CIR. NO. 10/2003-04-RB, DT. 20/08/2003

Issue of shares to NRIs/OCBs on rights basis

Attention of authorised dealers is invited to sub-regulation (2) of Regulation 6 of Notification No.FEMA.20/2000-RB dated 3rd May 2000 in terms of which Indian companies are permitted to offer to a person resident outside India, equity or preference shares or convertible debentures on right basis subject to conditions stipulated therein.

2. With a view to extending to non-resident shareholders the facility to subscribe to additional equity or preference shares or convertible debentures over and above their entitlement on rights basis, on par with the resident shareholders, Reserve Bank has issued Notification No.FEMA.76/2002-RB dated 12th November 2002 (copy enclosed) amending Regulation No.6 of Notification No.FEMA.20/2000-RB dated 3rd May 2000. Accordingly, the existing non-resident shareholders may apply for issue of additional equity shares or preference shares or convertible debentures over and above their rights entitlements and the investee company may allot the same subject to the condition that the overall issue of shares to non-residents in the total paid-up capital of the company does not exceed the sectoral cap.

3. All other terms and conditions stipulated in Regulation No.6 of the Notification No.FEMA.20/2000-RB dated 3rd May 2000 as amended from time to time shall remain unchanged.

4. Authorised dealers may bring the contents of this circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).

Yours faithfully,

Grace Koshie
Chief General Manager

Foreign Exchange Management ( Transfer or Issue of Security by a Person Resident outside India) ( Second Amendment) Regulations, 2002

Reserve Bank of India
Exchange Control Department
Central Office
Mumbai-400 001

Notification No. FEMA/76 /2002-RB, Dt. 12/11/2002

Foreign Exchange Management ( Transfer or Issue of Security by a Person Resident outside India)( Second Amendment) Regulations, 2002

In exercise of the powers conferred by clause(b) of sub-section(3) of Section 6 and Section 47 of the Foreign Exchange Management Act,1999 (42 of 1999) and in partial modification of its Notification No.FEMA 20/2000-RB dated 3rd May 2000, the Reserve Bank of India makes the following Regulations to amend the Foreign Exchange Management ( Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, namely:-

1. Short title and commencement:-

(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations 2002.

(ii) They shall come into force on their publication in the official gazette.

2. Amendment of the Regulation

(i) In Regulation 6, the following may be added as sub-Regulation (2)(ii):-

" The existing non-resident shareholders may apply for issue of additional shares, and the investee company may allot the same subject to the condition that the overall issue of shares to non-residents in the total paid-up capital does not exceed the sectoral cap".

(ii) The existing sub-regulation 2(ii) and 2(iii) of Regulation 6, may be renumbered as Sub-Regulation 2(iii) and 2(iv) respectively.

G.S.R.223(E)

K.J.Udeshi
Executive Director

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