| Investment in Shares by Foreign Collaborators | 10B.2 (i) As per the Foreign Investment guidelines issued by the Government of India, Ministry of Industry, foreign investment (equity/preference shares) upto certain specified limits would be permitted by Reserve Bank under Automatic Route as under: (a) Foreign investment (equity/preference) upto 50% in respect of Mining activities referred to in Part 'A' of Annexure III to Ministry of Industry's Press Note No.14 (1997 Series) dated 8th October 1997; (b) Foreign investment (equity/preference) upto 51% in (i) industries/items included in part 'B' of Annexure III to Ministry of Industry's Press Note No.14 (1997 series) dated 8th October 1997 and (ii) a trading company primarily engaged in export activity; (c) Foreign investment (equity/preference) upto 74% in industries/items included in part 'C' of Annexure III to Ministry of Industry's Press Note No.14 (1997 series) dated 8th October 1997; (d) Foreign Investment upto 100% in industries/items included in Part ‘D’ of Annexure III, to Ministry of Industry’s Press Note No.14(1997 Series) as amended from time to time provided the foreign investment in a project does not exceed Rs.1500 crores. Existing Indian companies are also permitted to raise foreign investment (equity/preference) to the level permissible as indicated above under the Automatic Route in case the company is engaged in the manufacture of item/s included in the Annexure III industries or the proposed expansion of capital is for undertaking an activity covered under the said Annexure. Raising of foreign investment (equity/preference) upto 51% in an existing trading company [cf. sub-paragraph 10B.,2(i)(b)(i) above] will be permitted if the company has already been registered as Export/Trading/Star Trading House. Reserve Bank, vide its Notifications No.F.E.R.A.180/98-RB dated 13th January 1998 as amended by Notification No.F.E.R.A.188/98-RB dated 11th November 1998 has granted general permission under Sections 19(1) (a), 19(1)(d) and 29(1)(b) of Foreign Exchange Regulation Act, 1973 to Indian companies for issue and export of equity/preference shares to foreign investors in respect of eligible investments under the Automatic Route. As a result of the general permission, Indian companies seeking foreign investment (equity/preference) under the Automatic Route of Reserve Bank and satisfying the conditions laid down in the said Notifications will not require prior clearance of Reserve Bank. Such Indian companies may issue shares to foreign investors and file a declaration in form FC(RBI) together with the required documents with the concerned Regional Office of Reserve Bank under whose jurisdiction their registered office is situated, within 30 days from the date of issue of shares to foreign investors/collaborators. Accordingly, non-residents who have been issued shares under the general permission granted by this Notification would not need specific approval under Section 29(1)(b) of FERA 1973 from Reserve Bank. Issue of preference shares to Non-Resident Indians/Overseas Corporate Bodies is also permitted under 100% Scheme.
| | (ii) | Applications for foreign investment which do not satisfy the parameters | | prescribed for Automatic Approval by Reserve Bank or in 100% Export Oriented Units located outside the Export Processing Zones are required to be made to the Secretariat for Industrial Assistance (SIA)/Foreign Investment Promotion Board (FIPB), as the case may be. If the unit is located in any of the Export Processing Zones, applications should be made to the Development Commissioner of the Export Processing Zone concerned. | | | | | | | | (iii) | With a view to simplifying the procedure under SIA/FIPB route, Reserve Bank, | | vide its Notification No.F.E.R.A.182/98-RB dated 10th February 1998 has granted general permission under Sections 19(1) and 29(1)(b) of FERA 1973 to Indian companies for issue and export of shares/securities to foreign investors/collaborators in respect of such investments approved by SIA/FIPB. As a result of the general permission, Indian companies seeking foreign investments based on the approvals granted by SIA/FIPB and satisfying the conditions laid down in the notification will not require any prior clearance of Reserve Bank. Such Indian companies may issue shares to foreign investors/collaborators and file a declaration in form ISD together with the required documents, with the concerned Regional Office of Reserve Bank under whose jurisdiction their Registered Office is situated, within 30 days from the date of issue of shares/securities to foreign investors/collaborators. In the case of composite approvals granted by SIA/FIPB for foreign financial as also technical collaborations, while issue of shares/securities will be governed by the general permission, in respect of technical collaboration, the procedure contained in paragraph 10B.1 should be followed | | A.D.(M.A. Series) Circular No.29
| | | (iv) | Retention of share subscriptions in foreign currency accounts in India/abroad for | | financing import of capital goods, etc. requires prior approval of Reserve Bank. Reserve Bank will also permit receipt of interest-free loans as advance share subscription from the collaborators to be adjusted against share capital contribution later, for meeting expenses in India of the Indian company. | | NOTE: | | Indian companies intending to raise foreign equity through preferential allotment of shares to non-residents are required to comply with the guidelines issued by Government of India, Reserve Bank of India, SEBI and other regulatory authorities from time to time. | A.D.(M.A. Series) Circular No.29
A.D.(M.A. Series) Circular No.2
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