RBI proposal of amending form FCGPR for your comment

Dear All,

Yes, the following proposal is approved now. Click here for details.

The Reserve Bank of India, today placed on its website for public comments, draft format for reporting ( ie Form FCGPR) foreign direct investments (FDIs).

In the revised form the class of investors has been broadened to include several new entities viz., foreign nationals, foreign companies, foreign institutional investors (FIIs), foreign venture capital investors (FVCIs) registered with SEBI, foreign trusts, private equity and other funds, pension/ provident funds, partnership / proprietorship firms, financial institutions, NRIs / PIOs. Secondly, the details of investment received in units of venture capital funds from FVCIs are proposed to be separately captured. Thirdly, Part B of the form has been modified so as to capture breakup of the details of foreign investor class. The date of filing of Part B of the form has been extended from June 30 of every year to July 31.

The Reserve Bank has invited feedback from all interested stakeholders on the draft format of FC-GPR. The feedback may be sent to the Chief General Manager, Foreign Exchange Department, Reserve Bank of India, 11th Floor, Shahid Bhagat Singh Road, Mumbai – 400 001 on or before March 31, 2008. The feedback may also be sent by fax (022-22610623/30) or by email

It may be noted that Foreign Direct Investments (FDIs) in India are permitted under the automatic and government/approval route. An Indian company issuing shares and convertible debentures to non-residents under automatic and government / approval routes is required to submit the details of the investment in a two-stage reporting procedure. In the first stage, receipt of funds has to be reported to the Reserve Bank of India within 30 days of receipt. In the second stage, the company has to file form FC-GPR with the Reserve Bank within 30 days from the date of issue of shares / convertible debentures.

In order to capture the details of FDI in a more comprehensive manner, form FC-GPR was revised in April 2007, in terms of which the AD Category – I bank in India receiving foreign remittance for issue of shares was required to obtain a Know Your Customer (KYC) report in respect of the foreign investor from the overseas bank remitting the amount. In the wake of the recent policy changes in foreign investment and also taking into account the suggestions and feedback received from various entities, form FC-GPR has now been further modified.

Link is available in this mail to access new form, respected members can give their comment to RBI in this regard.

Thanks & Regards

Alagar

Consolidated Updates flash

FEMA Master Circulars http://thisisvj.googlepages.com/MasterCircularRFO.pdf & http://thisisvj.googlepages.com/MasterCiruclar-remittancefacilitiest.pdf

UPDATES FROM Dr.KSR's DESK

Date: 11/03/2008	MCA	RBI	SEBI	Dept. of Commerce (DoC)	Dept. of Industrial Policy & Promotion (DIPP)
Circulars	Nil	---	SEBI/CFD/DIL/MB/IS/1/2008/11/03 Instructions to Registered Merchant Bankers on PAN card along with Public Issue applications	---	Nil
Notifications	Nil	Nil	---	Nil	Nil
Guidelines	Nil	Nil	Nil	---	---
Reports	---	---	Nil	Nil	---
Rules	Nil	---	Nil	Nil	Nil
Regulations	Nil	Nil	Nil	Nil	Nil
Master Circulars	---	Nil	---	Nil	Nil
Concept Papers / Papers for Discussion / Public Comments	Nil	---	Nil	Nil	Nil
Press Release	Nil	Nil	PR No.88/2008 SEBI instructs Merchant Bankers not to demand for photocopy of PAN card along with Public Issue applications	Nil	Nil

Date: 12/03/2008	MCA	RBI	SEBI	Dept. of Commerce (DoC)	Dept. of Industrial Policy & Promotion (DIPP)
Circulars	Nil	---		---	Nil
Notifications	Nil	Nil	---	Nil	Nil
Guidelines	Nil	Nil	Nil	---	---
Reports	---	---	Nil	Nil	---
Rules	Nil	---	Nil	Nil	Nil
Regulations	Nil	Nil	Nil	Nil	Nil
Master Circulars	---	Nil	---	Nil	Nil
Concept Papers / Papers for Discussion / Public Comments	Nil	---	Nil	Nil	Nil
Press Release / Press Note	Nil	Press Release: 2007-2008/1186 Respect Your Banknotes: RBI appeals to Public	Nil	Nil	Press Note No.1 (2008) Guidelines for foreign investment in Credit Information Companies Press Note No.2 (2008) Guidelines for foreign investment in Commodity Exchanges Press Note No.3 (2008) Guidelines for Foreign Direct Investment in Industrial Parks Press Note No.4 (2008) FDI Policy for the Civil Aviation Sector Press Note No.5 (2008) Rationalisation of FDI Policy for the Petroleum & Natural Gas sector Press Note No.6 (2008) FDI Policy for mining of Titanium bearing minerals and ores

Date: 10/03/2008	MCA	RBI	SEBI	Dept. of Commerce (DoC)	Dept. of Industrial Policy & Promotion (DIPP)
Circulars	Nil	---	Nil	---	Nil
Notifications	Nil	RBI/2007-2008/260 DPSS No.1405 / 02.10.02 / 2007-2008 Customer charges for use of ATMs for cash withdrawal and balance enquiry RBI/2007-2008/261 DPSS No. 1407 / 02.10.02 / 2007-2008 Use of electronic mode of payment for large value transactions	---	Nil	Nil
Guidelines	Nil	Nil	Nil	---	---
Reports	---	---	Nil	Nil	---
Rules	Nil	---	Nil	Nil	Nil
Regulations	Nil	Nil	Nil	Nil	Nil
Master Circulars	---	Nil	---	Nil	Nil
Concept Papers / Papers for Discussion / Public Comments	Nil	---	Nil	Nil	Nil
Press Release	Nil	Nil	Nil	Prohibition on Export of Basmati & Non-Basmati Rice – PR Dated 07/03/2008	Nil

FCEB made easy

FCEB made easy

What is FCEB?

Foreign Currency Exchangeable Bond is

• a Bond expressed in freely convertible Foreign Currency
• Interest and Principal of which is payable in foreign Currency
• Issued by an Indian company
• To overseas Investor who subscribes in foreign Currency
• Which on a later date can be converted into Equity shares of Offered Company

What are all the Eligibility conditions?

• Prior approval of RBI to be obtained

• Eligibility Conditions for the Offered Company
  • Offered company is a Listed company
  • Offered company is engaged in a sector eligible to receive FDI
  • Offered Company is eligible to issue FCCB or ECB
• Eligibility Conditions for the Issuer Company
  • The issuer shall form part of the Promoter Group of the offered Company
  • Issuer holding Equity Shares offered at the time of Issuance of FCEB
  • Issuer Company is not restrained by SEBI to access securities market
• Eligibility Conditions for the Subscriber
  • Entity not prohibited by SEBI from dealing in Securities
  • Subscriber comply with FDI Policy
  • Subscriber adhere to sector caps at the time of issuance of FCEB
  • Prior approval of FIPB obtained , wherever required

How the proceeds can be utilized?

• Can be invested in Promoter Group Companies
• Issuer company can invest in overseas by way of direct investment in Joint ventures or Wholly owned subsidiaries subject to FEMA Guidelines
• Promoter Group Company can utilize it according to the End Use Requirements applicable for ECBs
• Promoter Group Company shall not utilize the proceeds for investing in capital market or Real estate in India.
• Proceeds can be retained or deployed overseas in accordance with ECB policy

Conditions for Issuance?

v Rate of interest

• Rate of interest payable on FCEB and issue expenses incurred in foreign currency shall be within the ceiling prescribed by RBI for ECBs.

v Price

• The exchange price of the offered listed equity shares at the time of issuance of FCEB shall not be less than the higher of the -:

The average of the weekly high and low of the closing prices of the

related shares quoted on the stock exchange during the

(a) six months preceding the relevant date;

OR

(b) two weeks preceding the relevant date.

Relevant date-Date in which Board of Directors' passed the resolution authorizing the issuance of FCEB.

preceding the relevant date.

v Maturity

• Minimum maturity shall be 5 years for redemption

• Before that time holder can convert into shares of Offered company

• While exercising the option holder has to take delivery of shares and cash settlement is not allowed.

v Approvals Required

• Board Approval

• Shareholders approval, if applicable

• Offered company's Board approval

• Issuer company shall disclose the shareholding of the offered company to comply with respective provisions in SEBI Act, Rules, Regulations & Guidelines

v Other Conditions

• Issuer company shall not trade or mortgage or offer as collateral or trade offered securities till redemption or Exchange

• Issuer company keep the offered shares free from all encumbrances

Taxation Aspects?

• Interest till exercise subject to TDS

• Tax on dividend subject to Sec 115 AC of Income Tax Act

• Exchange of Bonds into Equity shares will not give raise to Capital Gains for computation of taxable income

• Transfer between Person Resident outside India to another Person Resident outside India will not give raise to Capital Gains tax in India.

Notified by Ministry of Finance, Dept. of Economic Affairs on Feb. 15, 2008 vide http://finmin.nic.in/the_ministry/dept_eco_affairs/capital_market_div/ExchangeableBonds.pdf