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
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.