The Department of Industrial Policy & Promotion Board (DIPP), Government of India, via Press note No. 9 (2015 Series), dated September 15, 2015, reviewed the existing Foreign Direct Investment (FDI) policy on partly paid shares and warrants.
The Government after reviewing the provisions of the extant FDI policy, has decided to allow partly paid shares and warrants as eligible capital instruments for the purposes of FDI policy. Accordingly, the following amendments are made in the 'Consolidated FDI Policy Circular of 2015', effective from May 12, 2015:
a. The definition of 'Capital' under FDI Policy shall now mean equity shares; fully, compulsorily & mandatorily convertible preference shares; fully, compulsorily & mandatorily convertible debentures and warrants.
The equity shares issued in accordance with the provisions of the Companies Act, as applicable, will include equity shares that have been partly paid. Preference shares and convertible debentures are required to be fully paid, and are mandatorily and fully convertible. Further, 'warrant' includes Share Warrant issued by an Indian Company in accordance to provisions of the Companies Act, as applicable.
b. Insertion of a new para under the heading of Types of Instruments of Consolidated FDI Policy Circular of 2015 is made as follows:
"Acquisition of Warrants and Partly Paid Shares – An Indian company may issue warrants and partly paid shares to a person resident outside India subject to terms and conditions as stipulated by the Reserve Bank of India in this behalf, from time to time."
Prior to this Policy review, the warrants and partly paid shares were issued to person/(s) resident outside India only after approval through the Government route. Accordingly, now permission will not be required for raising money through these instruments in sectors where FDI is allowed under the automatic route.
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