Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993

 
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GSR 700(E), DATED 12-11-1993

Central Government hereby notifies the following Scheme, for facilitating Issue of Foreign Currency Convertible Bonds and Ordinary Shares Through Global Depositary Mechanism by Indian Companies, namely:--

1. Short title and commencement. (1) This Scheme may be called the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.

(2) It shall be deemed to have come into force with effect from the first day of April, 1992.

2. Definitions. In this Scheme, unless the context otherwise requires:--

(a) "Domestic Custodian Bank" means a banking company which acts as a custodian for the ordinary shares or foreign currency convertible bonds of an Indian company which are issued by it against global depositary receipts or certificates;

(b) "Foreign Currency Convertible Bonds" means bonds issued in accor­dance with this scheme and subscribed by a non-resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments;

(c) "Global Depositary Receipts" means any instrument in the form of a depositary receipt or certificate (by whatever name it is called) created by the Overseas Depositary Bank outside India and issued to non­resident investors against the issue of ordinary shares or Foreign Currency Convertible Bonds of issuing company;

(d) "Issuing company" means an Indian company permitted to issue Foreign Currency Convertible Bonds or ordinary shares of that company against Global Depositary Receipts;

(e) "Overseas Depositary Bank" means a bank authorised by the issuing company to issue global depositary receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company;

(f) the words and expressions not defined in the Scheme, but defined in the Income-tax Act, 1961 (43 of 1961), or the Companies Act, 1956(1 of 1956), or the Securities and Exchange Board of India Act, 1992 (15 of 1992), or the Rules and Regulations framed under these Acts, shall have the meaning respectively assigned to them, as the case may be, in the Income-tax Act or the Companies Act, or the Securities and Exchange Board of India Act;

1[(g) "a software company" means a company engaged in manufacture or production of software where not less than 80% of the company's turnover is from software activities;

(h) "information technology software and information technology services" means the companies which deal with such activities as defined in recommendation No. 19(a) and (b) of the notification dated 25th July, 1998, issued by the Planning Commission.]

Footnotes

1Inserted by the Issue of Foreign Currency Convertible Bonds and Ordinanry Shares (Through Depositary Receipt Mechanism) (Smendment) Scheme, 1999, with effect from as follows:

(i) The scheme shall be deemed to have come into force with effect from the twenty-third day of June, 1998, in respect of the Indian software companies; and

(ii) from the sixteenth day of September, 1998, in respect of the Information Technology Software and Information Technology Services.

3. Eligibility for issue of convertible bonds or ordinary shares of issuing company. (1) An issuing company desirous of raising foreign funds by issuing Foreign Currency Convertible Bonds or ordinary shares for equity issues through Global Depositary Receipt is required to obtain prior permission of the Department of Economic Affairs, Ministry of Finance, Government of India.

1[3.(1)(i) An Indian Company may sponsor an issue of ADRs/GDRs with an overseas depository against shares held by its shareholders at a price to be determined by the Lead Manager, in respect of:-

(a) (a) Divestment by shareholders of their holdings of Indian companies listed in India.

(b) (b) Divestment by shareholders of their holdings of Indian companies not listed in India but which are listed overseas.

(ii) Such a facility would be available pari-passu to all categories of shareholders of the company whose shares are being sold in the ADR/GDR market overseas.

(iii) An approved intermediary under the scheme, would be an Investment Banker registered with the Securities and Exchange Commission in the USA, or under Financial Services Authority in U.K., or the appropriate regulatory authority in Germany, France, Singapore or in Japan.

(iv) Such issues would need to conform to the Foreign Direct Investment Policy and other mandatory statutory requirements and detailed guidelines issued in this regard. The provisions of paragraph (4B) of Schedule I to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) regulations, 2000 as notified by Reserve Bank of India vide Notification No. FEMA 41/2001-RB, dated March 2, 2001, would also need to be adhered to.]

2[3(1)(A). An Indian company, which is not eligible to raise funds from the Indian capital market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue (i) Foreign Currency Convertible Bonds and (ii) Ordinary Shares through Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.

3(1)(B). Unlisted Indian Companies issuing Global Depositary Receipts/Foreign Currency Convertible Bonds shall be required to simultaneously list in the Indian Stock Exchange(s).

3(1)(C) Erstwhile Overseas Corporate Bodies (OCBs) who are not eligible to invest in India through the portfolio route and entities prohibited to buy, sell or deal in securities by SEBI will not be eligible to subscribe to (i) Foreign Currency Convertible Bonds and (ii) Ordinary Shares through Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares(Through Depositary Receipt Mechanism) Scheme, 1993]

(2) An issuing company seeking permission under sub-paragraph (i) shall have a consistent track record of good performance (financial or otherwise) for a minimum period of three years, on the basis of which an approval for finalising the issue structure would be issued to the company by the Department of Economic Affairs, Ministry of Finance.

(3) On the completion of finalisation of issue structure in consultation with the Lead Manager to the issue, the issuing company shall obtain the final approval for proceeding ahead with the issue from the Department of Economic Affairs. Explanation. -- For the purposes of sub-paragraphs (2) and (3) "issue structure" means any of the requirements which are...

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