India:
Acceptance Of Deposits By Indian Companies From A Person Resident Outside India For Nomination As Director
23 May 2016
S&A Law Offices
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The Reserve Bank of India vide A.P. circular no. 59 (DIR Series)
dated 13.04.2016 cleared the ambiguous position on deposits made by
a person or on behalf of any other person residing outside India
for nomination as a director in an Indian company. The
clarification was given in regard to Regulation 3 of the Foreign
Exchange Management (Deposit) Regulations, 2016 which states that
no person resident in India shall accept a deposit from, or make
any deposit with, a person resident outside India without the prior
permission of RBI.
RBI has cleared the ambiguity by stating that, the deposits made
by any person to nominate himself or any other person for the
position of Director with the company, does not need any specific
approval from the Reserve Bank under Notification No. FEMA
5(R)/2016 RB dated 01.04.2016. This is in accordance with Section
160 of Companies Act, 2013 wherein, any such deposit made would be
considered a current account (payment) transaction and as such,
does not require any approval from the Reserve Bank. Also, the
refunds of such deposits arising in event of selection of person as
director or getting more than twenty-five percent shares shall be
treated similarly.
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