Fema compliance on bonus shares issuance

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Jiten Gupta (Querist)
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06 July 2013 Can someone pls guide me the FEMA reporting compliance in case of issue of Bonus Shares to NRIs (Minor Too) in May 2012.

Ajay Mishra

Ajay Mishra (Expert)
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08 July 2013 Hi

Issue of Rights / Bonus shares
An Indian company may issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, reporting requirements, etc. Further, such issue of bonus / rights shares have to be in accordance with other laws / statutes like the Companies Act, 1956, SEBI (Issue of Capital and Disclosure Requirements), Regulations 2009, etc.

Issue of Right shares to OCBs: OCBs have been de-recognised as a class of investors with effect from September 16, 2003. Therefore, companies desiring to issue rights share to such erstwhile OCBs will have to take specific prior permission from the Reserve Bank. As such, entitlement of rights share is not automatically available to OCBs. However, bonus shares can be issued to erstwhile OCBs without prior approval of the Reserve Bank, provided that the OCB is not in the adverse list of RBI.

Ajay Mishra

Ajay Mishra (Expert)
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08 July 2013
Reporting of issue of shares:

(a) After issue of shares (including bonus and shares issued on rights basis and shares issued on conversion of stock option under ESOP scheme)/ convertible debentures / convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, through it’s AD Category I bank, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.

(b) Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorised Dealer of the company, who will forward it to the concerned Regional Office of the Reserve Bank. The following documents have to be submitted along with Form FC-GPR:
(i) A certificate from the Company Secretary of the company certifying that :
a) all the requirements of the Companies Act, 1956 have been complied with;
b) terms and conditions of the Government’s approval, if any, have been complied with;
c) the company is eligible to issue shares under these Regulations; and
d) the company has all original certificates issued by AD banks in India evidencing receipt of amount of consideration.
(ii) A certificate from SEBI registered Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
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(c) The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated.
(d) Issue of bonus/rights shares or shares on conversion of stock options issued under ESOP to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR.

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