RBI/2005-06/353
A.P. (DIR Series) Circular No. 30
April 05, 2006
To,
All Banks Authorised to Deal in Foreign Exchange
Madam / Sir,
Overseas Investment – Liberalisation under ESOP
scheme
Attention of Authorised Dealer (AD) banks is
invited to Notification No.FEMA.120/RB-2004
dated 7th July 2004, as amended from time to time.
2. With a view to rationalize the Regulations
for investment outside India, it has been decided to bring about the following
changes to the existing Regulations :
3. Employees Stock Option Schemes (ESOPs)
Automatic Route
3.1 Presently, in terms of Regulation 22
(2) of Notification No.FEMA.120
/ RB-2004 dated 7th July 2004, as amended from time to time, Authorised
Dealer banks have been delegated authority to allow remittances, without any
monetary limit, for ESOPs provided that the foreign company offering ESOPs holds
not less than 51% stake in the Indian Company either directly or indirectly
(i.e. through a SPV or step down subsidiary). Such remittances are, however,
allowed directly to the Company offering shares under ESOP scheme. However,
the foreign company requires prior permission of the Reserve Bank to repurchase
the shares from the employees, issued under ESOP scheme.
3.2 As a measure of rationalization, it has
been decided that Authorised Dealer banks may allow remittance for acquiring
shares under ESOP Schemes, irrespective of the method of the operationalisation
of the scheme. It would, therefore, be in order for Authorised Dealer banks
to allow remittance for acquiring shares under ESOP scheme, where the shares
under the scheme are offered directly by the issuing company or indirectly through
a trust / a Special Purpose Vehicle (SPV) / step down subsidiary, provided (i)
the company issuing the shares effectively, directly or indirectly, holds in
the Indian company, whose employees / directors are being offered shares, not
less than 51% of its equity, (ii) the shares under the ESOP Scheme are offered
by the issuing company globally on uniform basis, and (iii) An Annual Return
is submitted by the Indian company to the Reserve Bank through the Authorised
Dealer banks giving details of remittances / beneficiaries / etc., as per Annex
I to this circular.
3.3 It has further been decided to grant
General Permission to foreign companies to repurchase the shares issued to residents
in India under any ESOP scheme provided (i) the shares were issued in accordance
with the Rules / Regulations framed under Foreign Exchange Management Act, 1999,
(ii) the shares are being repurchased in terms of the initial offer document
and, (iii) An Annual Return is submitted through the Authorised Dealer banks
giving details of remittances / beneficiaries / etc., as per Annex
II to this circular.
4. Reporting through Designated branches
4.1 Presently, an eligible Indian entity
making investment in a Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside
India, is required to route all its transactions relating to the investment
through one branch of an Authorised Dealer bank designated by it. However, the
Indian investor / promoter have freedom to designate different Authorised Dealer
banks / branches of Authorised Dealer banks for different JV / WOS outside India
promoted by them.
4.2 In order to keep the designated branches
of Authorised Dealer banks aware of the progress in the investment / disinvestment
outside India routed through them, it has been decided that all communications
from the Indian parties, to the Reserve Bank, relating to the investment outside
India should be routed through the branch of the Authorised Dealer bank that
has been designated by the Indian investor for the investment. The Authorised
Dealer bank while forwarding the request from their customers to the Reserve
Bank, shall also forward its comments / recommendations on the request.
5. Necessary amendments to the Foreign Exchange
Management (Transfer or issue of Any Foreign Security), Regulations, 2004 are
being issued separately.
6. Authorised Dealer banks may bring the
contents of this circular to the notice of their constituents and customers.
7. The directions contained in this
circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange
Management Act (FEMA), 1999 (42 of 1999) and is without prejudice to permissions
/ approvals, if any, required under any other law.
Yours faithfully,
Vinay Baijal
Chief General Manager-in-Charge
ANNEX I
[Annex to A. P. (DIR Series) Circular No. 30 dated
April 05, 2006]
Statement of shares allotted to Indian employees
/ directors under ESOP Schemes for the year ended March ________
(to be submitted on the letterhead of the company
through their Authorised Dealer bank)
We, M/s …………….., (Indian company) hereby declare
that :
a) M/s …………. (foreign company) has issued ……
shares to our employees under ESOP Scheme during the year as under
(i) No. of shares allotted :
(ii) Number of employees / directors who accepted
shares : (iii) Amount remitted :
b) effective holding of the foreign company
M/s …………. in the Indian company, as on March 31, ______, is not less than 51%;
and
c) the information furnished above is true and
correct to the best of our knowledge and belief.
Signature of the Authorised Official :
Name :
Designation :
Date :
To,
The Chief General Manager
Reserve Bank of India,
Foreign Exchange Department,
Overseas Investment Division,
Central Office, Amar Bldg., 3rd floor,
Sir. P. M. Road, Fort,
Mumbai 400 001.
ANNEX II
[Annex to A. P. (DIR Series) Circular No. 30 dated
April 05, 2006]
Statement of shares repurchased by the issuing
company from Indian employees / directors under ESOP Schemes
for the year ended March ________
(to be submitted on the letterhead of the company
through their Authorised Dealer bank)
We, M/s …………….., (Indian company) hereby declare
that :
a) M/s …………. (foreign company) has repurchased
…… shares issued to our employees under ESOP Scheme during the year,
(i) Number of shares repurchased :
(ii) Number of employees / directors who sold
shares :
(iii) Amount of remittance (inward) :
b) effective holding of the foreign company
M/s …………. in the Indian company, as on March 31, ______, is not less than 51%;
and
c) the information furnished above is true and
correct to the best of our knowledge and belief.
Signature of the Authorised Official :
Name :
Designation :
Date :
To;
The Chief General Manager
Reserve Bank of India,
Foreign Exchange Department,
Overseas Investment Division,
Central Office, Amar Bldg., 3rd floor,
Sir. P. M. Road, Fort,
Mumbai 400 001.
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