offsite tas 24022016 f

TAS- Offsite

Feb 2016

Overview of recent amendments and drafts

Drafts under consideration post Acts….

Companies (Auditor’s Report) Order (CARO), 2016 dated 9th February,2016

Draft Rules for Formation of National Company Law Tribunal(NCLT)

Draft rules under chapter XV of Companies Act,2013 ( Compromise, Arrangements and

Amalgamations)

Companies (Indian Accounting Standards) Amendment Rules,2016 dated 16th February,2016

Companies (Accounting Standards) Amendment Rules,2016

Companies (Amendment) Act,2015 notified on 26th May,2015

Formation of Company Law Tribunal

Issues in and rules for Compromises, Arrangements & Mergers

under the Companies Act, 2013

Compromises, Arrangements And Amalgamations – Proposed amendments to Sections

by Company Law Committee

Exclusions from the definition of deposits under Companies(Acceptance of Deposits)

Highlights on Companies (Amendment) Act, 2015

FDI - Updates

Contents

Formation of National Company Law Tribunal (NCLT)

Supreme Court Judgment

The Present Writ Petition was heard by the SC where it categorized the challenges put forth in three

categories, as under:

1. Challenge to the validity of the constitution of NCLT and NCLAT;

2. Challenge to the prescription of qualifications etc. of President / Chairman and Members of the

NCLT/NCLAT;

3. Challenge to the structure of the Selection Committee for appointment of President/Members of

the NCLT and Chairperson/Members of the NCLAT.

On 14th May 2015 (‘SC Judgment 2015’) , the SC squarely applied the 2010 Judgment to this case

and upheld the Constitutional validity of NCLT and NCLAT mentioned in point 1 above.

As regards to point 2 & 3 , the SC held that that the provisions regarding establishment of NCLT and

NCLAT contained in Companies Act, 2013 are not valid till the point they are not fully realigned as

per the directions given in the 2010 Judgment. Further, SC has held that the technical members in

NCLT / NCLAT should be of a rank equivalent to a Secretary or An Additional Secretary in the

government of India, as opposed to a Joint Secretary as contemplated in the Cos Act, 2013.

Steps taken so far

Apart from the above, in SC Judgment 2015, SC has also considered the following steps taken till date

towards setting up of NCLT and NCLAT:

Approvals taken for creation of various positions in NCLT and NCLAT;

Draft Rules on various matters prepared to place before appropriate authorities, inter alia including:

- rules, remuneration and recruitment of NCLT/NCLAT members;

- schemes of compromises/arrangements, and

- rehabilitation of sick companies

Space for Principal Bench and other Benches of NCLT at Delhi;

Process initiated for set up of infrastructure;

Allocation of budget heads for meeting the expenditure; and

Surrender of allocated funds in 2014-2015 in view of the delay in settling up the Tribunals.

Conclusion

Thus, in order for NCLT to take over the functions currently performed by the High Court, the

following needs to be addressed:

- Settlement of the pending Writ Petition No 276/2012,

- Completion of setup of NCLT and NCLAT; and

- Notification of the relevant provisions which include provisions of Chapter XV - Compromises,

arrangements and amalgamations under sections 230- 240 of Cos Act, 2013 and corresponding rules.

The current procedural aspects pertaining to schemes of arrangement would undergo changes which

include:

i. Threshold limits provided for objections to schemes by any shareholder / creditor;

ii. Threshold limits provided for obtaining dispensation from holding creditors meeting;

iii. Intimation of compromise/ arrangement to be given to various authorities;

iv. Mandatory requirement of auditor’s certificate on accounting;

v. Provision for indicating Appointed Date in schemes;

vi. Exit route to be provided to dissenting shareholders; and

vii. Specific provisions for merger of Specified Companies.

Comments

The SC Judgment 2015 has upheld the constitutional validity for setting up the NCLT and the NCLAT

and has also ensured that the judiciary has a greater role to play than the executive.

Due to the petitions filed with the SC, the notification of a large number of sections including

provisions for schemes of arrangements involving mergers, demergers etc. under the Cos Act, 2013,

haven’t been notified yet due to delay in setting up the NCLT.

Once the NCLT, is set up it will not just replace the Company Law Board (CLB), but will also take

care of cases that are with the High Courts, the Board for Industrial and Financial Reconstruction

(BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

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Feb 2015

Issues in Compromises, Arrangements & Mergers


Index



Sections 391, 393 & 394A vis-à-vis Section 230

Approval of scheme by postal Ballot is allowed by New Act

Introduction of Threshold limit for raising objections in respect of scheme:

• Objection to scheme of compromise or arrangement can be made only by:

- those shareholders who holds not less than 10% of the shareholding or

- those Creditors who holds not less than 5% of the total outstanding debt as per latest audited financial

statement

Circulation of Valuation Report to the shareholders/creditors/debenture-holders along with the

notice convening meeting.

Additional disclosure requirements vide an Affidavit at the time of filing an Application before the

NCLT:

• Reduction of share capital of the company, if any, included in the compromise or arrangement;

• In case of scheme of corporate debt restructuring, report by auditors on the position of liquidity and also as

to whether the corporate debt restructuring is in the line with guidelines provided by RBI among other

disclosures.

Introduction of Concept of dispensation of creditors’ meeting if creditors at least 90% in value agree

and confirm by way of affidavit to the scheme.

Requirement of certificate by auditor to the effect that accounting treatment is in line with

Accounting Standards notified under section 133.



Sections 391, 393 & 394A vis-à-vis Section 230

Requires service of notice to various statutory authorities including :

• Central Govt., Income Tax Authorities, RBI, SEBI, the Registrar, respective stock exchanges, Official Liquidator,

Competition Commission of India and other sectoral regulators and authorities.

The notice and other documents to be placed on the website of the company

Specific provision in relation to matters, all or any of which shall be included in order of tribunal.

Provision for takeover of companies through a scheme of compromise or arrangement.

Buy back if included in scheme shall be in compliance with section 68 of the act.

Section 393 vis-à-vis Section 231

The power of any person to apply for winding up, which existed in sec 392 of the 1956 Act is not

available under the sec 231 of the 2013 Act.




Specific provision for compromise or arrangement between Listed transferor company and

Unlisted transferee Company

Proviso requiring filing of report by Registrar and official liquidator is omitted in the light of

serving of notice to them under section 230.

Compliance requirement by way of filing of statement duly certified by CA/Cost

Accountant/CS.

Requirement of certificate by auditor to the effect that accounting treatment is in line

with Accounting Standards notified under section 133.

Prohibition on maintenance of Treasury Stock




The norm and practice of indirectly holding investments through intermediaries like a

private trust is now prohibited and cannot be structured by companies.

The concept of “Appointed Date” has been introduced under this section.

The clubbing of authorised capital which was normally litigated and objected by the

Registrar is now permitted under this section.

Definitions of ‘Transferor Company’ and ‘Transferee Company’ are omitted.

Introduced by way of explanation- new propositions of amalgamation being “merger by

formation of a new company”, “merger by absorption” and scheme involving division

of undertaking, property/liability


under the Companies Act, 2013Section 233[Newly Introduced] – Introduction of Fast Track Merger for certain Companies

Provides for amalgamations between two or more small companies or between a

holding company and its wholly owned subsidiaries or such other class or classes of

companies as may be prescribed.

Small companies which meet the threshold of s. 2(85) of the 2013 Act viz. definition of

‘Small Company’ can avail the merger route under this section.

Attempt to reduce time lines and provide a platform to facilitate amalgamations

without approval of the Tribunal.

Requires Approval of :a) Registrar of Companies;

b) Official Liquidator;

c) Members or class of members holding at least 90% of total no. of shares;

d) Majority of creditors or class of creditors representing 9/10th in value;

e) Each of the companies involved in the merger shall file a declaration of solvency with the ROC

Section 233 of the 2013 Act prohibits the maintenance of the Treasury Stock.

Section 233 of the 2013 Act gives legal sanctity to the concept of Clubbing of

Authorised Capital


under the Companies Act, 2013SECTION 234[Newly Introduced]:- Merger or Amalgamation of company with Foreign Company

Provides legal sanctity to structure cross-border amalgamations

Prior to the introduction of this section, only mergers of Foreign Company being the

Transferor Company and the Indian Company being the Transferee Company were

permitted.

This new section also facilitates the merger of an Indian Transferor Company with a

Foreign Transferee Company.

All the Mergers under this section would require prior approval of the Reserve Bank of

India.

The consideration for merger can be in the form of Cash and / or Depository Receipts

or partly in Cash and partly in Depository Receipts. This would apply to Foreign

Companies in jurisdictions as notified by the Central Government.


under the Companies Act, 2013SECTION 235- Major Highlights

Provides the mechanism under which the Transferee Company under a scheme or

contract can acquire shares of the dissenting shareholders.

Scheme or contract to be approved by holders of not less than 9/10th of the value of

the shares whose transfer is involved.

Right to Dissenting Shareholders to make an application to the Tribunal

Transferee Company to send the notice along with the instrument of transfer

Registration of the Transferee Company as the holder of the shares.

the sum received as consideration from the Transferor Company shall be deposited in a

separate bank account and held in trust by the Transferor Company.




Facilitates exit mechanism for minority shareholders

Seeks to create a balance between the interests of the promoters and minority

shareholders.

Specific Provision covering Offer to sell by Minority shareholders to Majority

shareholders

Provision for Purchase of Minority Shareholding by Majority shareholder/s

Section can be invoked not only in case of amalgamation but also in case of share

exchange or conversion of securities.


under the Companies Act, 2013SECTION 237

Similar to section 396 of Old Act

Provides for the process of amalgamating companies in public interest.

Every member or creditor or a debenture holder of the Transferee Companies shall

have the same right and interest in the Transferee Company.

Member, creditor or debenture holder shall be entitled for compensation if rights and

interest in Transferee Company are less

Any grievance of the shareholder, creditor or debenture holder against the assessment

of compensation can be appealable within 30 days from the date of publication of such

assessment in the official gazette.


under the Companies Act, 2013Section 395(4A) vis-à-vis Section 238

Requirement of registration of circular for the offer under s. 235 of the 2013 Act with

Registrar and can be issued only after its registration.

The Registrar may refuse to register the circular for reasons to be recorded in writing.

The section also provides for not only a remedy of Appeal against refusal of

registration but also contains penal provisions of fine.

The above amendment is brought into force in order to provide for a stringent

mechanism with respect to issuing of the scheme or offer to the transferor company

and its shareholders.


under the Companies Act, 2013SECTION 239

Similar to 396A of Old Act

Books and papers of the amalgamating company to be maintained and not to be

disposed off without the prior permission of the Central Government.

Ensures availability of past records of company for any process of investigation which

may be initiated by any Central or State regulatory authority in future.

This section has been inserted to ensure that the past records of the companies are

maintained which can be utilized in the future


under the Companies Act, 2013SECTION 240 [Newly Introduced]

Liability in respect of any offences committed under this Act by the officers of the

Transferor Company prior to any merger, amalgamation or acquisition shall continue to

exist even after such merger, amalgamation or acquisition.

This section has been inserted to ensure that the officers of the Transferor Company

do not escape any liability which might have arisen on account of violation under the

Act.

Forms prescribed under draft Rules in Compromises, Arrangements & Mergers


Sr.no Form Particulars

1 AMG 1 Affidavit disclosing contents as per section 230(2)

2 AMG 2 Advertisement of notice of meeting of members and creditors

3 AMG 3 Creditors’ Responsibility Statement

4 AMG 4 Notice of meeting

5 AMG 5 Notice to Statutory Authorities

6 AMG 6 Result of meeting

7 AMG 7 Application under section 230(12)

8 AMG 8 Petition confirming Compromise or Arrangement

9 AMG 9 Order on Petition by Tribunal

Forms prescribed under draft Rules in Compromises, Arrangements & Mergers


Sr.no Form Particulars

11 AMG 11 Statement of Compliance

12 AMG 12 Notice of the scheme under section 233 inviting objections or

suggestions

13 AMG 13 Declaration of Solvency

14 AMG 14 Meeting of members or creditors or class of members or

creditors

15 AMG 15 Confirmation order by Central Govt

16 AMG 16 Filing of confirmation order issued by Central Govt in AMG 15

17 AMG 17 Notice to dissenting Shareholders

18 AMG 18 Offer of scheme or contract involving transfer of shares

TAS- Offsite

Feb 2015

Compromises, Arrangements and Amalgamations – Proposed amendments to

Sections by Company Law Committee

Index

COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS – Proposed amendments

to Sections by Company Law Committee

Purchase of Minority Shareholding [SECTION 236]

Section 236 of the Act deals with the purchase of minority shareholding.

While Sections 236 (4), 236 (5) and 236 (6) make a reference to a “transferor company”,

the term ‘transferor company’ has not been defined in the section itself. The Committee

felt that the use of the term ‘transferor company’ in the said Section 236 without

providing for a context may ostensibly include even transfer of assets by a company,

thereby including amalgamations and mergers within the ambit of this provision, which did

not appear to be the intention.

Accordingly, the Committee recommended that the references to the phrase ‘transferor

company’ in Section 236, may be modified to a ‘company whose shares are being

transferred’ or alternatively, an explanation be provided in the provision clarifying that

Section 236 only applies to the acquisition of shares.

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Feb 2015

Exclusions from the definition of deposits under Companies(Acceptance of

Deposits)Rules, 2014

Index

Companies(Acceptance

of Deposits)Rules, 1975

Companies(Acceptance of Deposits)Rules,

2014

Changes in the New Act.

Amount received

• by way of security or

• as an advance from any

purchasing agent, selling

agent, or other agents.

• as an advance received

against orders for the

supply of goods or

properties or for the

rendering of any service

Amount received:

• by issue of Commercial paper

• any other instruments as per the guidelines

of RBI.

• as an advance for the supply of goods or

provision of services,

• as advance as consideration for property

under agreement or arrangement,

• security deposit for performance of a

contract

• Advance received under long term project

for supply of capital goods.

Advance for supply of goods or provision of

services needs to be appropriated against the

same within 365 days. Otherwise the advance

shall fall under the purview of deposits.

Security Deposit received

from an employee

Non-interest bearing Security deposit

received from employee not exceeding his

annual salary

Security Deposit is limited to employee’s

annual salary





Companies(Acceptance

of Deposits)Rules, 1975

Companies(Acceptance of Deposits)Rules,

2014

Changes in the New Act.

Amount received by way of:

• subscriptions to shares,

bonds, stock or

debentures.

• Bonds or Debentures are

to be secured by a

mortgage on immovable

property

. Amount raised by way of :

• issue of bonds or debentures of type 1 or 2

below

• subscription of securities

Bonds and debentures need to be secured by a

first charge on the assets specified under

Schedule III excluding intangible assets or 2.

Bonds or debentures compulsorily convertible

into equity shares within five years

If the securities are not allotted within 60 days

from the date of receipt of application money

or advance then the Company has to refund the

amount within 15 days from the completion of

60 days.*

Amount received by a

Private Co. from director,

relative of director or

member. Declaration by

director or member that

the funds are not

borrowed or accepted

from others is necessary.

Amount received from director of company or

relative of director of private company (

amended rule wef. 15.09.2015), Declaration

by director or relative that the funds are not

borrowed or accepted from others is necessary

• Apart from private companies , now even

public company can accept the amount

from Directors which will not be

considered as deposit.

• Private companies can accept loans from

relative of directors.

• Also the new provision has excluded

members from the ambit of the rule.

Amount accepted by Nidhi Co.in accordance

with rules made under section 406 of the act.New Rule included

TAS- Offsite

Feb 2015


Index


• Requirement of Minimum Paid up Share Capital

[Section 2(68) and Section 2(71)]

The requirement of having a minimum paid up sharecapital by a company has been done away with.

Hence, going forward, a private or a public company

can be incorporated without the need for minimum

paid up share capital of one lakh or five lakh rupees,

respectively.

• Common Seal made optional [Sections 9, 12, 22, 46 and223]

The requirement of having a common seal has been

made optional, and as a consequence, changes have

been made with regards to authorization for execution

of documents.

• Commencement of Business [Omission of Section 11]

Hitherto, before commencement of business or

exercising any borrowing powers, the director of a

company having share capital was required to file with

the Registrar of Companies a declaration that every

subscriber to the Memorandum has paid the value of

shares committed by him/her and that the paid-up

share capital of the company is not less than the

amount prescribed.

The relevant Section has now been omitted and the

requirement of filing a declaration before

commencement of business has been done away with.


• Punishment for Contravention of Section 73 and Section

76 of Companies Act, 2013 for Acceptance of Deposits

by Companies [New Section 76A inserted]

The amended law has inserted a new Section 76A after

Section 76 which introduces penal provisions for

contravention of provisions of Section 73 and Section 76

(pertaining to acceptance of deposits by a company) or

rules made thereunder, or if a company fails to repay

deposits within the time specified.

As per the amendment:

a) In addition to the payment of the amount of deposit

or part thereof and the interest due, a company

shall be punishable with a fine which shall not be

less than one crore rupees but which may extend to

ten crore rupees.

b) Every officer of the company who is in default shall

be punishable with imprisonment which may extend

to seven years or with a fine which shall not be less

than twenty-five lakh rupees but which may extend

to two crore rupees, or with both.

• Obtaining copies of Board Resolution

As per the amendment, no person shall be entitled

under Section 399 to inspect or obtain copies of the

Board Resolutions passed by a company under Section

179(3), filed with the Registrar under Section 117(3).

• Declaration of Dividend [Section 123(1)]

Additional proviso has been inserted in Section 123 in

accordance with which no company shall declare

dividend unless carried over past losses and

depreciation in previous year or years are set off

against profit of the company for the current year.


• Reporting of Fraud by auditor [Section 134(3) and

143(12)]

As per the amendment, the Report by the Board of

Directors, in addition to others, shall also include

details in respect of frauds reported by auditors under

Section 143(12) other than those which are

reportable to the Central Government.

Further, the enabling provisions of Section 143(12)

[replaced vide this amendment] prescribes a

threshold (yet to be defined) beyond which fraud

shall be reported to the Central Government or audit

committee/Board, as may be applicable.

Companies whose auditors have reported fraud to the

audit committee or the Board but not to the Central

Government also need to disclose details of such

fraud in the Board’s Report.

• Empowered Audit Committee to give omnibus approval

for related party transactions [Section 177(4)]

Vide the amendment, an audit committee may give

omnibus approvals for related party transactions

subject to conditions as may be prescribed.


• Loan to Directors [Section 185]

Section 185 of the Companies Act, 2013 deals with

provisions relating to loans, guarantees and securities

provided by a company to its directors or any other

person in whom directors are interested.

The prohibition is not applicable to:

a) loans given to a managing director or whole time

director as part of the conditions of services

extended by the company to all its employees or,

pursuant to any scheme approved by the members

by a special resolution;

b) companies which provide loans or give guarantees or

securities in the ordinary course of its business.

As per the amendment, the following are added to

the above mentioned exceptions:

a) Loan made or guarantee given or security provided

by the holding company to its wholly owned

subsidiary; or

b) Guarantee given or security provided by the holding

company in respect of loan made by the bank or

financial institution to its subsidiary.

Provided the loans made above are utilised by a

subsidiary for its principal business activity.

• Related party Transaction [Section 188]

As per the amendment, the requirement of passing

special resolution for approving certain related

party transactions has been done away with. With

this, certain related party transactions can now be

approved through a ‘resolution’- ordinary instead of

‘special resolution’.

Further, it has also been provided that for related

party transactions between a holding company and

its wholly owned subsidiary, no resolutions are

required to be passed if the accounts of the

holding and subsidiary company are consolidated

and placed before the shareholders in a general

meeting for approval.

1956

2013

2015

Where do we stand ??

Having at least one Woman Director for specified class of companies

Requirement of at least two Independent directors for certain class of

companies

Provision of Vigil Mechanism

Formation of Stakeholder relation committee

Spending on CSR Activities

Appointment of Small Shareholder Director

Floating One person Company

Moving ahead in right direction…

Vesting of powers with Audit Committee

Voting through Electronic mode

Maintenance of registers in electronic form

Voting by postal Ballot

Requirement of Internal Audit

TAS- Offsie

Feb 2015

FDI - Updates

Index

FDI in Limited Liability Partnerships (LLPs)

100% FDI permitted under the automatic route in LLPs operating in sectors/activities

where 100% FDI is allowed, through the automatic route and there are no FDI-linked

performance conditions.

LLPs having foreign investments are now permitted to undertake downstream

investments in other companies/LLPs where 100% FDI is allowed, through the

automatic route and there are no FDI linked performance conditions

FDI - Reporting

Mandatory reporting on e-Biz platform and discontinuation of physical filing

• Following documents to be mandatorily filed through e-Biz platform:

i. Advance Reporting Form (ARF) to report FDI inflows;

ii. Form FC-GPR to report allotment of shares); &

iii. Form FC-TRS to report transfer of shares

Control & Ownership

Company LLP

Control Right to appoint a majority of the directors

or to control the management or policy

decisions including by virtue of their

shareholding or management rights or

shareholders agreements or voting

agreements

Right to appoint majority of the designated

partners, where such designated partners,

with specific exclusion to others, have

control over all the policies of the LLP

Owned by resident Indian

citizens

More than 50% of the capital is beneficially

owned by resident Indian citizens and / or

Indian companies, which are ultimately

owned and controlled by resident Indian

citizens

More than 50% of the investment in such an

LLP is contributed by resident Indian citizens

and/or entities which are ultimately 'owned

and controlled by resident Indian citizens'

and such resident Indian citizens and entities

have majority of the profit share

Foreign Investment guidelines

Sectors/activities under Government approval route

Government approval required where:

a) Indian company is not owned/controlled by a resident entity

b) Control/ownership of an Indian company is being transferred to a non-resident entity,

including by way of issue of shares through amalgamation/merger, etc

c) Foreign investment includes FDI, investment by FII, FPI, QFI, NRI, ADR, GDR, FCCB,

CCPS & CCD

d) Investment on non-repatriation basis by:

i. NRIs;

ii. A company, Trust & partnership firm incorporated outside India & owned and controlled by

NRIs

Miscellaneous

Foreign investment by way of share swap in companies engaged in automatic route

sector does not require government approval

Valuation of shares to be undertaken by Merchant Banker registered with SEBI or Investment

Banker outside India registered with appropriate regulatory authority

Issue of partly paid shares and warrants recognized as eligible capital instruments

Prior approval of government not mandated

Government approval not required for foreign investment in an Indian company not

having any operations nor having any downstream investments for undertaking

activities under the automatic route without FDI linked performance conditions.

Sector Specific Updates

Sector Foreign

Investment

cap

Route Other Amendments

Construction 100% Automatic - completed

projects for operation

and management of

townships, malls/

shopping complexes

and business centers.

• The conditions of a minimum floor area &

minimum capitalization have been removed

• Permission to exit & repatriate foreign

investment before completion of project (min

lock-in 3 years)

• ‘Real Estate’ business excludes earning of

rent/income income from leased property

Defence 49% Automatic

Approval – upto 49%

Broadcasting

• News channel & FM

Radio

• Non-news channels—

or entertainment

broadcasters

• DTH, digital cable

networks and

Headend in the Sky

services (HITS)Z

49%

(earlier 26%)

100%

100%

(earlier 74%)

Approval

Automatic

Upto 49%-Automatic

Regional Air Transport Services

49% Automatic route

Sector Specific Updates

Sector Foreign

Investment

cap

Route Other Amendments

Plantation 100% Automatic • Plantation sector to include coffee, rubber,

cardamom, palm oil and olive oil

• Earlier only tea was included

Single Brand Retail trading 100% Automatic- upto 49%

Automatic -100% for

Duty free Shops

• Mandatory 30% domestic sourcing condition at the

time of opening of the first store rather than at the

time of receipt of FDI (Relaxations subject to Govt

approval)

• Selling merchandise through e-commerce

permitted

• Indian brands also eligible for SBRT

• A single entity permitted to undertake both the

activities of SBRT and wholesale

Non Scheduled Air

Transport Service, Ground

Handling Services,

Satellites- establishment

and operation and Credit Information Companies

100%

(earlier

74%)

Automatic – Sectors

other than Satellites-

establishment and

operation

Banking – Private Sector • Full fungibility of foreign investment in private

banking sector permitted.

• FIIs/FPIs/QFIs, can now invest up to sectoral limit

of 74%, provided that there is no change in control

and management of the investee company

External Commercial Borrowings

The Reserve Bank of India (RBI) has issued a revised framework ECB framework, relaxing the regulations, in order to uphold the

needs of the Indian entities.

Track-wise Bifurcations

Parameters Track I Track II Track III

Minimum Average Maturity

(MAM)

Upto USD 50 Mn- 3 Yrs or more

Beyond USD 50 Mn- 5 Yrs or more

10 Yrs or more, irrespective of

amount

Upto USD 50 Mn- 3 Yrs or more

Beyond USD 50 Mn- 5 Yrs or more

Currency Foreign currency Indian Rupees

All-in-cost ceilings If MAM 3-5 Yrs – 300 (earlier 350)

basis points

If MAM more than 5 Yrs – 450

(earlier 500) basis points

500 basis points Commensurate with prevailing

market conditions

Permitted End Uses General Corporate Purposes for

MAM of 5 Yrs or more, if availed

from –

• Direct equity holder (25%)

• Indirect equity holder

(minimum 51%)

• Group company (having

common overseas parent)

● Shipping and Airline companies

can raise ECBs only for import of

vessels and aircraft

● ECBs will now also be permitted

for import of second hand goods

(as per DGFT guidelines) under

the approval route.

● The ECB proceeds can be used for all purposes (including general

corporate purposes and repayment of rupee loans) except for real

estate activities, investing in capital market, domestic equity

investment, on-lending to other entities with any of the above

objectives and purchase of land.

Eligible Borrowers

• Companies engaged in miscellaneous services, Non-

Banking Financial Institutions (NBFCs), Developers of

Special Economic Zones (SEZ) / National

Manufacturing and Investment Zones (NMIZs), Not for

Profit companies, NGOs, etc. can now only avail

Indian Rupee denominated ECBs.

• Shipping companies, Real Estate Investment Trusts

(REITs) and Infrastructure Investment Trusts (InvITs)

and companies providing logistics services have now

been included as an eligible borrower.

Eligible Lenders

• Indian Banks and their overseas branches /

subsidiaries will not be recognized as lenders to avail

ECBs under Track II and III categories

• Long term lenders like prudentially regulated

financial entities, Sovereign Wealth Funds, Pension

Funds, Insurance companies and financial institutions

located in International Financial Services Centres in

India have are now considered as Recognized

Lenders.



Miscellaneous Amendments:

ECB borrowers are allowed to park ECB proceeds in term deposits with AD Category I banks in India for a maximum period of 12

months (earlier 6 months)

Change of currency of ECB from one convertible foreign currency to any other convertible foreign currency as well as to INR is

freely permitted (Vice versa not permitted)

ECB by entities under Joint Lender Forum (JLF) or Corporate Debt Restructuring (CDR) are permitted under approval route

Prepayment of ECBs, irrespective of the sum involved, eliminating the limit of USD 500 million, may be permitted by AD banks in

India subject to compliance with the stipulated MAM as applicable to the contracted loan.

Mumbai

The Ruby, Level 9, North West Wing,

Senapati Bapat Marg, Dadar (W),

Mumbai – 400028, INDIA

Tel: +91-22-24393600

Pune

Level 3, Riverside Business Bay,

Wellesley Road, Near RTO,

Pune – 411001, INDIA

Tel: +91-20-26225500

Aurangabad

C-6, Balaji Apartments,

Behind Kohinoor Plaza, Nirala Bazar,

Aurangabad – 431001, INDIA

Tel: +91-240-2345597

Hyderabad

Manbhum Jade Towers, II floor,

6-3-1090/A/12 & 13, Somajiguda,

Hyderabad 500082

Tel: +91 40 4040 4003

New Delhi - Gurgaon

Office No. 1032, 1033 & 1034, Level 10,

Tower A, Spaze 1 Tech Park, Sector 49,

Sohna Road,

Gurgaon 122001, INDIA

Tel: +91-124-4518350

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Bangalore

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133, Brigade Road,

Bengaluru 560 025 INDIA

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