India: FEMA, SEBI And Other Laws Related To Securities (Securities Law: October 2016 - December 2016)

Notification of Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2016

Securities and Exchange Board of India ("SEBI") has, vide its notification dated November 30, 2016, amended the SEBI (Real Estate Investment Trusts) Regulations, 2014 ("Regulations"). Under the amended regulations, definition of real estate or property has been broadened by introducing within its ambit rent generating or income generating hotels, hospitals, convention centres, and additionally common infrastructure, industrial parks and Special Economic Zones ("SEZ").

The Amendment further has inserted a new sub – regulation to sub- regulation(2) of the Regulations whereby the slabs for minimum initial offer size and public floats proposing to be raised by the Real Estate Investment Trust ("REIT") are introduced and are produced below:

# Post issue capital Offer size (minimum)
1. Less than INR 1,600 crores 25% OR INR 250 crores, whichever is higher
2. Equal to or more than INR 1,600 crores but less than INR 4,000 crores INR 400 crores
3. Equal to or more than 4,000 crores 10%

However, the public float in all cases shall be increased to a minimum of 25% within a period of three years from the date of listing. Additionally, any units offered to sponsor or the manager or their related parties or their associates shall be excluded from the calculation of the offer size.

Further, REITs are now permitted to invest via a two-level structure through a holding company, subject to sufficient shareholding in the holding company and the underlying Special Purpose Vehicle ("SPV"). This substantially reduces costs of consolidation, and added capitalisation at the holding company level through the primary markets. Thus an analogy can be drawn between REITs and Companies under the Companies Act, 2013 ("CA, 13"), which similarly permits investments through two layers.

Notification of SEBI (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2016

SEBI has, vide its notification dated November 30, 2016 amended the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The amendment mandates that reservation on competitive basis shall be in accordance with the conditions laid down in the Regulations provided that in the event of under – subscription in the employee reservation portion, the unsubscribed portion shall be allotted on a proportionate basis, for a value in excess of two lakhs rupees, subject to the total allotment to an employee not exceeding five lakhs rupees.

Amendment in Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000

RBI has, vide notification dated October 20, 2016, amended that any Foreign Venture Capital Investor ("FVCI") which has obtained registration under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 ("FVCI Regulations") will not require any approval from RBI and can invest in Equity or equity linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange at the time of issue of the said securities / instruments and engaged in any of the sectors like Biotechnology, IT related to hardware and software development, Nanotechnology, Seed research and development, Research and development of new chemical entities in pharmaceutical sector, Dairy industry, Poultry industry, Production of bio-fuels, Hotel-cum-convention centres with seating capacity of more than three thousand, Infrastructure sector. Further it can also invest in equity or equity linked instrument or debt instrument issued by an Indian 'startup' irrespective of the sector in which the startup is engaged. Prior to this amendment, RBI approval was mandatorily required to be obtained by FVCI thus unnecessarily deferring and complicating the procedure. Such simplification has done away with the apprehension of the FVCI.

Circular of streamlining the process for Acquisition of shares pursuant to Tender – Offers made for Takeovers, Buy Back and Delisting of Securities

SEBI vide its circular dated December 9, 2016 has ruled that the transfer of shares of shareholders under the tender offers would be made directly to the account maintained by the clearing corporation. The clearing corporation will utilise the securities towards the settlement obligations under the offer and will directly credit the unaccepted tendered shares under such offer to shareholder's bank and demat accounts respectively. Such welcome measure shall reduce the systematic risk for investors and ease the process of implementation. This amended procedure shall be applicable to all the offers for which Public Announcement is made on or after January 2, 2017.

Notification on reviewing the sectoral caps and simplification of Foreign Direct Investment ("FDI") Policy

RBI vide its notification dated October 20, 2016 has done away with the Government approval and compliance with the sectoral conditions for the portfolio investments up to aggregate foreign investment level of 49% or sectoral cap, whichever is lower, provided such investment does not result in change in ownership leading to control of Indian entities by non – resident entities.

Additionally, foreign investment by way of swap of shares has been permitted provided the resident company in which the investment is made is engaged in an automatic route sector subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with the SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.

Further, foreign investment in Limited Liability Partnership ("LLP") is permitted under the automatic route if the LLP is engaged in sector where 100% FDI is allowed and there are no attendant FDI linked performance conditionality to the sector.

RBI Simplifies Norms related to ECB

Prior to simplification, under the extant ECB guidelines, designated AD Category-I banks were authorized to approve requests from borrowers for changes in repayment schedule during the tenure of the ECB, i.e., prior to maturity, provided average maturity and all-in-cost are in conformity with applicable ceilings/ norms. To simplify the procedure relating to ECB, under the liberalized scheme, the powers have been delegated to designated AD Category-I banks to approve requests from borrowers for extension of matured but unpaid ECB, subject to the following conditions:

a. No additional cost is incurred;
b. Lender's consent is available; and
c. Reporting requirements are fulfilled.

Further, powers are also delegated to designated AD Category – I bank to approve cases of conversion of matured but unpaid ECB into equity subject to same conditions as set out above.

It should also be noted that if the ECB borrower concerned has availed credit facilities from the Indian banking system including overseas branches/subsidiaries, any extension of tenure / conversion of unpaid ECBs into equity (whether matured or not) shall be subject to applicable prudential guidelines issued by the Department of Banking Regulation of RBI, including guidelines on restructuring. Further, such conversion into equity shall also be subject to consent of other lenders, if any, to the same borrower or at least information regarding conversions shall be exchanged with other lenders of the borrower.

Government of India ("GoI") allowed 100% FDI in 'Other Financial Services'

Pursuant to Press Note dated October 25, 2016, GoI has decided to allow foreign investment up to 100% under the automatic route in 'Other Financial Services'. Other Financial Services will include activities which are regulated by any financial sector regulator viz. RBI, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority, National Housing Bank or any other financial sector regulator as may be notified by the GoI of India in this regard. Such foreign investment shall be subject to conditionalities, including minimum capitalization norms, as specified by the concerned Regulator/ Government Agency.

Salient features of the revised regulatory framework are as under:

a. In financial services, activities which are not regulated or partly regulated by any financial sector regulator or where there is lack of clarity regarding regulatory oversight, foreign investment will be allowed up to 100% under the Government approval route.
b. Foreign investment in an activity which is specifically regulated by a specific act, will be restricted to foreign investment levels/limits, if any, specified in that particular act.
c. Downstream investment by any entity engaged in 'Other Financial Services" will be subject to extant sectoral regulations and provisions of Principal Regulations.
d. Prior to the aforestated press note, 100% FDI was allowed under automatic route for only 18 specified Non Banking Financial Companies (NBFC) activities including merchant banking, under writing, portfolio management services, financial consultancy and stock broking and that too subject to adherence to certain conditions including fulfillment of minimum capitalization norms.

Indians Outside Can Buy Health, General Insurance in Forex

Pursuant to RBI's notification dated November 17, 2016, the following amendments in Foreign Exchange Management (insurance) Regulations, 2000 have been notified:

(i) All general/health insurance policies permitted by Insurance Regulatory and Development Authority of India ("IRDAI") are allowed to be placed in foreign exchange. No RBI permission is required for issuance/renewal of any insurance policy;
(ii) Payment of insurance premium in foreign currency by Indian Resident is no longer required irrespective of currency for settlement of claim;
(iii) Resident outside India may obtain general/health insurance policy on payment of insurance premium in foreign currency irrespective of currency for settlement of claim. However, if the premium is paid in INR, settlement of claim will be in INR;
(iv) Resident going abroad for employment purpose may also take health insurance policy on payment of premium in INR; and

Claims settlement under cashless international health insurance policies to hospitals providing treatment or through Third Party Administrator ("TPA") arrangements allowed.

Implementation of The Insolvency and Bankruptcy Code, 2016.

The Insolvency and Bankruptcy Code, 2016 ("Code") was passed by the Parliament on May 11, 2016 and was notified in the official gazette on May 28, 2016.

The objectives of the Code are as follows:

a) to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons;
b) to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues; and
c) to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

The Code extends to the whole of India; however, Part III of this Code does not apply to the state of Jammu and Kashmir. It applies only to the extent of insolvency, liquidation or bankruptcy.

Persons covered under the Code are as follows:

  • Companies incorporated under the CA, 2013 or under any previous company law;
  • Companies governed by any special act, to the extent the provisions are consistent with the Act;
  • Limited Liability Partnerships ("LLPs");
  • Any other body corporate incorporated under any act for the time being in force, as the Central Government may specify;
  • Partnership Firms; and
  • Individuals;

The Code has constituted an Insolvency and Bankruptcy Board of India ("IBBI") that seeks to consolidate and amend laws relating to reorganization as well as insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner. The Board for Industrial and Financial Reconstruction ("BIFR") has become redundant; therefore, corporate insolvencies shall be dealt by the NCLT and proprietorship and partnership insolvencies by the Debt Recovery Tribunal ("DRT"). It envisages one law for bankruptcy and has repealed two laws and amended eleven in relation to the same. The Code covers companies, partnerships, limited liability partnerships and individuals. However, more can be included.

Under the Code, various institutions have been established for the smooth implementation of the Code:

  • The IBBI as mentioned above to oversee the entire process;
  • Insolvency Resolution Professionals to guide the insolvency process and agencies to regulate these professionals. The Model Bye-Laws and Governing Body of Insolvency Professional Agencies and in relation to the Insolvency Professional Agencies have been notified by the IBBI;
  • Information utilities which will collect, collate and disseminate financial information related to a debtor; and
  • Adjudicating Authorities (AA) as discussed below.

For adjudication, there are two authorities specified under the Code to exercise judicial control over the insolvency and liquidation process; firstly, for companies, LLPs and other limited entities the authority is the NCLT; secondly, for individuals and partnerships, the authority is the DRT and appeals lie before the Debt Recovery Appellate Tribunal. Their role is limited to ensuring due process rather than adjudicating on the merits of the insolvency resolution. The Supreme Court shall have appellate jurisdiction over NCLT and DRT.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions