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FEMA, SEBI and Companies Act

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(Querist)
20 September 2009 60% of the shares of I Co. (A software company incorporated in India) are held by F Co. (A company incorporated outside India) the reminder of the shares is held by the Indian Shareholders. I Co. want to acquire an Indian Company:

[A] Can it take a loan from F Co. for this acquisition? If so, what would be the regulatory approvals required for such a loan?

[B] Can it issue shares to the F Co. such that the proceeds of the issuance be utilized for the acquiring the shares of the other Indian Company’? If so, what would any regulatory approvals be required for such issuance of shares?
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Shaurya

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Shaurya (Expert)
23 September 2009 Hi Poonam,

As per my understanding, Indian Comapny can not use ECB availed from foreign Company for acquiring an Indian Comapny. This is not permitted as per ECB guidelines.

Further, If you issue share to Foreign Company, plzz take care of the sectoral caps and main business of the Indian Company.

hope this clarifies.

Regards,

Shaurya
shauryamitra@gmail.com
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