Changes in Automatic Route Sectoral Cap under FEMA FIPB & treatment of additional foreign investments - Press Note 1 2010

Government Route (ie) prior approval of Government of India shall be considered by Foreign Investment Promotion Board (FIPB), under Department of Economic Affairs (DEA), Ministry of Finance.

Approval of FIPB/CCEA:

• FIPB can recommend on proposals for approval of Ministry of Finance if total foreign equity inflow is UPTO Rs.1200 crore.
• The FIPB Secretariat in DEA will process the recommendations of FIPB to obtain the approval of Minister of Finance and Cabinet Committee on Economic Affairs (CCEA) for total foreign equity inflow of more than Rs. 1200 crore.
• The CCEA would also consider the proposals which may be referred to it by the FIPB/ the Minister of Finance.

Additional Foreign Investment into Same Entity:

It has also been decided that companies may not require fresh prior approval of the Government i.e. Minister in-charge of FIPB/CCEA for bringing in additional foreign investment into the same entity, in the following cases:

1. Cases which earlier required prior approval of FIPB/Cabinet Committee on Foreign Investment (CCFI)/CCEA and who had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such activities/sectors have been placed under automatic route;
2. Cases which had sectoral caps earlier and who had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such caps were removed/increased and the activities placed under automatic route; provided that such additional investment alongwith the initial/original investment does not exceed the sectoral caps;
3. Cases of additional foreign investment into the same entity where prior approval of FIPB/CCFIICCEA had been obtained earlier for the initial/original foreign investment due to requirements of Press Note 18/1998 or Press Note 1 of 2005 and prior approval of the Government under the FDI policy is not required for any other reason/purpose.

Thats it, this is the final and last of the classes of Press Note series.  This subsequently will be superceded by Master Press Notes which will be released for every 6 months.

Source: Press Note 1 of 2010

Foreign Investment in Commodity Exchanges to be diluted on or before 31st March 2010 – PN 7 issued by DIPP

Press Note 7 of 2009 vide D/o IPP F.No. 12(58)/2005-FC dated 26.09.2009

Difficulties have been brought to the notice of the government in complying with the provisions of the earlier Press Notes within the stipulated time frame by Commodity Exchanges in India. The Government, on consideration and in order to facilitate the existing Commodity Exchanges to comply with the guidelines notified vide Press Note 2 (2008), has now decided to allow a further transition / complying/correction time to the existing Commodity exchange(s) beyond 30.09.2009. Accordingly, all such Commodity Exchanges are hereby advised to adhere to the conditions of Press Note 2 (2008) by 31.03.2010. This would comprise the last opportunity for such compliance.

All Commodity Exchanges shall furnish a status report informing the foreign investment in the Commodity Exchange as on 30.09.2009, along with details of equity structure, as well as the steps already taken/proposed to be taken with regard to compliance with the guidelines notified vide Press Note 2(2008), to the Department of Industrial Policy & Promotion (DIPP), Department of Consumer Affairs, Foreign Investment Promotion Board (FIPB), the Forward Market Commission (FMC) and SEBI.

DIPP Consolidated FDI Policy Circular 1 of 2010 wef 1st April and all Press Notes repealed, the legal edifice is built on FEMA RBI notifications (Master)

The system of periodic consolidation and updation of Indian Foreign Direct investment (FDI) Policy issued by Department of Industrial Policy & Promotion (DIPP) under Ministry of Commerce & Industry is introduced as an investor friendly measure (as assured by Finance Ministry in his recent Budget Speech).  The draft master Press Note was released for public comments which can be read from Download all Press Notes from 1991 to 2009 issued by DIPP as it proposes to consolidate PNs in 2010 to release a comprehensive FDI policy in India like Master Circulars with a sunset clause of 6 months

Now, it has been decided that from now onwards a consolidated circular (Master Press Notes or Consolidated FDI Policy or Circular 1 of 2010) would be issued every 6 months to update the FDI policy. This consolidated circular will, therefore, be superseded by a circular to be issued on September 30, 2010. (like you wait for RBI Master Circulars on 1st July every year).  While this circular consolidates FDI Policy Framework, the legal edifice is built on notifications issued by RBI under FEMA.

Press Notes are NOT applicable:

All earlier Press Notes/Press Releases/Clarifications on FDI issued by DIPP which were in force and effective as on March 31, 2010 stand rescinded as on March 31, 2010. The present circular consolidates and subsumes all such/these Press Notes/Press Releases/Clarifications as on March 31, 2010.  Enjoy reading the last press note, it won’t kill you any more.  Its just a single document hereon (making the life of a Corporate Legal Consultant easier and interpretations tougher).

Consolidated FDI Policy is APPLICABLE:

With effect from 1st April 2010, the Consolidated FDI Policy will be applicable.  It has the following important categories,

1. ORIGIN, TYPE, ELIGIBILITY, CONDITIONS AND ISSUE/TRANSFER OF INVESTMENT
2. CALCULATION, ENTRY ROUTE, CAPS, ENTRY CONDITIONS ETC. OF INVESTMENT
3. POLICY ON ROUTE, CAPS AND ENTRY CONDITIONS
4. AGRICULTURE
5. INDUSTRY, MINING, MANUFACTURING
6. SERVICES SECTOR
7. REMITTANCE, REPORTING AND VIOLATION/COMPOUNDING
8. ANNEXURES

• Annex-1 Form FC-GPR
• Annex-2 Terms and conditions for transfer of capital instruments from resident to non-resident and vice-versa
• Annex-3 Documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift
• Annex-4 Definition of "relative" as given in Section 6 of Companies Act, 1956
• Annex-5 Report by the Indian company receiving amount of consideration for issue of shares / convertible debentures under the FDI scheme
• Annex-6 Know Your Customer (KYC) Form in respect of the non-resident investor
• Annex-7 Form FC-TRS
• Annex-8 Form DR
• Annex-9 Form DR – Quarterly

Definitions

CAPITAL
Means
Compulsorily, Mandatorily and Fully convertible
Preference Shares	Debenture Shares
and includes
DR’S	FCCB’s

Any many more interesting definitions, concepts, provisions, etc…

Download Circular 1 of 2010 on FDI Policy

Foreign Direct Investment Policy

Consolidated policy on Foreign Direct Investment.   DIPP issued a Press Note  (7/2008) dated 16th June 2008 detailing the summary of the FDI policy and regulations applicable in various sectors and activities after incorporating the policy changes up to 31-3-2008 .The press note gives details of sectors in whcih FDI is prohibited and sector specific FDI cap , entry route and other conditions .The said press note can be accessed at http://siadipp.nic.in/policy/changes/pn7_2008.pdf.

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Best Jokes, Best Friends, Best Food. Get all this and more on Best of Yahoo! Groups.

LLP Press Note on applicability of Income Tax on LLP similar to general Partnership effective 1st April 2010

Taxation of Limited Liability Partnership like General Partnerships effective from 1st April 2010-LLP Press Note 2009

Since the taxation related matters in India are provided under Tax Laws, the taxation of LLPs was not provided in the Limited Liability Partnership (LLP) Act, 2008. The Finance Bill, 2009 has made provisions in this regard, pursuant to which the taxation scheme of LLPs has been proposed to be introduced in the Income Tax Act.  The amendments shall be effective from the 1st day of April 2010 i.e. assessment year 2010-11.  Find details of the notification in http://www.lawlabz.com/blog.html

Source: Press Note No.1/16/2007-CL.V dated 10/07/2009 on Taxation of Limited Liability Partnerships

No limits for royalty/lumpsum payment in FEMA under Current Account Transaction as per PN 8 – DIPP allowed it under Automatic route (ie) without the approval of RBI

Press Note 8 of 2009 as notified by 0/0 IPP F. No. 5(6)/2008-FC dated 16.12.2009

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. In addition, where there is no technology transfer involved, 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. Separate norms are available for the hotel sector vide Press Note 18 (1991 Series) and Press Note 1 (1995 Series). Technology transfers involving payments above these limits required prior permission of the Government of India (Project Approval Board, Department of Industrial Policy and Promotion).

The Government of India has reviewed the extant policy and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

Meaning, Payment of Royalty and Lumpsum fees is fully liberalised now without any ceiling limits and will fall under Automatic Route.

[FDI-DIPP]Print Media liberalisation & read Indian Wall Street Journal now

Department of Industrial Policy & Promotion has issued press Note 1 of (2009 Series) dated 14th January 2009 amending FDI policies in Print Media in particular News & Current affairs matters.

Foreign direct investment (FDI) in publication of facsimile edition of foreign newspapers:

· FDI up to 100% is permitted with prior approval of FIPB in publication of facsimile edition of foreign newspapers.

· Investment should be made by the owner of the original foreign newspaper(s) whose facsimile edition is proposed to be brought out in India.

· Business can be undertaking only by an entity incorporated or registered in India under the provisions of the Companies Act.

· Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.

Foreign investment in publication of Indian editions of foreign magazines dealing with news and current affairs.

• FDI upto 26% including investment by NRIs/PIOs/FII, is permitted with prior approval FIPB.
• 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news.

· Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008.

Click here for the Press Note 1 2009 series http://siadipp.nic.in/policy/changes/pn1_2009.pdf

So, whats the impact of this amendment

A facsimile edition is an exact replica of an international edition that meets certain conditions and cannot carry separate advertisements aimed at Indian readers or locally generated content or India-specific content, not published in the original edition of the foreign newspaper.

The all new Indian edition was added to the WSJ.com website this weekend and includes coverage from the New Delhi and Mumbai bureaus of Wall Street Journal which can be read from http://india.wsj.com/

For your kind information, Wall Street Journal also has a partnership with Hindustan Times in India to publish Mint - a business newspaper that is available in both print and online edition at livemint.com.

And you will find many more Indian editions of e-newspapers & foreign magazines.

SEBI Board Meeting on P Notes Issue

PRESS RELEASE

PR No.286/2007

SEBI Board Meeting

The SEBI Board today discussed the various issues relating to registration of FIIs viz issuance of P-Note/ODIs by some FIIs/Sub-accounts, the linkages (or absence thereof) between quantum of P-Notes/ODIs issued v/s the capital flows into the Indian markets.

The Board also discussed the nature of measures that need to be implemented immediately vis-à-vis the long term direction of the policy aspects relating to participation of foreign entities in the Indian Securities Market. It was felt that in the long term, SEBI may consider introduction of a regime of KYC/AML/CFT certification on foreign entities seeking to invest in the Indian markets, as is currently applicable on domestic entities, compliance with which will enable such entity to invest directly.

Having regard to the need to contain the export of the Indian capital markets, the Board felt that in the long term the approach should be to enable access to Indian markets by quality investors, by introducing a range of innovative products, including OTC derivatives, as are available in other markets, at competitive costs.

The Board discussed the policy measures on Offshore Derivative Instruments (Participatory Notes) hosted by SEBI on its website on October 16, 2007. Having considered the comments and suggestions in response to the proposals, the Board has taken the following decisions:

1. It was proposed that "FIIs and their sub-accounts shall not issue/renew ODIs with underlying as derivatives with immediate effect. They are required to wind up the current position over 18 months, during which period SEBI will review the position from time to time."

It is has already been clarified by SEBI that there is no proposed bar on ODI contracts, expiring this month or in the following months, being renewed, provided the renewal does not go beyond 18 months. It was further made clear that this proposal did not in any manner seek to restrict renewal or rollover of Indian Exchange Traded Derivative Contracts by the FIIs.

FIIs/sub-accounts are free to invest in derivatives traded on recognized stock exchanges.

The Board decided that starting from the date of implementation of this proposal, they can not issue P-Notes that are based on such derivatives.

2. It was proposed that "further issuance of ODIs by the sub-accounts of FIIs will be discontinued with immediate effect. They will be required to wind up the current position over 18 months, during which period SEBI will review the position from time to time."

The Board decided that from the date of implementation of the proposal, no sub-account can issue fresh ODIs. Existing ODI issuing sub-accounts have to ensure that they wind up all their ODIs within 18 months of implementation of the proposal.

SEBI had received several requests from existing P-Note issuing sub-accounts on the above proposal. Taking note of the transition being made by the sub-accounts currently issuing participatory notes, into FIIs, and in order to ensure implementation of the proposals in a non-disruptive manner, the Board has decided that that these applicants be treated as if they were FIIs as on the date decided for calculation of the AUC for the above proposals.

3. It was proposed that "The FIIs who are currently issuing ODIs with notional value of PNs outstanding (excluding derivatives) as a percentage of their AUC in India of less than 40% shall be allowed to issue further ODIs only at the incremental rate of 5% of their AUC in India. "

The Board confirmed the proposal with the understanding that 5% incremental issuance allowed to such FIIs would be applicable on an annual basis, till such time that the percentage reaches 40%, after which the entity will abide by the proposal applicable to entities above the 40% limit.

4. It was proposed that "Those FIIs with notional value of PNs outstanding (excluding derivatives) as a percentage of their AUC in India of more than 40% shall issue PNs only against cancellation / redemption / closing out of the existing PNs of at least equivalent amount." The Board confirmed the proposal.

5. The Board discussed several possible dates for implementation of the above proposals. Taking into account the fact that reporting of P-Notes/ODIs by FIIs is on a monthly basis and the last available data with SEBI was in respect of September 2007, the Board decided that the effective date for calculation of the AUC for the purpose of determining the notional value of PNs issued as a percentage of AUC, for the above proposals shall be September 30, 2007. The proposal will however take effect after close of trading hours on October 25, 2007.

In view of the submissions of some PN-holders that they would like to register with SEBI directly, instead of participating through the P-Note route but are are unable to adhere to the eligibility criteria prescribed under the FII Regulations, the SEBI board has agreed to the following changes to the registration criteria

1. Broad-based criteria

The "broad-based" criteria shall now be modified to include entities having at least 20 investors, no single investor holding more than 49% (instead of 10% at present).

2. Track record of the applicant

Track record of individual fund managers will be considered for the purpose of ascertaining the track record of a newly set up fund, subject to such fund manager providing its disciplinary track record details.

3. Issuance of ODIs/PNs would be limited to only "regulated" entities and not "registered" entities.

4. FII and sub-account registrations will be perpetual, subject to payment of fees.

5. The Board further discussed the issue of registration of Pension Funds, Foundations, Endowments, University Funds and Charitable trusts or societies, which are not regulated with any regulatory authority and having regard to the nature of these entities, advised that these entities may be registered as FIIs without imposing the requirement of their being "regulated".

Mumbai

October 25, 2007

Thanks & Regards
Alagar

[ECB]corporates in service sector under automatic route&any all-in-cost ceiling, NBFCinfrastructure finance with approval

1. RBI has liberalized the ECB policy by dispensing with the requirement of all-in-cost ceilings on ECB until June 30, 2009. However eligible borrowers, proposing to avail of ECB beyond the permissible all-in-cost ceilings as mentioned below may approach the Reserve Bank under the Approval Route.

Ceilings under Automatic Route:

2. Development of integrated township [as in Press Note 3 (2002 Series) dated January 04, 2002] is now a permissible end-use of ECB unless reviewed in 30th June 2009. Integrated township includes housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials. Development of land and providing allied infrastructure forms an integrated part of township's development.

The minimum area to be developed should be 100 acres for which norms and standards are to be followed as per local bye-laws / rules. In the absence of such bye-laws/rules, a minimum of two thousand dwelling units for about ten thousand population will need to be developed.

3. ECB by Non-Banking Financial Companies (NBFCs) exclusively involved in financing of the infrastructure sector, to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the Approval route.

The direct lending portfolio of the above lenders vis-à-vis their total ECB lending to NBFCs, at any point of time should not be less than 3:1. AD Category - I banks should obtain a certificate from the eligible lenders to this effect. This facility will be reviewed in June 2009.

4. Corporates in the Hotels, Hospitals and Software sectors to avail of ECB up to USD 100 million per financial year, under the Automatic Route, for foreign currency and / or Rupee capital expenditure for permissible end-use. The proceeds of the ECBs should not be used for acquisition of land. ECB by other entities in Hotels, Hospitals and Software sector continue to remain under Approval Route as earlier.

5. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately

Pl. find atached RBI/2008-09/343 A.P. (DIR Series) Circular No. 46 dated January 2, 2009 for details.

Click here for erstwhile ECB amendment.

Conversion into New Pricing Norms for FCCB on or before 15th August 2010 (ie) average 2 week high & low prices only like QIP under ICDR

A Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme was notified in 1993 to allow the Indian Corporate sector to access global capital markets through issue of Foreign Currency Convertible Bonds (FCCB)/Equity Shares under the Global Depository Receipt Mechanism (GDR) and American Depository Receipt Mechanism (ADR). The Scheme has been amended several times since then.

What is FCEB?

Amendment: On or before 15th August 2010 (6 month period from 15th February 2010), the corporates have the option to revise from OLD CONVERSION PRICE norms to NEW CONVERSION PRICE norm (as below) for FCCB’s.  The said revision of conversion price is subject to the following conditions:

• Prior approval from RBI (PRBI) is mandatory.
• The issuing Company shall ensure that the revision of price and consequent issue of shares may not breach Foreign Direct Investment (FDI) limit (Sectoral caps) under Automatic or Approval route.
• The issuing Company shall take approval from its Board as well as from its shareholders (Board Resolution + Ordinary Resolution).
• The issuing Company shall enter into a fresh agreement with the FCCB holders in terms of re-negotiation of the conversion price.

Source: Ministry of finance Press Note F.No.9/3/2009-ECB dated 15th February 2010.

[Old Conversion Price]FCCB Pricing Norm prior to 27th November 2008:

Listed Companies – The pricing should not be less than the higher of the following two averages:

(i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock
      exchange during the six months preceding the relevant date;

(ii) The average of the weekly high and low of the closing prices of the related shares quoted on a stock
       exchange during the two week preceding the relevant date.

The “relevant date” means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed issue.”

[New Conversion Price]FCCB Pricing Norm from 27th November 2008: similar to QIP pricing under ICDR

Listed Companies – The pricing should not be less than the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date; [avg 2 weeks high & low]
The “relevant date” means date of the meeting in which the Board of the company or the Committee of Directors duly authorized by the Board of the company decides to open the proposed issue.”

Source: FINMIN

Violation of ECB provisions mandates RBI approval route, instead of automatic route & SEZ can avail for devlopment now

Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to the A.P. (DIR Series) Circular No. 46 dated January 2, 2009 relating to External Commercial Borrowings (ECB).

On a review, it has been decided to modify some aspects of the ECB policy vide RBI/2008-09/517 A.P. (DIR Series) Circular No.71 dated 30th June 2009 as indicated below:

(i) ECB for Integrated Township
As per the extant policy, corporates, engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002, issued by DIPP, Ministry of Commerce & Industry, Government of India are permitted to avail of ECB, under the Approval route, until June 2009 [which is extended to 31st December 2009], still under RBI approval route.

(ii) ECB for NBFC sector
As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are exclusively involved in financing of the infrastructure sector, are permitted to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the Approval route, subject, inter-alia, to the condition that the direct lending portfolio of these lenders vis-à-vis their total ECB lending to NBFCs, at any point of time, should not be less than 3:1 [the ratio is dispensed from 1st July 2009], still under RBI approval route.

(iii) ECB for Development of Special Economic Zone
As per the extant guidelines, ECB is permissible for the Infrastructure sector, which is defined as (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial parks, (vii) urban infrastructure (water supply, sanitation and sewage projects) and (viii) mining, refining and exploration. Further, units in the Special Economic Zone (SEZ) are also permitted to access ECBs for their own requirements. However, ECB is not permissible for the development of SEZ. It has now been decided to allow SEZ developers also to avail of ECB under the Approval route for providing infrastructure facilities, as defined in the ECB policy, within the SEZ. However, ECB shall not be permissible for development of integrated township and commercial real estate within the SEZ.

(iv) Corporates under Investigation
Currently, the ECB policy is not explicit about accessing of ECB by the corporates, which have violated the extant ECB policy and are under investigation by the Reserve Bank and / or Directorate of Enforcement. It is clarified that corporates, which have violated the extant ECB policy and are under investigation by Reserve Bank and / or by Directorate of Enforcement, will not be allowed to access the Automatic route for ECB. Any request by such corporates for ECB will be examined under the Approval route.

Click here to read all about External Commercial Borrowings

Like it, keep getting updates through mail

FC & JV in WTO

FOREIGN COLLABORATION & JOINT VENTURE (FC & JV)

 

            Collaboration is a generic term, which pre-supposes a joint commercial enterprise or a consortium.   JV presupposes the joint participation by foreigner & an Indian to capitalise on the opportunities in the market by forging the mutual strength for common advantage.

           

"JV differs from a Partnership as JV is WITH the business whereas the partners are IN the business".

 

            Domestic partners may have skills but experienced in local market, existing business whereas they may be lacking physical capital or technology, which may be supplied by foreign parties, commonly there are four types of FC/JV,

1.       Equity JV/Financial Collaboration: Foreign partners & Indian party collectively hold an Indian company at an agreed % of shareholding & pursue the objects of JV. There is no technology transfer involved.   Typically, JV of these types takes place in FMCG, distribution, etc…

2.       Technical JV/Collaboration: Foreign party supplies technology to JV & JV does not need capital.  For instance, Technical JV for upgrading production, efficiency, processes, rejection, etc…

3.       Techno-Equity JV or Tie-up agreement: Here there is both equity & technical participation.  A foreign equity holder enjoys both share in the profit & payment towards technology transfer.   These types of JV are typically in manufacturing & service sector where technology transfer is continuous & retention of ownership control is critical from the confidentiality of IPR.

4.       Contractual JV: Through contracts.

 

 

RESTRICTIVE CLAUSES IN JV AGREEMENT:

1.       Restriction on IPR (Intellectual Property Rights):  This deals about restriction in supply for confidentiality.

2.       Restriction after expiry of agreement:  These are basically provisions ensuring confidentiality.

3.       Restriction on Research & Development (R&D).

4.       Non-Compete:  This clause may typically require a JV partner or key employees not to unfairly compete after termination or resignation.

5.       Tying arrangement:  These arrangement typically tie-up one consideration for another.

6.       Price fixing.

7.       Restrictions on territory.

8.       Grant back provision: This clause requires any improvement to be granted back.

9.       Exclusive sales or Representation agreement.

10.   Restriction on quality control, like, use of personnel or other prescriptions.

11.   Restriction on publicity.

 

More on Foreign Collaborations can be better read while doing FEMA for Economic Laws; Concentrate more on Press Note 1 & 5.

 

Also, read a sample FC agreement.

--
Vj
Trezrrr every pulsss
http://yehseeyes.blogspot.com/

ECB NBFC & Spectrum amended w.e.f December 2009 & others applicable from 1st January 2010 – RBI FEMA Notification

On a review of the prevailing macroeconomic conditions and developments in international financial markets, it has been decided to modify some aspects of the ECB policy as indicated below:

AMENDMENTS WITH IMMEDIATE EFFECT

(i) ECB for the NBFC Sector

As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are exclusively involved in the financing of the infrastructure sector, are permitted to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the approval route.  In view of the thrust  given to development of infrastructure sector, it has been decided with immediate effect to allow NBFCs exclusively involved in financing the infrastructure projects to avail of ECB from the recognized lender category including international banks under the approval route, subject to complying with the prudential standards prescribed by the Reserve Bank and the borrowing entities fully hedging their currency risk. The AD Category-I bank should certify the compliance with the prudential norms by the borrowing NBFCs.

(ii) ECB for Spectrum in the Telecommunication Sector

As per the extant policy, as indicated in A.P. (DIR Series) Circular No. 26 dated October 22, 2008, payment for obtaining license/permit for 3G Spectrum is considered an eligible end - use for the purpose of ECB under the automatic route. It has now been decided to permit eligible borrowers in the telecommunication sector to avail of ECB for the purpose of payment for Spectrum allocation. This modification will come into effect with immediate effect.

AMENDMENTS WITH EFFECT FROM 1ST JANUARY 2010

(i) All-in-cost ceilings

As per the extant policy, the all-in-cost ceilings have been dispensed with, under the approval route, until December 31, 2009. In view of the improvement in the credit market conditions and narrowing credit spreads in the international markets, it has been decided to withdraw the existing relaxation in the all-in-cost ceilings under the approval route with effect from January 1, 2010. Accordingly, the all-in-cost ceilings under the approval route for the ECBs, where Loan Agreements have been signed on or after January 1, 2010 will be as under:

Average Maturity Period	All -in-cost Ceilings over six month Libor*
3 – 5 years	300 basis points
Over 5 years	500 basis points

*for the respective currency of borrowing or applicable benchmark.

Eligible borrowers proposing to avail of ECB after December 31, 2009, where the Loan Agreement has been signed on or before December 31, 2009 and where the all-in-cost exceed the above ceilings, should furnish a copy of the Loan Agreement. Such proposals would continue to be considered under the approval route.

(ii) Integrated township

As per the extant policy, corporates, engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002, issued by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India are permitted to avail of ECB, under the approval route, until December 31, 2009. On a review of the prevailing conditions, it has been decided to extend the current policy until December 31, 2010, under the approval route. All other terms and conditions, stipulated in the A.P. (DIR Series) Circulars referred to above, remain unchanged.

iii) Buyback of the Foreign Currency Convertible Bonds (FCCBs)

In terms of A.P. (DIR Series) Circular No. 39 dated December 8, 2008, read with A.P. (DIR Series) Circular No. 58 dated March 13, 2009 and A.P. (DIR Series) Circular No. 65 dated April 28, 2009, Indian companies have been allowed to buyback their Foreign Currency Convertible Bonds (FCCBs) both under the automatic route and approval route until December 31, 2009. Keeping in view the prevailing macroeconomic conditions and global developments, especially the improvements in the stock prices, it has been decided to discontinue the facility with effect from January 1, 2010.

Source: RBI/2009-10/252 A.P. (DIR Series) Circular No.19 dated 9th December 2009

No Ministry of Commerce approval is required for Royalty/Lumpsum payment above 5%/8% - RBI Current Account Transaction Amendment

In continuation of Press Note 8 issued by DIPP with effect from 16.12. 2009 that No limits for royalty/lumpsum payment in FEMA under Current Account Transaction as per PN 8 – DIPP allowed it under Automatic route (ie) without the approval of RBI

The Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2010 is passed. They shall be deemed to have come into force with effect from the 16th day of December, 2009.

In terms of Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules 2000, prior approval of the Ministry of Commerce and Industry, Government of India, 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 [item 8 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000]. The Government of India has reviewed the extant policy with regard to liberalization of foreign technology agreement and it was decided to omit item number 8 of Schedule II to the Foreign Exchange Management (Current Account Transaction) Rules, 2000, and the entry relating thereto.

Accordingly, 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, Government of India.

The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in this regard has been notified by the Government of India vide Notification No.G.S.R.382 (E) dated May 5, 2010.

Source: RBI/2009-10/465 A. P. (DIR Series) Circular No. 52 dated 13th May 2010

General Circular No. 13/2007 Dated 27/09/2007 - Section 141 of the Companies Act, 1956 regarding extension of time for filing documents by companies and levy of additional fee

The final position is http://yehseeyes.blogspot.com/2008/07/companies-acte-form-8-within-30-days-of.html

The Hon'ble Company Law Board has allowed the petition and passed an order dated 1.8.2007 which is re-produced as follow:

"The Central Government, through the Secretary, Ministry of Corporate Affairs, has filed this instant application under Section 141 of the Companies Act, 1956 seeking for directions of this Board to permit Registrars of Companies to condone the delay beyond the prescribed period of 60 days and 30 days from the date of registration/modification and satisfaction of charges respectively. I heard the representatives of the Central Government. Presently, the power to condone delay rests with this Board in terms of Section 141 of the Act. Even though, this power has been sought to be conferred on the Central Government by the Companies (Second Amendment) Act, 2002, the same has not been notified due to pendency of proceedings before the Supreme Court. The power exercised by this Board under Section 141 is purely procedural and very rarely any adjudicatory issue arises. In other words, there has been hardly any legal issue requiring application of mind is involved in disposal of the applications under Section 141. Taking this aspect into consideration and also the fact that a lot of time, efforts and money are involved in prosecuting an application under Section 141, I find justification in the application of the Central Government. Accordingly it is directed as follows:

(1) In cases where there are no disputes, the Central Government is authorised to accept registration/modification/satisfaction of charge up to a period of 300 days from the dates of events.

(2) Additional fees as prescribed in terms of Section 611(2) of the Act shall be levied for the delay beyond 30 days. The Central Government shall notify a slab system of levying additional fee up to 300 days.

(3) Since the very purpose of the application is to avoid time and efforts, the Central Government may ensusre that MCA-21 system accepts the documents on payment of additional fees so that physical approach to ROC for registration can be avoided.

(4) These directions will be effective from a date to be notified by the Central Government.

(5) All the applications pending with the Company Law Board as on the date of Notification by the Central Government shall be disposed of by the respective Regional Benches as hereto before.

(6) However the present system of filing applications before the Company Law Board in terms of Section 141 will continue in respect of:

a. where the delay is beyond 300 days from the dates of events;

b. Rectification of register of charges; and

c. when documents are sought to be filed by the lenders.

(7) The Central Government shall send a copy of this order to all Regional Directors/Registrars of Companies and Regional Benches of the Company Law Board."

Pursuant to the order dated 01.08.2007 passed by the Company Law Board as reproduced above, following decisions have been taken for implementation of the said order:-

(i) The aforesaid order shall take effect from the 27th October, 2007.

(ii) Documents under the defined categories for registration/ modification/ satisfaction of charge, excepting those mentioned under Para 6 of the order, shall be accepted for filing under MCA 21 system up to 300 days from the event date with effect from 27 ^th October,2007.

(iii) The Registrar of Companies shall register the documents so filed in cases where: (a) there are no disputes and (b) there is an omission in filing of the particulars or the registration/ modification of the charge or in giving of intimation of payment or satisfaction thereof within a period of 60 days and 30 days respectively, up to a period not exceeding 300 days from the date of event by levying additional fee prescribed in section 611(2) i.e. not exceeding ten times the amount of fee specified in Schedule X.

(iv) All applications pending with the Company Law Board, prior to the effective date i.e. the 27^th of October, 2007 for extension of time in omission of filing of the particulars or the registration/ modification of the charge or for the giving of intimation of payment or satisfaction thereof within a period of 60 days and 30 days respectively, shall be disposed of by the respective Regional Benches as hereto before.

(v) Documents filed on the portal (www.mca.gov.in), prior to the effective date i.e. the 27^th of October, 2007 for registration /modification of the charge or for the giving of intimation of payment or satisfaction thereof after a period of 60 days and 30 days respectively, shall not be registered by the concerned Registrar until the delay is condoned by the respective Regional Benches as hereto before.

(vi) The present system of filing applications before the Company Law Board in terms of Section 141 shall continue in respect of all other matters except for extension of time in omission of filing of the particulars of the registration/ modification of the charge or for the giving of intimation of payment or satisfaction thereof up to a period not exceeding 300 days from the date of event.

(vii) The slab system for levy of additional fees, pursuant to para (2) of the order of the CLB referred to above, in terms of section 611(2) shall be as per Ministry's Press note No.2 dated 21-3-1995 as may be amended from time to time.

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