MODES IN WHICH FDI IN EQUITY CAN BE MADE GIVEN BELOW

THERE ARE VARIOUS MODES IN WHICH FDI IN EQUITY CAN BE MADE GIVEN BELOW

(a)      Issuance of fresh shares by the company

(b)     Acquisition by way of transfer of existing shares by person resident in or outside India:

?    Sale or Gift of Shares/ Convertible debentures by person resident in or outside India

?    Sale of Shares/ Convertible debentures on the Stock Exchange by person resident outside India

?    Transfer of shares/convertible debentures from Resident to Person Resident outside India

?    Acquisition of shares under the FDI scheme by a non-resident on a recognized Stock Exchange

(c)      Issue of Rights/Bonus shares

(d)     Issue of shares under Employees Stock Option Scheme (ESOPs)

(e)      Conversion of ECB/Lump-sum Fee/Royalty/Import of capital goods by units in SEZs in to Equity/ Import payables/Pre incorporation expenses

(f)      Issue of shares by Indian Companies under ADR/GDR

(g)     Through issue/transfer of ‘participating interest/right’ in oil fields to a non resident

(h)     Acquisition of shares under Scheme of Merger/Amalgamation

Explanation:

(i)      An Indian company may issue fresh shares /convertible debentures under the FDI Scheme to a person resident outside India (who is eligible for investment in India) subject to compliance with the extant FDI policy and the FEMA Regulation.

(ii)     Mergers and amalgamations of companies in India are usually governed by an order issued by a competent Court on the basis of the Scheme submitted by the companies undergoing merger/amalgamation. Once the scheme of merger or amalgamation of two or more Indian companies has been approved by a Court in India, the transferee company or new company is allowed to issue shares to the shareholders of the transferor company resident outside India, subject to the conditions that :

(i)      the percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the sectoral cap, and

(ii)     the transferor company or the transferee or the new company is not engaged in activities which are prohibited under the FDI policy

(iii)    FEMA provisions allow Indian companies to freely issue Rights/Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, if any. Such issue of bonus/rights shares has to be in accordance with other laws/statutes like the Companies Act, as applicable, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (in case of listed companies), etc. The offer on right basis to the person’s resident outside India shall be:

(a)     in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company;

(b)     in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders.