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COMPANY MEETINGS UNDER
COMPANY LAW IN INDIA
by :
DR. T.K. JAIN
AFTERSCHOOL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
FOR PGPSE participants
mobile : 91+9414430763
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TYPES OF MEETINGS
1. AGM (ANNUAL GENERAL MEETING)
2. STATUTORY MEETING
3. EXTRAORDINARY GENERALMEETING
4. CLASS MEETING
5. BOARD MEETINGS
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STATUTORY MEETING
First general meeting of a public company
Once in the life of a company
only in a public companyin period from 1 to 6 month of start of
company
statutory report is presented with details ofissue / preliminary expenditure
penalty : 5000 sec. 165
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AGM
In 18 month from start there after everyfinancial year gap should not be more than
15 months.
Ordinary business : 1. annual reports &accounts 2. dividends 3. directors & auditors
appointments & terms.
Any other special business
on any day except public holiday (as per NI act1881)
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Place of AGM
Registered office or in the same city whereregistered office is located at business hours
penalty for not organising (sec. 168) : 50000 +2500 per day.
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Case : Asia Udyog
When police has seized the books of accounts,the company is exempted from holding AGM
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CASE : MEENASKHI MILLS
THERE MUST BE ONE AGM EVERYYEAR = AS MANY AGM AS THE YEARS
OF THE COMPANY
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CASE : WEST COAST
PLANNERS
NO AGM IS NECESSARY WHEN ONLYONE SHAREHOLDER IS LEFT
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EGM (169 TO 186)
Who may call it :Directors
shareholders
company law boardrequisitionists
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Time period of EGM
The board will call it in 21 days to 45 daysfrom the date of requisition
OTHERWISE
requisitonists can themselves call it (they musthave 1/10th of shares.
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CLASS MEETINGS
BY PARTICULAR CLASS OFSHAREHOLDERS FOR EXAMPLE BYPREFERENCE SHAREHOLDERS ETC.
ON ANY MATTER AFFECTING THATCLASS OF SHAREHOLDERS LIKE NON
PAYMENT OF DIVIDEND
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REQUISITIONS OF A VALID
MEETING
PROPER NOTICE
QUORUM TO BE PRESENTPROPERLY HELD
AGENDA PROPERLY CIRCULATED
MINUTES PREPARED & PRESENTED INNEXT MEETING
PROPER CHAIRMAN
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NOTICE OF MEETING
At least 21 day clear notice
(less than 21 day notice is permitted if 95%shareholders agree to it )
notice has to be sent to auditor also
notice must be sent to legal representative when the member is not alive / insolvent
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QUORUMMINIMUM NUMBER OF MEMBERS
REQUIRED
5 MEMBERS FOR PUBLIC COMPANY
2 MEMBERS FOR PRIVATE COMPANY /ADJUOURNED MEETING OF PUBLIC CO.
OR AS PER ARTICLES
(SEC. 174)IF QUORUM DOESNT COME IN HOUR,
THE MEETING IS POSTPONED FOR SAME
TIME NEXT WEEK.
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CHAIRMAN
SENIORMOST DIRECTOR
OR
IF NO DIRECTOR IS PRESENT IN 15MINUTES MEMBERS TO CHOOSE
AMONG THEMSELVES
CHAIRMAN WILL HAVE CASTING VOTE
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PROXY
Right of every shareholder to proxy (sendsomeone else in his place) proxy form is is
sent with notice must be submitted incompany before 48 hours before meeting.
Proxy cannot speak in meeting, cannot vote in
show of hand he can only vote in pollno person / company convass for proxy
any member can inspect proxy list
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Voting (177 to 185)
By show of hand or by poll
poll can be demanded by members / proxy /chairman and must be held in 48 hours of
demand.
Chairman will appoint 2 scrutinizer at poll outof whom one should be a member
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Adjournment of meeting
1. when qorum is not present in hours
2. when members demand adjuournment
3. when there is chaos chairman may adjournit for short period
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Resolution
Ordinary : 51%
speical : 75%
motion is a proposal it is also seconded bysomeone when it is passed it is resolution
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Resoluions requiring special
notice (sec. 190)
All the matters that require special notice require that 14 day notice be given - then only
that matter can be taken up in meeting
some matters require special notice are :
appointment of auditor (sec. 225)
appointment of director (sec. 284)
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Registration of resolutions ...
All special resolutions have to be registeredwith registrar of companies
some other resolutions alsohave to be filed
with registrar like resolution to wind upcompany voluntarily
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Contents of chairman speech :
Situation of the country
situation of industry
situation of company
performance of company
environment / employee / society welfaremeasures etc.
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Postal Ballot
Every member gives vote by post (ballot =vote)
Company amendment act (2000) requirepostalballot on some matter like :
alteration of memorandum / articles
change in registered office
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Definitions
Foreign exchange sec 2 (n) : -foreign currency,notes, draft etc.
Foreign security sec 2(o) : shares, debenturesetc. In foreign company
capital account transaction 2(e) : which alters
assets / liabilities out of indiacurrent account transaction 2(j) : foreign trade
payments etc.
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Current account transactions
They are generally permitted and dont require
RBI permission. However, schedule I gives alist of transactions which require prior
permission, some of these are : remittances
relating to lottery, commission (if rate is morethan 10% of export price), payments from NRE(rupee) account etc.
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Prior approval of RBI is required
in the following cases :
Forex more than $10000 for private visit
abroadgift over $5000
exchange facilities for emigrants / visitors
above $5000over $100000 per annum for any person
purchase of foreign trade mark / franchise
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Capital account transactions
require prior permission of RBILease of property in India for more than 5years by foreigner require prior permission
transfer of shares / sale of securities toforeigners require RBI approval
foreign currency loans out of India by Indian
residentstransfer of immovable property out of India by
residents
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FDI
There are two routes :
1. automatic
2. government
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Restricted sectors for FDI
Retail, atomic energy, lottery business,gambling, betting, nidhi company, chi fund,real estate business, agricultural, plantation,trading in transferable development rights
agriculture doesnt include floriculture,horticulture, seeds etc.
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FDI In SSI
Upto 24% investments in SSI are permitted
(even if it is in FTZ)
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ARCs
Investment upto 49% of capital in AssetReconstruction companies is permitted by FDI
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Infrastructure companies
26% FDI and 23% FII investment is permittedin infrastructure companies
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DIRECT INVESTMENT OUT
OF INDIA
INDIAN RESIDENTS ARE PERMITTED TO
INVEST OUT OF INDIA IN COMPANIESIN JOINT VENTURES / WHOLLY OWNED
SUBSIDIARIES (WOS)
INVESTMENT IN REAL ESTATEBUSINESS/ BANKING BUSINESS ISPROHIBITTED.
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HOW TO FUND
INVESTMENTS OUT OF INDIA
Use your funds from FCCB, EEFC, foreignexchange funds, capitalisation of exports, swap
of shares, foreign currency funds etc.
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Immovable property out of India
A person requires RBI permission for acquringimmovable property out of India. He may buy
it using his RFC account (Resident foreigncurrency account)
similarly, an NRI will have to take prior
permission to acquire agriculture / plantationproperty in India (no permission required forother property)
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Place of business
As per FEMA prior approval of RBI isrequired for foreign companies which are
opening their offices in India and similarly
when Indian companies go out of India andopen their office out of India
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FCCB
Foreign currency convertible bond these arepermitted upto $500 million as per guidelines
of RBI and SEBI
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Bonus and rights issue to NRIs
Indian companies can issue bonus / rights toNRI shareholders without RBI / SEBIpermission subject to sectoral caps.
Bonus issue : free issue to a shareholder
rights issue : a share issued to existingshareholder
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Who is resident?
182 days of stay in India during last financialyear.
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Difference between foreign
currency and foreign exchange
Foreign currency means currency notes ofother countries
foreign exchange is a wider word and includes
currency, cheque, drafts and other instrumentsof other countries.
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HOW MUCH FOREIGN
CURRENCY CAN YOU TAKE?
Authorised dealers can release upto $25000 fora business trip to any country except Nepal andBhutan. If you want more amount, you have to
obtain permission from RBI.
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What is non cooperative countries
/ territories?
List of the countries where you cannot takeforeign exchange as identified by FATF(FINANCIAL ACTION TASK FORCE)
see the website : www.fatf-gafi.org
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For students ...
Students going abroad for studies are treated as
NRIs and are given all the facilities that areoffered to NRIs. They can receive remittances
upto $100000
they can take with them $2000 for theirexpenditure in cash and remaining amount intraveller cheque/ bank draft.
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Private visit abroad
If you are going for private visit (for example
for tourism) you are allowed to take upto$10000 per annum from authorised dealers.You may visit more than once, but the total
aggregate foreign exchange withdrawals may
be upto $10000, beyond which you have totake permission from RBI. You Can take it for
visit for education / employment also.
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VISIT TO NEPAL & BHUTAN
No foreign exchange is available for visit toNepal and Bhutan
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Visit to Iraq & Libya
Normally a person can get foreign currencynotes upto $2000 when he visits abroad, but
when a person is visiting Iraq or Libya, he can
get upto $5000 .
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How to get foreign exchange?
Go to any authorised dealer / money exchangerand collect foreign exchange against rupees.You can do it in cash upto Rs. 50000. if the
amount is more than Rs. 50000, you have to doit against cheque / draft.
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ICC
With international credit card, you can makepayment of international journals, internationalpayments etc. You can also buy international
book and meet personal expenses in foreignexchange through ICC.
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Foreign Traveller
A foreign traveller can keep upto Rs. Rs. 5000,and foreign currency upto $5000 and totalforeign exchange upto $10000. if the amount ismore than this limit, the traveller will have to
make declaration at airport in CurrencyDeclaration form at the customs office.
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Current account / capital account
Current account transaction refers to
expenditure on day to day items and otherusual transactions. Capital account transactionsrefers to investments for long term like
Debentures / mutual funds etc. Current account
transactions in foreign exchange are generallypermitted. Capital account transactions
generally require prior permission.
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Permissible capital account
transactions....Following capital account transactions are
permissible :
schedule I for residents in Indiaschedule II fore persons from out of India
Non permissible : - real estate investments,
TDR (transferrable development rights),agriculture, plantation,nidhi company, chit
fund, etc.
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Schedule I
for residents in India :
insurance policy out of india
investment in foreign security
export / import of foreign currency
etc.
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Schedule II for persons from out
of India
Foreign currency accountsexport / import of foreign currency
remittance out of india
acquisition of immovable property in Indiaetc.
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Restrictions on Indian residents
Generally Indian residents are not permitted togive loan in Rupees to a foreign nationals
subject to some exceptions. Indian residentscan take loan in Rupees on non-repatriationbasis from non-residents subject to someconditions like amount has to come from
NRE / NRNR/NRO account and period of loanshould not be more than 3 year. Rate of interest
should not be more than 2% than bank rate.
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Indian companies issueing
debentures...If Indian companies issues debentures to non-residents, they have to inform RBI about it. If
they issue non-convertible debentures, theywill have to give all the details to RBI in 30days. Rate of interest should not be more than
PLR of SBI + 300 basis points. Minimum
duration of such debenture must be 3 years.The company cannot deal in agri / plantation /
nidhi / chit fund activities.
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Immovable property out of India
RBI has made Foreign exchange management
(acquisition and transfer of immovableproperty out of India) regulations 2000 as perthat no person can acquire immovable property
out of India other than as gift without RBIpermission. This doesnot apply to NRI or non-
residents.
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Repatriation of foreign exchange
If you earn any foreign exchange than youhave to bring it to India within maximum 60
days (if you resident in India) as per FEM(realisation, repatriation and surrender of
foreign exchange) regulations 2000
if you have taken some foreign exchange from
an authorised dealer for travel etc, you have toreturn it back in 90 days from return back to
India
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Facilities for foreign tourists
For a short stay in India, they can open NROrupee account for maximum 6 months. Whenthey return back they can get it converted into
foreign exchange. AD (Authorised dealers)have to ensure that repatriation of money fromIndia is such which is repatriable. A resident
in India can repatriate to his relative upto hissalary only. Forign nationals living in India canopen resident rupee account with banks and
can deal in rupees.
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Role of AD
They have follow all the rules and ensure that
they give money as per FEMA. They canrelease foreign exchange upto $25000 forbusiness trip, $100000 for education /employment / medical purpose and upto
$10000 for tourism purpose. They have toensure that forign exchange is repatriated as
per law.
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Gifts from residents
You can give gifts upto Rs. 500000 to non-residents.
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IMPORTANT INFORMATION
DOCUMENTSEXIM POLICY
HANDBOOK OF IMPORT AND EXPORTPROCEDURE
FEMA
EXCHANGE CONTROL MANUALSFEDAI DOCUMENTS
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IMPORTANT DOCUMENTS AT
THE TIME OF IMPORT
IMPORT LICENSE
FOREIGN EXCHANGE CONTROL COPY
BILL OF ENTRY FOR HOMECONSUMPTION
CUSTOMS ASSESSMENT CERTIFICATEOR POSTAL ASSESSMENT FORM
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OPENING L/C
Importer will approach his bank for opening anL/C
L/C = Letter of credit
the bank of the importer will give a guaranteeabout payment to the bank of the exporter
under L/C. When the exporter exports, he can
obtain immediate payment from his bank onproducing L/C of the importer's bank. Thebanks will have transaction between
themselves.
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Difference between packing credit
and L/CPacking credit is issued to exporter, but L/C is
issued to importer. Packing credit covers all the
expenditure till export, L/C covers the price ofimport = and as per this the exporter gets
payment as soon as he exports. The bank of theimporter provides this facility to the importer
against some charges.
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Foreign exchange requirements
Importer requires foreign exchange forimports. The banker / authorised dealer
provides foreign exchange after looking at thenecessary documents like import licence etc.The foreign exchange must be used for the
purpose for which it has been obtained. The
banker / authorised dealer has to ensure thatonly that amount is released which is actually
required.
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Mode of payment
Authorised dealers will ensure that paymentregarding impor is made in account. Cash
payments are not permitted.
In case advance payment is made, physicalgoods must come in 3 months. If the amount is
more than $25000 then there must be a
guarantee from some international bank.Proper EC copy must be submitted by the
importer
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Time limit for settlement
Import payments must be settled within 6months from the date of import. If it is morethan 6 months, then it will be treated as ECB
(external commercial borrowing) and willrequire prior permission of RBI/ Government
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Export remittances
The exporter has to declare exports to RBI andhas to ensure that payments are received within
time and as per approved methods ofpayments. Payments can be collected through
bank account / international credit card / FCNR/ NRE account / escrow account etc
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Exports that dont require
declarations....
Demonstrations / sales promotions (UPTO 2%OF TOTAL EXPORTS ONLY) , gifts (upto 1lakhs), exports for reimports only, goods sentfor repairs, goods less than 25000 rupees in
value, samples, publicity material, personalgoods of travellers.
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What is consignment export ?
Consignment means you are sending goods tosomeone for trade on your responsibility and
if goods are not sold, they are your propertyand you may get it back. Consignment export
means sale or return back. It has to be settledin 6 months.
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Exports requiring RBI approval
Examples : project exports, export as contractagainst imports, elongated payment period,
exports relating to agrements of government of
India or other governments
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Remittances relating to exports...
These include : agency commission, exportclaims etc.
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SEZ
If you are operating from SEZ you arepermitted to have foriegn currency account
with an authorised dealer
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Authorised dealers
These are listed with RBI as per FEMA, theyhave to obtain RBI permission for some
specified business transactions. Example: theycannot give guarantee in favour of exporters
without RBI permission unless that exporter islisted as non-caution exporter.
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Forfaiting
Factoring and forfaiting can be undertaken byEXIM bank / authorised dealers. Under this
they collect payments regarding export
receivables against commission.
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New trends....
Indian companies are now permitted to have
foreign exchange accounts in other countriesand to have properties in other coutnries (with
prior approval from RBI) and they can acquirebusinesses / firms in other countries also as per
their business requiremetns (as per govt.Policies) .
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PEM
PEM stands for Project Export memorandum when companies are entering into project
exports, they have to follow guidelines relatingto this. Project exports generally has deferred
payments - therefore prior permission mustobtained before enteringi into PEM.
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Other provisions
Authorised dealers have to ensure that they getcopesof GR Form and other documents
required andforeign currency is used for acutalimport / export and all required documents are
submitted.
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FDI
Upto 100% Foreign Direct Investment ispermitted under automatic route in many
sectors. Investors will have to inform regionaloffice of RBI in 30 days of remittances. In
some sectors industrial licence is required and
in some sectors, FDI is not permitted. But inmost of the sector, now it is permitted
including atomic energy etc.
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Shares issue to NRIs
Within 30 days of share issue to Non-residents,FC GPR form has to be submitted. They have
to submit all the details like they haveimplemented all the provisions of companies
act & FEMA for this purpose.
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Transfer from NR
Now non residents can transer shares to other
non-residents / residents and such transfer canbe for consideration / as a gift. This tranfercan be only to an NRI / resident Indian. They
can also sell it in stock exchanges throughbrokers. They will have to take NOC from
income tax department
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Tranfer by residents
As per RBI notification of 2000, residents can
also tranfer to non-residents as per FEMA so long as it is in automatic route. You have tokeep in mind SEBI (Substantial acquisition of
shares and takeover) regulation 1997 +required regulations under IRDA or other such
laws.
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Permission from RBI
If it is not falling in automatic route, apply for
permission to RBI with a copy of FIPBapproval and details like pric, mode of
payment etc. Price must not be lower than thehigher of the average weekly high / low of last
6 months. FC-GPR form with details ofexisting shareholding must also be submitted.
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FDI in different modes
FEMA regulations 2000 give schedule I whichgives list of industries for which automatic
route is there. It doesnt requre prior RBIpermission, for othe industries, take prior
permission from RBI. Rate of dividend should
not exceed SBI prime lending rate + 300 basispoints. For other sectors take permission from
SIA / FIPB/ RBI for investments.
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PORTFOLIO INVESTMENT
FIIs including asset management companies,mutual funds, hedge funds etc. Are permittedto invest in shares in India. FII have to investin ratio of 70:30 in equity and debt when they
invest in India, they are also permitted to investas 100% debt.
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Limits for FII investment
An NRI / PIO can buy upto 5% in a company.All NRI/PIO/OCB can invest upto 10% in a
company. A single FII can invest upto 10% ina company and all FIIs together can invest upto
24% in a company. Companies can raise this
limit by passing board resolution and specialresolution in general meeting subject to
sectoral cap (like 49'% or 74% etc.)
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FII dealings
FII can deal through stock exchanges withoutRBI permission, but if they are dealing without
stock exchanges, they have to obtain
permission from RBI.
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NRI dealings
NRIs have to deal through NRE /FCNRaccount only. Sometimes they are permitted to
deal in NRO account also when they are
investing on non-repatriation basis.
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PERMITTED FIIs
FOLLOWNG CAN REGISTER AS FII WITHRBI & SEBI:
banks, pension funds, hedge funds, mutualfunds, insurance companies, investment funds
etc.
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ECB
External commercial borrowings : Indiancomapnies can raise loans from other countriesthrough various routes like : FRN (floating rate
note), ECP (euro commercial paper), FCCB
(foreign currency convertible bond), NIF (noteissue facility), syndicate loan, etc.
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ECB MECHANISMS
Companies engage in many ECB mechanismslike :
arbitrage
hedging
underwriting
fund raising etc.
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ADR /GDR
American depository receipt / Globaldepository receipt are permitted by RBI as perscheme of 1993, companies can also sponsorissue of ADR / GDR. Infosys, Wipro etc. Aresome of the companies which went for ADR /
GDR during 1990s. After ADR/ GDR
company will have to submit return inproforma as per annexure C of RBI
notification 2000.
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Royalty / technical fees
Upto $2million of royalty upto 5% ofdomestic sale or 8% of export sale is permitted
as royalty.
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EEFC account
Exchange Earners Foreign Currency account
a person who has earned foreign currency canretain 50% of the foreign currency earned inEEFC account with authorised dealers. This
account can be used for current accounttransactions or for permitted capital account
transactions.
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RFC account
Resident foreign currency account if an NRIis returning India for ever, he can keep his
foreign currency in RFC account and there are
no restriction on use of funds in RFC account.
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RFC (DOMESTIC) ACCOUNT
A Resident who lives in India but receivesforeign exchange payments / honorarium canopen RFC (Domestic) account for retaining
such payments.
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Liberalised Remittance Scheme
Residents can use upto $25000 for paymentsfor permitted transactions per annum in this
scheme Foreign Exchange Management(current account transactions) rules 2000
schedule I and II.
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