Foreign Exchange Management (Non-debt Instruments) Rules, 2019

Dec 06, 2019 | by Avantis RegTech Legal Research Team


Finance & Taxation Compliance

The Ministry of Finance on December 05, 2019, notifies the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2019 to further amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

The amendments made in Foreign Exchange Management (Non-debt Instruments) Rules, 2019 are as follows: -

A. Rule 2(ae)(iv) which states that mutual funds which invest more than 50 % in equity governed by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been omitted; 

B. Rule 11 related to ‘Transfer of equity instruments of an Indian company by FPI’ has been substituted as follows: -

A FPI holding equity instruments of an Indian company or units in accordance with these rules, may transfer such equity instruments or units held by him in compliance with the conditions, if any, specified in the Schedules annexed to these rules, subject to the terms and conditions specified therein and by the Securities and Exchange Board of India: 

Provided that, - 

prior Government approval shall be obtained for any transfer in case the company is engaged in a sector which requires the Government approval; (ii) where the acquisition of equity instruments by FPI under Schedule II has resulted in a breach of the applicable aggregate FPI limits or sectoral limits the provisions of item (iii) of sub-paragraph (a) of paragraph (1) of Schedule II shall apply.”

C. In Rule 21(2)(ii), an explanation has been inserted: -

In case of convertible equity instruments, the price or conversion formula of the instrument should be determined upfront at the time of issue of the instrument. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with these rules.

D.Further amendments are also made in Schedule I and Schedule II.

[Notification No. S.O. 4355(E)]


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