RBI/2015-16/319
A.P. (DIR Series) Circular No. 52
February 11, 2016
To,
All Authorised Dealer Category – I Banks
Madam/Sir,
Regulatory Relaxations for Startups- Clarifications relating to Issue
of Shares
Attention of Authorised Dealer Category - I (AD Category-I) banks is invited
to the Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000, notified by the Reserve Bank vide
Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to
time.
- Pursuant to paragraph 14 of the Sixth Bi-Monthly Monetary Policy
Statement for 2015-16, Reserve Bank of India vide Press Release dated
February 2, 2016, had announced that in case of startups, certain
permissible transactions under the existing regulatory framework shall be
clarified. One of the issues related to issue of shares without cash payment
by the investor through sweat equity or against any legitimate payment owed
by the company remittance of which does not require any permission under
FEMA, 1999.
- Accordingly, the following is clarified:
a. Issue of shares without cash payment through sweat equity: Reserve Bank
of India vide
Notification No. FEMA. 344/2015 RB dated June 11, 2015 has
permitted Indian companies to issue sweat equity, subject to conditions,
inter-alia, that the scheme has been drawn either in terms of regulations
issued under the Securities Exchange Board of India Act, 1992 in respect of
listed companies or the Companies (Share Capital and Debentures) Rules, 2014
notified by the Central Government under the Companies Act 2013 in respect
of other companies.
b. Issue of shares against legitimate payment owed: Reserve Bank of India
vide
Notification No. FEMA.315/2014-RB dated July 10, 2014, has permitted
Indian companies to issue equity shares against any other funds payable by
the investee company (e.g. payments for use or acquisition of intellectual
property rights, for import of goods, payment of dividends, interest
payments, consultancy fees, etc.), remittance of which does not require
prior permission of the Government of India or Reserve Bank of India under
FEMA, 1999 subject to conditions relating to adherence to FDI policy
including sectoral caps, pricing guidelines, etc. and applicable tax laws
(cf. paragraph 3 of Schedule 1 to Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) Regulations, 2015).
- Authorised Dealer banks may bring the contents of this circular to the
notice of their constituents and customers concerned and advise them to
refer to the above notifications for further details.
- The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999)
and are without prejudice to permissions / approvals, if any, required under
any other law.
Yours faithfully,
(B. P. Kanungo)
Principal Chief General Manager
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