Tuesday, 7 January 2014

RBI allows Indian companies to issue debt to NRIs as bonus from general reserve

With a view to rationalize and simplify the procedures, the Reserve Bank of India (RBI) has allowed Indian companies to issue non-convertible or redeemable preference shares or debentures to non-resident shareholders from their reserves as bonus. Further, this facility will also encompass the depositories that act as trustees for the ADR/GDR holders. Up-till now, India’s central bank has granted permission for such issuance only on case-to-case basis.

RBI’s decision come in the backdrop of reference from some Indian companies to issue non-convertible or redeemable bonus preference shares or debentures to non-resident shareholders from the general reserve under a scheme of arrangement by a court, under the provisions of the Companies Act. However, India’s central bank has only allowed for issue of non- convertible/redeemable preference shares or debentures to non- resident shareholders by way of distribution as bonus from the general reserves.

Further, it has also clarified that issue of preference shares (excluding non-convertible/redeemable preference shares) and convertible debentures (except optionally convertible or partially convertible debentures) would be subject to Foreign Direct Investment Scheme.

No comments:

Post a Comment