In pursuance of clause (a) and clause (d) of sub-section (1) of Section 19 read with clause (b) of sub-section (1) of Section 29 of the Foreign Exchange Regulation ACT, 1973 (46 OF 1973) , the Reserve Bank is pleased to permit a company incorporated in India -

1. which is engaged or proposing to engage in any activity/manufacture of items except those sectors (for the time being in force) indicated in annexed List A (which may be amended from time to time as notified by Govt.);

2. which is a Trading Company primarily engaged in export, and is registered as an Export/Trading/Star Trading House, with the Ministry of Commerce, Government of India;

to issue shares to non-residents subject to the conditions mentioned in para 3, and to send such shares out of India, to their place of residence or incorporation, as the case may be:

    Provided that a company, existing on the date of this Notification, which is not engaged in the activity/manufacture of items as per (a) above, shall be eligible to issue shares, if it embarks on expansion programme in the said eligible activities/manufacture of items , subject to the condition that the capital raised by issue of shares to non-residents is utilised for such expansion

    Provided further that in the case of a newly set-up Trading Company primarily engaged in exports, issue of shares shall be subject to the condition that registration as an Export/Trading/Star Trading House is obtained before remittance of dividend to the foreign investor.

The general permission granted herein shall not apply to or in respect of -

1. a person who is a citizen of, or a company incorporated in Pakistan, Bangladesh or Sri Lanka

2. investment proposal in which the foreign company/entity has any previous venture/tie up in India (through investment or technical collaboration or trade mark agreement) in the same or allied field

3. a company :

   1. being an SSI unit seeking investment more than 24% of capital, or

   2. being unit manufacturing items which require an Industrial licence under the Industries (Development and Regulation) Act, 1951 or which require an Industrial Licence in terms of the locational policy notified by Government under the New Industrial Policy of 1991, or

   3. having a proposal exceeding Rs.600/- Crores.

The general permission granted herein to issue shares is subject to the following conditions, namely:

1. where the issuer company is a Trading Company, non-resident investment therein shall not exceed 51% of its capital and in respect of activities/area specified in the annexed List B, the cap for non-resident shareholding indicated thereat shall be observed;

2. In the case of issue of shares by an existing company,

1. Board Resolution has been passed in connection with preferential allotment of shares, if any, to foreign investor, indicating the issue price;

2. Special Resolution has been passed under Section 81(1A) of the ompanies Act, 1956, wherever applicable, in connection with preferential allotment, indicating the issue price;

3. In the case of a listed company, the price for the issue is worked out according to SEBI guidelines and is duly certified by the Company's Statutory Auditors; and in the case of any other company, calculation of fair value of shares (as per erstwhile CCI guidelines) is made by an independent Chartered Accountant; and the issue price shall not be less than that calculated price.

3. Approval, wherever necessary, from any authority, statutory or otherwise, required for the project or for issue of shares is obtained by the company;

4. payment for the shares to be issued to the foreign investor has been received by remittance from abroad through normal banking channels and/or from the NRE/FCNR accounts of eligible holders;

5. In the case of issue of convertible preference shares , the valuation procedure shall conform to the guidelines issued by the Reserve Bank or SEBI, as the case may be, besides observing the equity cap prescribed ( after conversion).

6. the rate of dividend payable in respect of preference shares shall not exceed SBI Prime Lending Rate (prevailing on the date of the Board meeting in which issue of shares is recommended) plus 300 basis points;

7. remittance of dividend in respect of 22 consumer goods industries specified in the Ministry of Industry Press Note No.12 dated 26.6.1992, shall be subject to the condition of balancing of dividend over a period of seven years to be reckoned in the case of an existing company, from the date of issue of shares, and in any other cases, from the date of commencement of production;

8. the issuer company files with the Regional Office of Reserve Bank, not later than 30 days from the date of receipt of remittance, a report containing the following:

   1. Name of the foreign investor;

   2. Country of residence or incorporation of the foreign investor;

   3. Date of receipt of remittance and its rupee equivalent;

   4. Name and address of the authorised dealer in India through whom the remittance is received.

9. the issuer company files with the Regional Office of Reserve Bank, not later than 30 days from the date of issue of shares, the following:

1. A declaration as per annexed Form "FC-GPR"

2. Original Foreign Inward Remittance Certificate (FIRC) evidencing receipt of funds from abroad or as the case may be, from the eligible NRE/FCNR accounts of the investor;

3. Memorandum and Articles of Association of the issuer company;

4. Particulars of shares issued, date of issue, number of shares and the issue price duly countersigned by a Chartered Accountant

5. Certified copy each of Board Resolution, Special Resolution, Statutory Auditor's Certificate, or the Chartered Accountant's calculation, referred to in para 3(ii) above.

6. Such other particulars and documents as may be required or specified by the Reserve Bank from time to time.

This notification supersedes the following notifications :

1. No. F.E.R.A. 180/98-RB dated 13.01.1998

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2. No. F.E.R.A. 184/98-RB dated 14.07.1998

3. No. F.E.R.A. 187/98-RB dated 03.10.1998

4. No. F.E.R.A. 190/98-RB dated 02.12.1998/LI>

5. No. F.E.R.A. 197/99-RB dated 30.03.1999

(P.R. Gopala Rao)
Executive Director

Encl: List A & B, Form FC-PR

LIST A

1. Banking

2. NBFC's activities in Financial Services Sector

Civil Aviation

3. Petroleum including exploration/refinery/marketing

4. Housing & Real Estate Development sector for foreign investment, other than NRIs/OCBs.

5. Venture Capital Fund & Venture Capital Company

6. Investing companies in Infrastructure & Service Sector

7. Atomic Energy & related projects

8. Defence and strategic industries

9. Agriculture (including plantation)

10. Print Media

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11. Broadcasting

12. Postal services

LIST B