Procedure for Issue of FCEBs

PROCEDURAL REQUIREMENTS  

Before the issue of FCEBs to a person resident outside India, the issuing company must note the following points:

1. Whether, the issuing company is eligible to raise funds in foreign exchange in accordance with Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000.

2. Whether, the issuing company is eligible to raise fund in compliance with the provisions of Issue of Foreign Currency Exchangeable Bonds Scheme 2008.

3. An issuing company, which is not eligible to raise funds from the Indian Capital market or restricted by SEBI to sell, purchase or otherwise deal in securities is not eligible to raise funds through issue of FCEBs.

4. To ensure that, issuing company belong to the part of the promoter group of the Offered Company and shall hold the equity shares being offered at the time of issue of FCEBs and the Offered Company is the listed company.

5. To ensure that, the Offered Company is the listed company, which is engaged in a sector eligible to receive Foreign Direct Investment (FDI) and eligible to issue or avail of Foreign Currency Convertible Bond (FCCBs) or External Commercial Borrowings (ECBs).

6.  Ensure that, subscriber complying with the Foreign Direct Investment policy and adhering to the sectoral caps at the time of subscribe to FCEB. Prior approval of the Foreign Investment Promotion Board, wherever required under the Foreign Direct Investment policy, should be obtained.

7. You are required to specify the proposed end-uses of the issue proceeds at the time of making your application and to submit statement of utilization of funds for the approved end use, duly certified by your auditor.

8.  Decide the following matter with the Lead manager to your FCEBs issue:

(a) Public/Private placement.

(b) Number of FCEB to be issued.

(c) Conversion price, coupon, and the pricing of the conversion options of FCEBs.

(d) Maturity.

(e) Rate of Interest.

9. Decide the exchange price of the FCEB issue in consultation of Lead manager/Chartered Accounts, the exchange price of the offered shares shall not be less than the higher of the following two:

(i) The average of the weekly high and low of the closing prices of the shares of the offered company quoted on the stock exchange during the six months preceding the relevant date; and

(ii) The average of the weekly high and low of the closing prices of the shares of the offered company quoted on a stock exchange during the two week preceding the relevant date.

Explanation to clause (i) and (ii): "Relevant date" means the date on which the Board of directors of the issuing company passes the resolution authorizing the issue of FCEB.

10. Finalize the issue structure in consultation with Lead Manager/Chartered Accountants to the FCEBs issue.

11. Apply to the Chief General Manager, Exchange Control Department (Foreign Investment Division) Reserve Bank of India, Central Office Mumbai, seeking permission for the issue and for finalizing the issue structure as specified in the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000.

12. Obtain the final approval of Reserve Bank of India or Government of India, as the case may be.

13. Note that the Authorised Dealer (Banks)/Public Financial Institutions are authorised to accept foreign currency subject to certain conditions.

14. Hold a Board Meeting after giving notice to all the Directors of the Company as per section 286, to approve the following:

(a) The FCEBs issue.

(b) The exchangeable price.

(c) Appointment of Lead Manager, Authorised Dealer/PFI.

(d) The draft of special resolution under section 81 of the Companies Act, 1956.

(e) The notice of the general meeting at which the special resolution will be considered.

15. Issue notice of general meeting to the members of the company.

16. Ensure that it would be appropriate that special resolutions mentions the ceiling or upper limit of the issue and not necessarily the exact amount.

17. Hold the General Meeting and pas the special resolution by three forth majority sanctioning the FCEBs issue.

18. File the special resolution so passed with the ROC in Form No.23 within 30 days of its passing.

19. Ensure that the Issuing Company intending to offer shares of the offered company under Foreign Currency Exchangeable Bond shall comply with all the applicable provisions of the Securities and Exchange Board of India Act, Rules, Regulations or Guidelines with respect to disclosures of their shareholding in the Offered Company.

20. Ensure that the Issuing Company shall not transfer, mortgage or offer as collateral or trade in the offered shares under Foreign Currency Exchangeable Bond from the date of issuance of the Foreign Currency Exchangeable Bond till the date of exchange or redemption. Further, the Issuing Company shall keep the offered shares under Foreign Currency Exchangeable Bond free from all encumbrances from the date of issuance of the Foreign Currency Exchangeable Bond till the date of exchange or redemption.

Thanks & Regards

CS Ajay Mishra

Email: ajaygkp@gmail.com / csajaygkp@gmail.com