foreign Trade Policy). along with necessary documents. implementation of new existing projects. Borrowings Division.industrial sector including small and medium enterprises (SME) and enterprises (SME).BL. infrastructure sector and specified service sectors infrastructure sector .Com.industrial sector including small and existing production units] in medium real sector .S Managing Partner . for spectrum allocation permitted for first stage acquisition of may. modernization/expansion of modernization/expansion production units] in real sector . A. Wholly Owned Subsidiaries subject to existing guidelines on the the guidelines Direct Indian Direct Investment in India. be met out of resources bidders. (c) The payment by eligible c) Utilization of ECB proceeds is borrowers in the Telecom sector.

mandatory second stage offer to the public under the conditions: i) compliance with the norms prescribed in the DNBS Circular Government’s disinvestment programme of PSU shares. recognized lender.CCNo. Category activities. all-in-cost. e) Payment for Spectrum Allocation. A. for onlending to the infrastructure sector as (d) The first stage acquisition defined under the ECB policy. 2010 development township as of integrated defined by Ministry of Commerce and ii) hedging of the currency risk in full.PD.e.(e) Corporate engaged in the 10 dated February 12.168 / 03. are permitted to avail of ECBs. and f) Infrastructure Finance Companies i.S Managing Partner . etc.02.089 / 2009. should monitor the end-use of funds. (iii) Banks in India will not be permitted to provide any form of guarantees.Dhanapal. Industry. SIA (FC Division).Dhanapal & Associates Practising Company Secretaries Chennai (i) The ECB should be raised d) For lending to self-help groups or for micro-credit or for bonafide micro finance activity including capacity building by NGOs engaged in micro finance (ii) The designated I bank AD within 12 months from the date of payment of the final installment to the Government. Press Note 3 (2002 Copy Right @2010 SD Associates S. B. including the outstanding ECBs. subject to their complying with the following of shares in the disinvestment process and also in the average maturity.BL. categorized as IFCs by the Reserve such as eligible borrower. Bank. Non Banking Financial Companies iv) All other conditions of ECB.C. DIPP. DNBS. up to 50 per cent of their owned funds. should be complied with.Com. BA.S.

commercial premises. A. city and regional level urban infrastructure facilities. 2010. resorts. of two a thousand dwelling units for about ten thousand population will need to be developed.S. (a) For on-lending or investment in (a) END-USES NOT PERMITTED For on-lending or capital market or acquiring a company investment in capital market or (or a part thereof) in India by a corporate acquiring a company (or a part except Companies. This facility is available up to December 31.BL.Com. such as roads and bridges.C. BA. hotels.. B. are also Copy Right @2010 SD Associates S. Money Market Mutual Funds. etc. mass rapid transit manufacture materials. ensure compliance with the extant norms while certifying the ECB application. 2002.Dhanapal.Dhanapal & Associates Practising Company Secretaries Chennai Designated Authorised Dealer should Series) dated January 4.S Managing Partner . land and systems of and building of Development providing forms allied an infrastructure integrated part of township’s development. Integrated township includes housing. institutions Infrastructure banks and Finance thereof) in India by a corporate financial [investment in Special Purpose Vehicles. The minimum area to be developed should be 100 acres for which norms and standards are to be followed as per local byelaws/rules. In the absence of such minimum bye-laws/rules.

TRANSFER OF SHARES / PREFERENCE SHARES / CONVERTIBLE DEBENTURES BY WAY OF SALE .Dhanapal & Associates Practising Company Secretaries Chennai (b) For real estate. the term considered as investment in real estate excludes development of capital markets).S.REVISED PRICING GUIDELINES PARTICULARS EXISTING PROVISIONS REVISED PROVISION Transfer Resident Non resident By To incorporated non resident entity to Other then erstwhile OCB. Press Note 3 (2002 Series) dated January 4. (b) for real estate sector DIPP. FOREIGN DIRECT INVESTMENT (FDI) IN INDIA . foreign national.C. FII. NRI. integrated township as defined by the Ministry of Commerce and Industry.Com. B. However. NRI To foreign national. (c) for working capital.S Managing Partner . SIA (FC Division). FII and incorporated non resident entity other than erstwhile OCB a) the ruling market incase the shares are listed on stock exchange a) where shares of an Indian company are listed on a recognized stock exchange in India. general corporate repayment of existing Rupee purpose and repayment of existing loans. the price of shares Copy Right @2010 SD Associates S.Dhanapal. general corporate purpose and (c) For working capital. BA. 2002. Rupee loans. A.BL.

BL.S Managing Partner . the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered Category . as applicable. A.I Merchant Banker or a Chartered Accountant discounted method.Dhanapal. which shall be the date of purchase or sale of shares b) Incase of unlisted shares.C. provided that the same is determined for such duration as specified therein.Com.Dhanapal & Associates Practising Company Secretaries Chennai transferred by way of sale shall not be less than the price at which a preferential allotment of shares can be made under the SEBI Guidelines. preceding the relevant date. B. fair valuation chartered guidelines of shares done as by a CCI company are not listed on a recognized stock exchange in India. as free per cash the flow b) where the shares of an Indian accountant per The price per share arrived at should be certified by a SEBI Copy Right @2010 SD Associates S. BA.S.

the price of shares low) for one week preceding the date of transferred by way of sale shall application with 5 per cent variation.S Managing Partner .S. erstwhile OCB.Dhanapal. the price shall company are listed on a be arrived at by taking the average recognized stock exchange in quotations (average of daily high and India. however. the shares are being which a preferential allotment of sold by the foreign collaborator or the shares can be made under the foreign promoter of the Indian company to the existing promoters in India with SEBI Guidelines. B. BA. a) where shares of an Indian b) if the transfer is other than that referred to in clause (a).Com. foreign national. foreign national. the objective of passing management provided that the same is control in favour of the resident determined for such duration as promoters the proposal for sale will be Copy Right @2010 SD Associates S.BL. by non-resident to company are traded on stock exchange a) The sale is at the prevailing market price on stock exchange and is resident shall not be more than effected through a merchant banker the minimum price at which the registered with the SEBI or through a transfer of shares can be made stock broker registered with the stock from a resident to a non-resident exchange.’ Transfer by non By incorporated non-resident entity. resident resident to erstwhile OCB. NRI.Dhanapal & Associates Practising Company Secretaries Chennai registered Category-I-Merchant Banker / Chartered Accountant. NRI and FII Where the shares of an Indian Price of shares transferred by way of sale. A. as applicable. not be less than the price at Where. FII By incorporated non-resident entity.C.

or a price based on the Net Asset Value (NAV) linked to book value multiple. namely: 1) a price based on earning per share (EPS) linked to the Price Earning (P/E) multiple. at a price mutually agreed to between the seller fair value to be determined by a and the buyer. valuation of the shares. the transfer of shares shall transfer does not exceed Rs. 20 lakhs per seller per company. at a price registered Category-I-Merchant arrived at. preceding the higher by up to a ceiling of 25 per cent over the price arrived at as above. which shall be the Where the shares of an Indian b) where the shares of an Indian company are not listed on a recognized stock exchange in company are not listed on stock exchange or are thinly traded a) if the consideration payable for the India. date of purchase or sale of shares relevant date.20 should be certified by a SEBI lakhs per seller per company.S. and b) if the amount of consideration The price per share arrived at payable for the transfer exceeds Rs. on submission of a certificate from the statutory auditors of the Indian Accountant as free per cash the flow Merchant Banker or a Chartered be at a price not less than the company whose shares are proposed discounted to be transferred. whichever is higher. B.BL. based on any valuation SEBI registered Category . regarding the method.I methodology currently in vogue.Com. A. at the seller's option. BA.Dhanapal.C.Dhanapal & Associates Practising Company Secretaries Chennai considered at a price which may be specified therein.S Managing Partner . Copy Right @2010 SD Associates S. in any Banker / Chartered Accountant. of the following manner.

B.07.S.Dhanapal Practising Company Secretary Disclaimer This write-up has been prepared based on my bona-fide understanding of the provisions provided in the Act and the legal provisions as they exist. This write up only provides basic and elementary knowledge to its readers. Place : Chennai Date : 08. Copy Right @2010 SD Associates S. Independent professional advice should be sought from experts if there requires any further clarity in the provisions of law depending upon various circumstances. at a price which is lower of the two independent valuations of share.Dhanapal. BA.Dhanapal & Associates Practising Company Secretaries Chennai (Or) 2) the prevailing market price in small lots as may be laid down by the Reserve Bank so that the entire shareholding is sold in not less than five trading days through screen based trading system (or) 3) where the shares are not listed on any stock exchange.S Managing Partner . one by statutory auditors of the company and the other by a Chartered Accountant or by a Merchant registered Banker with in Category 1 and Securities Exchange Board of India.BL.C. This write up would be an indicative expression of my personal understanding and thoughts about the provisions provided in the Act and need not be conclusive one and the same should not be construed as professional advise.Com.2010 S. A.







a M i l l i o no f p e o p l e r e s w living ithouthe f sn b a s i c a c i l i t i ea .cocorc(oEetrng6mocaJ. Narayana Ku.C0mmerce Industry.Company tespecuvery .c4|l: Lorordolr. rnl rn. 6.done by NGOs.rthori.l^co)6ocdA @COrlL(Bcn.. apArttrom can contribute to achieve social Bharat N Khona said the purpose of the seminar was to generate lnahiDgprofit at any cost. to the courts.gj(o) 6)o6r)lal 41. Koclli Thursday bodywho dealswith the corporate Corporates and proiessionals dress. (l)(')dcoE (r)so|orl. in his Dr JusticeK. ducedby the Union Ministry the corporate To be successful.o .to the statutory ar.'and 'CLSS2010and DES handted GopalKrishby 2010'were na Raju.o"iilooceo) 6(nl(rrlaua@ocot c6L(B &(nl(rr1 6coj ol(rocei@).trans. subjects plinary firms in India through LLBS. cuss and deliberate upon anycorporate Transparency shalL the valious aspects the Combe of Law hall-markofall corporate ac. to the courts and to of CCDTgavea brief outline everybodywho deals with of the two schemesintroentity. tdlo{cdjl4 pc(ful . and company directors and corporate as other\!iseit woulcibe opento more remains to be donc by the professionals and to provide a platform to discuss and deliberate public the Khona. former ICCI president entity. "To bc successful.Schcmc Mr Baiju Ramachandran itors.and S Dhanapal. shareholders.he added. d o m o r er e m a i nts b e d o n eb y t h e . in his welcomeaddress. orDql-d o. N G O s n a n oc o r p o r a t e s t 2010 pany Law Settlement Scheme ' 2010.te6 codororpi"jooog (o9aaoiioLs(ot (r)loi rD. 1 July .cotc(r) (slo(l)ja.awareness amongthe corpodirectorsand icies and actions that fulfil rates.Oa.m. CorporateDevelopment Training (a Division of Baiju Millions of peoplegowithRamachandran Associates' out the basic {acilities and & Corporate SolrtionsP\t Ltd) much more remains to be in association with the Indi. JusticeK Narayana and the aspirations the people corporateprofessionals of should form the bedrock of to provide a platform to disgovernance.July 1 open to the chargeof acting public interest. to key corporategovernance our Bureau it. High Court of Madras. oc.r c6i?rcoso. achieving by and socialjustice.1'rc*v horp Mr Bharat N. CharteredAccoltI-Itant. thechargc actingagainst of Dclivering the presidenlial ad' upon various aspectsof the Com_ interest. ns. Chennai.flaY V' )nrn omfilmco (nsonDl oa.oco)6m dololql odeoi6rl. corporates an chamber of commerce etc. J L r s t i Ke a r a y d n au f u p n a u g u r a t i nh e s e m i n ao r ' E m e r q i l 'dgm e n s i o n s mafk of cQrporate professionals'organised Ientrefor C0Iporate by the pareucyto thc shaleholders. af. Callfor corporate News Express service Kgchi. and EasyExit Scheme of Baiju Ramachandran CCDT. be to a coi'eideologyand live up to it.fd mj6'1" .gave a brief outline of the two schemes introducedby the Union Ministry of Corporate Affairs in order to reduce the number of defaulters which are and weedout companies not intlresied in doing thc crcd.and to every.Devel0pment Jrainifgin association the Indian in 0n and ties. Od"ercs(r)" c"r"6Dd olai urmilcuofl raoroi oldat nOoA." Jltstice Kurup said.hc said. the seminar is to generate pointed out that sound pol. In the iechnical sessionsthat like'multidisci. . former actingChiefJus. \\'ithout thc basic facillties.i6rD" "Ocril(xd k'rrac THE NEW INDIAN EXPRESS transparency ideology. Secretary ing.(r)l (rt om)t65an nO(rU. :Ii' policiesand actionsthat SOUND fuLhli the aspirations the people of shouldform the bedrockof corporate governance. in Corporate organised the Centre for their own waysin.pany Settlement tions ..evcry lustice. otherwise it would be Kochi. every corporation faulters and weed out comthat arenot interested should be committed to a panies core ideologyand live up to in doingbusiness. A seminar on the theme against 'Emerging Dimensions for Corporates and profesProfessionals' u'as sionals could contribute.presidential address.tioned that the purpose of tice. menrup.apart ofCorporateAffairs aimedat frorn making profit at any reducingthe number of decost. eetCIJcllffig8mng BuSinessLine ^. Inaugurating seminal on the a 'Emerging dimensions corpolbr rate professionais' organisedby the Centrefor CorporateDevelopin rnentandTraining (CCDT) associationwith the Indian Chamber of Commerce Industry he saicl and transparency shouldbe the hall tg r li i cN K actions.2o1o q(r)d0l eoo)joi c"r.he said.l corporates.6r!A 6icod cDoo6o6rD oaccodmtoal a"ncd eaed.transparency the Scheme2010 and EasyExit to 2010. the f0r c0rpordte to (hamber0f with and creditors. PractisChennai. forInauguratingthe Serninar mer President ofICCI."€rs'lCd o(\)ol(r)cd eB migl(ni 6J6. corporation shorLld committecl NIillions of peopLe are living alvarenessamong the corporates. follolved.4 JgOCS(tI) GId66)^]6IIB Transparency.