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Indian companies’ issues equity shares; compulsorily & fully convertible debentures and fully, compulsorily convertible preference shares based on pricing guidelines norms prescribed under Foreign Exchange Management (Transfer or Issue of Security to a Person Resident outside India) Regulations, 2000 (“FEMA Regulations”).
To regulate foreign investment, the RBI had amended the FEMA Regulations 2000 in 2017 under FEMA and published it on 7 November 2017.
In the article, we will discuss RBI’s changes with respect to price guidelines under FEMA Regulations.
Table of Contents
RBI’s direction states the pricing guidelines for various form or number of ways to price capital instrument. The pricing guidelines can be summarized as follows.
At whatever time, the Indian company issues a capital instrument, then the price must not be less than:
The pricing guidelines under FEMA Regulations are not applicable for any investment in capital instruments by non-resident in India on the non repatriation basis.
Further, the pricing guidelines shall not be applicable on:
However, a Chartered Accountant’s certificate is must to the effect that the SEBI guidelines have been complied with and has to be attached with Form FC-TRS filed with the AD Bank.
On overall remarks of pricing guidelines on Shares, either on subscription or acquisition though partly or fully paid up or convertible or not the shares price needs to be valued according to RBI pricing guidelines as amended from time to time. At any cost, the transfer of share needs to be valued before issue/transfer to any person resident outside India to comply with the regulation on extant FEMA and FDI policy.
The revision in the pricing guidelines under FEMA Regulations was needed to have a better monitoring the transfer of shares to the person residing outside India. The price at which the companies are issuing shares, debentures must not be less than the price determined in accordance with various provisions under SEBI & FEMA regulations.
Read our article:FEMA Guidelines for Export of Goods and Services (Amendment) Regulations, 2021
Completed BA LLB from JEMTEC, School of Law, Greater Noida (Affiliated to GGSIP University, New Delhi). I have an experience of about 2 years in various fields of corporate laws, but I have a keen interest in researching on legal issues and to gain knowledge. I always strive to bring the best to work on what I do.
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