Urgent: Issue of Shares other than Cash

[Prasenjit Sarkar]

hi all !

There is a query regarding the FEMA.

An Indian Company wants to allot shares to PROI in consideration other than cash i.e. Machinery or we can say a Machinery is imported in India and its consideration is shares.
What are the various compliances on the part of the Indian Company and whether it is eligible to allot shares ? What are compliances to be complied as per fema and companies act...
urgent response is required.

 
With Regards
 
Prasenjit Sarkar
Company Secretary
09650375850

[Prasenjit Sarkar]

Pls friend do give response.....and please refer the guidelines/ notification, if any.

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[Suresh Kumar Vaishraj]

Dear Friend,

 

What's PROI stands for.

 

Thanks and Regards,

Suresh Kumar V
Company Secretary
91-9849991201

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[Prasenjit Sarkar]

PROI stands for person resident outside India means Foreign Person

[gaurav]

Mr. Sarkar,

 

 

Issue of shares for consideration other than cash is allowed only against lump sum fees, royalty and ECB’s. However under approval route u may get the  approval from the Foreign Investment Promotion Board (FIPB ) for issuing shares  for other than cash.

 

In a recent case of M/s kerns Aero Products Private limited, shares against machinery imported were allowed subject to certain conditions laid down by the FIPB.

 

There are no specific guidelines issued on this matter by the FIPB so far .  However FIPB has quoted the same recently  stating that “The Issue of shares for other than cash consideration should not become a norm since purpose of FDI gets defeated. Appropriate guidelines will shortly be notified in this regard.”

 

Hope the said guideline will be notified soon. Till then looking at the case law quoted above, I would suggest you to go under the approval route an  make an application to the FIPB and place your proposal to issue shares for consideration other than cash.

 

Views form other members solicited. . .  J

 

Regards,

 

CS Gaurav Shenoy

Bangalore

 

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[Prasenjit Sarkar]

Thank You very much Mr. Gaurav.... can I have the case study...actually I did not found teh actual case material of this particular case. Thanks

[gaurav]

Well I regret Mr. Sarkar, I do not have the detailed case of Kerns Aero. . However u can get the gist of the case on the FIPB website. U can get access to the following website for the briefs on the case and also to how to go about in getting the approval :   www.fipbindia.com.

 

Thanks & Regards,

 

CS Gaurav Shenoy

Assistant Company Secretary

Bangalore