Foreign Institutional Investors In India, Foreign Financial Institution India, Financial Institution

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Corporate Laws

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Employment Laws

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Intellectual Property

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Real Estate Business Process Outsourcing Immigration laws Taxation

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Judicial System

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Financial Insitutions

An Indian corporate can raise foreign currency resources abroad by issuing ADR/GDR which makes a provision by foreign institutional investors in India. This is permissible by Regulation 4 of Schedule I of FEMA notification no.20.

The ADRs/GDRs can be issued to the foreign financial institutions in accordance with the Scheme for Issue of Foreign Currency Convertible Bonds and ordinary shares through Depository Receipt Mechanism Scheme, 1993.

The foreign financial investor can invest only when the Indian company issuing such shares has an approval from the Ministry of Finance, Government of India. The Indian company should be eligible such ADR/GDR in terms of the relevant scheme in force or notification issued by the Ministry of Finance.

There should be no end use restrictions on GDR/ADR issue proceeds except for an express ban on investment in real estate and stock markets.

The Foreign Currency Convertible Bonds (FCCBs) can also be issued to the foreign financial institution which should be in conformity with the external commercial borrowing end use requirements. Apart from this, 25% of the proceeds can be used for corporate restructuring.

The issue of ADR/GDR to the foreign financial institutional investor should not be invalid as the Indian corporate attracting investment should be eligible to issue shares to persons resident outside India in terms of these Regulations.

The issue of FCCBs to the foreign financial institution for the purpose of investment should be in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Mechanism) Scheme, 1993.

Investment by the foreign financial institution should be made upto USD 50 million under the Automatic Route permissible for foreign direct investment

From USD 50-100 million the companies have to take RBI approval.

For USD 100 million and above prior permission of the Department of Economic Affairs is required.

Investment can be made in the form of investment in preference shares forming part of share capital. Therefore investment can be made by way of receipts as well as shares.

Duration for conversion of preference shares shall be as per the maximum limit prescribed under the Companies Act, 1956 or what is agreed to between the parties to the shareholders agreement.

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