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.
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.
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