Central Government has issued Foreign Exchange Management (Nondebt Instruments) Amendment Rules, 2024.
Key Amendments:
Definition Overhaul:
The amendment introduces crucial changes to the definitions in the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The term “International Exchange” is now explicitly defined as a permitted stock exchange in permissible jurisdictions listed in Schedule XI. Additionally, the definitions of “listed Indian company” and “permissible jurisdiction” have been refined for greater clarity.
New Chapter: Investment by Permissible Holder:
A new chapter, Chapter X, has been incorporated into the rules, specifically addressing the investment in equity shares of public Indian companies listed or to be listed on International Exchanges. This chapter outlines the conditions and procedures for such investments.
Direct Listing Scheme:
Schedule XI introduces the Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme. It provides a comprehensive framework for public Indian companies to issue or offer equity shares on specified International Exchanges.
Investment Framework:
The rules permit permissible holders, including those residing outside India, to purchase or sell equity shares of public Indian companies listed on International Exchanges under the specified scheme. The Reserve Bank determines the mode of payment and other related conditions for remittance of proceeds.
Eligibility Criteria:
The eligibility criteria for public Indian companies and existing shareholders to issue or offer equity shares on International Exchanges are clearly laid out. Companies must ensure compliance with various regulatory aspects, including not being under investigation, not having wilful defaulters among promoters or directors, and not having promoters or directors classified as fugitive economic offenders.
Permissible Holder:
The concept of a permissible holder is introduced, referring to individuals or entities holding equity shares listed on International Exchanges. However, special scrutiny is applied to holders from countries sharing a land border with India, requiring Central Government approval for their investments.
Obligations and Compliance:
Public Indian companies are obligated to comply with existing laws related to equity share issuance. The rules highlight the importance of adhering to laws such as the Securities Contracts (Regulation) Act, Securities and Exchange Board of India Act, Depositories Act, Foreign Exchange Management Act, Prevention of Money-laundering Act, and the Companies Act, 2013.
Voting Rights and Pricing:
To maintain transparency and fairness, companies with equity shares listed on International Exchanges must ensure that voting rights are exercised directly by permissible holders. The pricing of equity shares issued or transferred on International Exchanges is subject to specific regulations, ensuring consistency with domestic norms.
