Articles

The Consolidated Foreign Direct Investment Policy (Effective Oct 01, 2011) states as below:

  1. Only equity shares, fully, compulsorily and mandatory convertible debentures and fully, compulsorily and mandatory convertible preference shares, with no in-built options of any type, would qualify as eligible instruments for FDI. Equity instruments issued/transferred to non-residents having in-built options or supported by options sold by third parties would lose their equity character and such instruments would have to comply with the extant ECB guidelines.
  2. Preference shares/ debentures i.e., non-convertible, optionally convertible or partially convertible for issue of which funds have been received on or after May 01, 2007 are considered as debt. Accordingly, all norms applicable for ECBs relating to eligible borrowers, recognised lenders, amount and maturity, end-use stipulations, etc shall apply.

In view of the aforesaid it is imperative to examine the documentation in relation to issue of securities  (equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatory convertible preference shares) and if required make suitable modification to ensure that their equity character is retained.

Leave a Reply

Your email address will not be published. Required fields are marked *

Disclaimer

The Bar Council of India Rules do not permit law firms to solicit work or advertise. By clicking the ‘I Agree’ button the Reader accepts that it seeks information on its own accord. Alaya Legal shall in no way be responsible for any technical inaccuracies in the website, or for any actions taken or not taken for reasons attributable to the information contained in this website or accessed through this website. Readers are advised to seek counsel from a qualified professional while dealing with specific issues.By continuing to use this site you consent to use of cookies on your device as mentioned in this cookie policy.

Alaya Legal shall in no way be responsible for any technical inaccuracies in the website, or for any actions taken or not taken for reasons attributable to the information contained in this website or accessed through this website. Readers are advised to seek counsel from a qualified professional while dealing with specific issues.The views appearing under various heads, including ‘Trending’, are those of the author. The author may be reached at by writing to Alaya Legal at contact@alayalegal.com Nothing herein is or may be construed as legal advice.