{"id":3995,"date":"2021-09-27T09:00:55","date_gmt":"2021-09-27T09:00:55","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=3995"},"modified":"2021-09-27T09:22:23","modified_gmt":"2021-09-27T09:22:23","slug":"all-about-right-issue-to-nris","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/","title":{"rendered":"All About Right Issue to NRI&#8217;s"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69ea452c010db\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69ea452c010db\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#RIGHTS_ISSUE_TO_NRIS\" title=\"RIGHTS ISSUE TO NRIS \n\">RIGHTS ISSUE TO NRIS \n<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#BRIEF_INTRODUCTION\" title=\"BRIEF INTRODUCTION\">BRIEF INTRODUCTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#MANDATORY_RIGHT_ISSUE\" title=\"MANDATORY RIGHT ISSUE\">MANDATORY RIGHT ISSUE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#What_is_procedure_for_Rights_Issue\" title=\"What is procedure for Rights Issue\">What is procedure for Rights Issue<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#RIGHT_ISSUE_TO_NON-RESIDENTS\" title=\"RIGHT ISSUE TO NON-RESIDENTS\">RIGHT ISSUE TO NON-RESIDENTS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#VALUE_OF_SHARES_UNDER_RIGHT_ISSUE\" title=\"VALUE\u00a0OF SHARES UNDER RIGHT ISSUE\">VALUE\u00a0OF SHARES UNDER RIGHT ISSUE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#RENOUNCEMENT_OF_RIGHT_SHARES_TO_NON-RESIDENTS\" title=\"RENOUNCEMENT OF RIGHT SHARES TO NON-RESIDENTS\u00a0\">RENOUNCEMENT OF RIGHT SHARES TO NON-RESIDENTS\u00a0<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#Renunciation_of_Rights\" title=\"Renunciation of Rights\">Renunciation of Rights<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#Pricing_guidelines_for_renunciation_of_right_issue\" title=\"Pricing guidelines for renunciation of right issue\">Pricing guidelines for renunciation of right issue<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#REPORTING_REQUIREMENT_IN_THE_MATTER_OF_RIGHT_ISSUE\" title=\"REPORTING REQUIREMENT IN THE MATTER OF RIGHT ISSUE\">REPORTING REQUIREMENT IN THE MATTER OF RIGHT ISSUE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#FAQs_on_Rights_Issue_to_NRIs\" title=\"FAQ\u2019s on Rights Issue to NRI\u2019s \">FAQ\u2019s on Rights Issue to NRI\u2019s <\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#Q_Is_it_possible_to_issue_rightsbonus_shares_to_non-resident_person\" title=\"Q.: Is it possible to issue rights\/bonus shares to non-resident person ?\">Q.: Is it possible to issue rights\/bonus shares to non-resident person ?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#Q_Can_a_remote_investor_invest_in_Rights_shares_issued_by_an_Indian_company_at_a_discount\" title=\"Q.: Can\u00a0a remote\u00a0investor invest in Rights shares issued by an Indian company at a discount?\">Q.: Can\u00a0a remote\u00a0investor invest in Rights shares issued by an Indian company at a discount?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-right-issue-to-nris\/#Q_Whether_the_entity_be_required_to_take_RBI_approval_in_respect_of_renunciation_of_rights_shares\" title=\"Q.: Whether the entity be required to take RBI approval, in respect of renunciation of rights shares?\">Q.: Whether the entity be required to take RBI approval, in respect of renunciation of rights shares?<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"RIGHTS_ISSUE_TO_NRIS\"><\/span><span style=\"color: #ff0000;\"><strong>RIGHTS ISSUE TO NRIS<\/strong><\/span><strong><br \/>\n<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-3999\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares.jpg\" alt=\"Basic of Right-Issue-of-Shares\" width=\"1200\" height=\"630\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares.jpg 1200w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-300x158.jpg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-1024x538.jpg 1024w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-768x403.jpg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-800x420.jpg 800w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<h3><span class=\"ez-toc-section\" id=\"BRIEF_INTRODUCTION\"><\/span><span style=\"color: #000080;\"><strong>BRIEF INTRODUCTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Right issues refers to the further issuance of securities to existing shareholders and such an approach is used in rasiing additional capital for the corporate entity. A public\u00a0Ltd.\u00a0Entity is allowed to issue rights shares and the same is governed by the section 62(1) of\u00a0the Companies\u00a0Act, 2013.<\/li>\n<li>A\u00a0rights issue\u00a0is distinguished by\u00a0the actual fact\u00a0that\u00a0it&#8217;s\u00a0limited to the company\u2019s current shareholders. It\u00a0can be\u00a0a public firm\u00a0that&#8217;s\u00a0listed or unlisted. Also, the offer can allow the shareholders to relinquish their rights in the name of some other shareholders.<\/li>\n<li>Existing shareholders of the Company will gain from the issue of right shares since they will be able to apply for the shares at a reduced price while keeping their voting rights. Issuance Company of rights shares can be used to raise a considerable amount of capital for a firm.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"MANDATORY_RIGHT_ISSUE\"><\/span><span style=\"color: #000080;\"><strong>MANDATORY RIGHT ISSUE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>It is obligatory\u00a0for each\u00a0company registered under Companies Act, 2013 to follow the provisions of Companies Act, 2013 and any non-compliance may\u00a0cause\u00a0penalties and punishments.<\/li>\n<li>As per the section 62 of the Companies Act, 2013, the provisions for \u201cFurther Issue of Share Capital\u201d has been provided. Thus, whenever a corporation, already having share capital, proposes\u00a0to raise further capital by way of issue\u00a0of shares, then the said entity is required to make an initial offer to &#8211;\n<ul>\n<li>To existing equity shareholders, i.e., persons who are holding equity shares on the date of offer;<\/li>\n<li>To the employees of the entity, and the same be provided under a scheme of ESOP, subject to the passing of special resolution\u00a0by corporate\u00a0and some other conditions.<\/li>\n<li>To a number of persons, provided the same is\u00a0authorised by passing of a special resolution, and the consideration is received either in cash or kind, and the value\u00a0of such shares\u00a0has been determined\u00a0under the valuation report of a registered valuer.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>Thus, the issuance of right shares stands as an obligation of\u00a0the public\u00a0company, where they look for raising funds thorugh issuance of further securities.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_procedure_for_Rights_Issue\"><\/span><span style=\"color: #000080;\"><strong>What is<a href=\"https:\/\/carajput.com\/blog\/further-issue-of-share-capital-on-under-right-issue-basis-section-62-of-the-companies-act-2013\/\"> procedure for Rights Issue<\/a><\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-4003\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-Step-by-Step-Procedure.jpg\" alt=\"what is Right-Issue-of-Shares-Step-by-Step-Procedure\" width=\"982\" height=\"457\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-Step-by-Step-Procedure.jpg 649w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Right-Issue-of-Shares-Step-by-Step-Procedure-300x140.jpg 300w\" sizes=\"(max-width: 982px) 100vw, 982px\" \/><\/p>\n<p>As per the Sub section (1) of \u00a0Section 62 of the CO. Act 2013, the procedure for issue of shares is as under:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-4000\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Process-for-Issuing-Right-Shares.png\" alt=\"What is Process-for-Issuing-Right-Shares\" width=\"1200\" height=\"1500\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Process-for-Issuing-Right-Shares.png 1200w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Process-for-Issuing-Right-Shares-240x300.png 240w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Process-for-Issuing-Right-Shares-819x1024.png 819w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Process-for-Issuing-Right-Shares-768x960.png 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Process-for-Issuing-Right-Shares-800x1000.png 800w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<ul>\n<li><strong>Issue of notice of Board meeting: <\/strong>As per sub section (3) of Section 173(3) of the CO. Act 2013, the board meeting notice must be given at least Seven days before to the meeting and must include the agenda.<\/li>\n<li><strong>Hold a meeting the First Board Meeting:<\/strong> The first Board meeting is conducted, and the resolution authorising the issuance of rights shares is approved. Because the rights issue does not require shareholder approval, the board can proceed with the issue.<\/li>\n<li><strong>Issue Letter of Offer: <\/strong>Following the passage of the resolution, a letter of offer is sent to all shareholders via registered mail or speed mail. A Time period of Fifteen to Thirty days has been set for shareholders to accept the offer, meaning that the most time they can take to accept the offer is Thirty days and the least time is Fifteen.<\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">If the offer is not accepted before the deadline, it is considered declined. The offer must be open for at least three days after the letter of offer has been issued.<\/p>\n<ul>\n<li><strong>Submitting Form MGT \u2013 14 : <\/strong>Within 30 days of the board resolution being made, the company must file the MGT-14. For a public limited company, the MGT 14 form is required. MGT 14 must be supported by a true certified copy of the Board Resolution.<\/li>\n<\/ul>\n<ul>\n<li><strong>Receive application money:\u00a0 <\/strong>Company shareholders shall have to share the accepted application along with required application money.<\/li>\n<\/ul>\n<ul>\n<li><strong>Convene Second Board Meeting: <\/strong>The Company shall convene 2<sup>nd<\/sup> board meeting, which must be announced seven days in advance. A quorum must be present, and the resolution authorising the allotment of shares must be approved. The allotment of shares must be completed within Sixty days of receiving the application money for the same once the resolution for allotment of shares has been passed.<\/li>\n<li><strong>Submit Forms with ROC:\u00a0 <\/strong>Within 30 days of the allotment of the shares, the company must file Form PAS -3 with the Registrar of Companies. The form must include a certified accurate copy of the Board Resolution as well as a list of the allottees. In addition, for both the allotment and issuing of shares, the MGT \u2013 14 must be filed.<\/li>\n<li><strong>Needed to Issue of Share Certificates:\u00a0 <\/strong>The share certificates must be issued; If the shares are held in Demat form, the corporation must immediately notify the depository of the allotment of shares.<\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">If the shares are held in tangible form, share certificates must be issued within two months of the date of the allotment. At least 2 directors must sign the share certificate. Form SH -1 i.e share certificates must be issued.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"RIGHT_ISSUE_TO_NON-RESIDENTS\"><\/span><span style=\"color: #000080;\"><strong>RIGHT ISSUE TO <a href=\"https:\/\/www.caindelhiindia.com\/blog\/money-transfers-repatriation-of-non-repatriable-earnings-and-nro-account-available-balances\/\">NON-RESIDENTS<\/a><\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-4002\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Compliance-for-Rights-Issue-under-FEMA-Rules-1.jpg\" alt=\"Compliance-for-Rights-Issue-under-FEMA-Rules\" width=\"975\" height=\"495\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Compliance-for-Rights-Issue-under-FEMA-Rules-1.jpg 642w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Compliance-for-Rights-Issue-under-FEMA-Rules-1-300x152.jpg 300w\" sizes=\"(max-width: 975px) 100vw, 975px\" \/><\/p>\n<ul>\n<li>If shares of\u00a0a corporation\u00a0are held by a Non-Resident then whether\u00a0the corporate\u00a0is required\u00a0to make\u00a0the right\u00a0issue of shares to such non-resident shareholders as well?<\/li>\n<li>Since, Company law requires right issue of shares to existing shareholders, therefore, right issue\u00a0is obtainable\u00a0to all or any\u00a0resident and non-resident shareholders.<\/li>\n<li>However, the instructions for issuance of right shares to Non-resident has been provided Master Direction \u2013 Foreign Investment in India, being issued vide RBI\/FED\/2017-18\/60 FED Master Direction No. 11\/2017-18.<\/li>\n<li>As per the Para 6.11 of the Master Directions, the provisions regarding \u201cAcquisition through\u00a0rights issue\u00a0or bonus issue\u201d has been provided. Under this, an NRI owing stock in an Indian company, may invest in capital instruments (other than share warrants), being issued by\u00a0the said corporate, in the form of rights or bonus issue, however, the same shall be available, subject to fulfilment of subsequent conditions:\n<ul>\n<li>Offer must be in compliance with the provisions of Companies Act, 2013;<\/li>\n<li>Such issue\u00a0won&#8217;t\u00a0end in\u00a0a breach of the sectoral cap applicable to the company.<\/li>\n<li>Shareholding of such person, after the issuance of rights issue or bonus, must be well within the limit prescribed in the FEMA regulations.<\/li>\n<li>Shares, being acquired as right issue, shall be subject to the conditions and restrictions, applicable to the original holding, in respect of reparability of the holding;<\/li>\n<li>Rights, being granted NRIs, by a listed Indian entity, shall be made at a price, being determined by such entity in general.<\/li>\n<li>The rights issued to\u00a0an individual\u00a0resident outside India by an unlisted Indian company shall not be at a price\u00a0but\u00a0the worth\u00a0offered to persons resident in India.<\/li>\n<li>Such an investment made through a\u00a0rights issue\u00a0is subject to the terms and conditions in effect at the time of\u00a0the difficulty.<\/li>\n<li>The consideration paid in respect of acquisition of such shares, shall be made using banking channels or the funds lying in an NRE\/FCNR(B) account, being maintained in accordance with the\u00a0Foreign Exchange\u00a0Management (Deposit) Regulations, 2016.<\/li>\n<li>If the first investment was made on non-repatriation basis*, the consideration for right issue of shares may additionally be paid by debit to the NRO account maintained in accordance with the foreign exchange Management (Deposit) Regulations, 2016.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Also to note that \u2013 <\/strong>\n<ul>\n<li>If\u00a0an individual\u00a0residing outside of India exercises a right that was issued while he or she was a resident of India, shares acquired as a\u00a0result of the right issue must be\u00a0held on\u00a0a non-repatriation basis.<\/li>\n<li>With effect from November 12, 2002, the Indian entity, on an application, allot additional shares to existing shareholders, who are NRI, under\u00a0offer\u00a0over and above their respect rights entitlement subject to certain limits and conditions.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"VALUE_OF_SHARES_UNDER_RIGHT_ISSUE\"><\/span><span style=\"color: #000080;\"><strong>VALUE\u00a0OF SHARES UNDER RIGHT ISSUE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As discussed earlier, the businesses\u00a0are free to decide\u00a0on the value\u00a0of right issue, however, the same is possible on fulfilment of following conditions:<\/p>\n<ul>\n<li>If unlisted Company, securities must be offered to non-residents at a price that&#8217;s not but the worth offered to residents during a rights issue.<\/li>\n<li>In case of publicly traded enterprises,\u00a0the value\u00a0shall be decided by\u00a0the corporate.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"RENOUNCEMENT_OF_RIGHT_SHARES_TO_NON-RESIDENTS\"><\/span><span style=\"color: #000080;\"><strong>RENOUNCEMENT OF RIGHT SHARES TO <a href=\"https:\/\/www.caindelhiindia.com\/blog\/applicability-of-income-tax-provision-to-nris\/\">NON-RESIDENTS\u00a0<\/a><\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Renunciation_of_Rights\"><\/span><a href=\"https:\/\/carajput.com\/blog\/further-issue-of-share-capital-on-under-right-issue-basis-section-62-of-the-companies-act-2013\/\"><strong><span style=\"color: #000080;\">Renunciation of Rights<\/span><\/strong><\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>According to\u00a0the companies\u00a0Act of 2013, existing shareholders can accept, deny, or renounce their right to\u00a0subscribe\u00a0a\u00a0rights offering\u00a0in favour of\u00a0a 3rd\u00a0party if a rights offer\u00a0is created. This renunciation\u00a0will be\u00a0made\u00a0within the\u00a0name of an Indian citizen or a foreigner.<\/li>\n<li>Thus, a person, being regarded as NRI, is eligible to renounce their shares offered under right issue. Renunciation is done either fully or part thereof in favour of someone named by them.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"2\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Pricing_guidelines_for_renunciation_of_right_issue\"><\/span><span style=\"color: #000080;\"><span style=\"color: #000080;\">Pricing guidelines for renunciation of right issue<\/span><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Investments in India through equity instruments by\u00a0someone\u00a0resident outside India is governed by\u00a0foreign exchange\u00a0Management (Non-debt Instruments) Rules, 2019 (\u201cNDI Rules\u201d)<\/li>\n<li>As per the explanation provided under the Rule 7 and Rule 6.11.4,\u00a0a person, being resident outside India, is elibiel to acquire shares under right issue, under the ambit of renunciation of rights. However, the price of such right issue shall be determined in accordance with the guidelines mentioned above. Therefore, price shall be:<\/li>\n<li>Where the issuing entity is an unlisted Indian company, the price of\u00a0offer, shall be the price determined in respect of persons residing in India, and<\/li>\n<li>Where the entity is a listed company, the price of right issue, be determined by\u00a0the corporate itself.<\/li>\n<li>Since, no restriction was provided for pricing therefore, non-resident shareholders were\u00a0ready to\u00a0make major investments in India at a fraction of the fair\u00a0market price.<\/li>\n<li>To curb\u00a0this example, an amendment was introduced in Rule 7 of NDI Rules vide notified the\u00a0foreign exchange\u00a0Management (Non-debt Instruments) (Second Amendment) Rules, 2020 issued on 27th April, 2020. Amendment deleted explanation to Rule 7 of NDI Rules and inserted\u00a0a replacement\u00a0Rule 7A which states that:<br \/>\n\u2018a person resident outside India who has acquired a right from\u00a0an individual\u00a0resident in India who has renounced\u00a0it should\u00a0acquire equity instruments (other than share warrants) against the said.<\/li>\n<li>As per the Rule 21(2)(a)(ii) of the NDI Rules, where the equity shares have been issued by an entity to an NRI, then the same be issued at a price, which shall not be less than:<\/li>\n<li>In case of listed company,\u00a0the worth\u00a0discovered\u00a0as per with the SEBI Guidelines or\u00a0just in case\u00a0of\u00a0a Company inquiring\u00a0a delisting process as per the SEBI (Delisting of Equity Shares) Regulations, 2009;<\/li>\n<li>For an unlisted Indian company, the valuation be done as per any of the internationally accepted pricing methodology and the same be made on arm\u2019s length basis, being duly certified by a CA or a Merchant Banker, being registered with Securities and Exchange Board of India.<\/li>\n<li>While the Amendment has made a long-awaited modification to the worth parameters within the case of residents renouncing a rights offer, it doesn&#8217;t cover a situation during which an existing non-resident investor renounces a offer entitlement in favour of another non-resident investor.<\/li>\n<li>it&#8217;s critical that these clarifications be provided so as to confirm that no equity instruments be purchased for fewer than their fair market price.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"REPORTING_REQUIREMENT_IN_THE_MATTER_OF_RIGHT_ISSUE\"><\/span><span style=\"color: #000080;\"><strong>REPORTING REQUIREMENT IN THE MATTER OF RIGHT ISSUE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>In the Reporting requirement, in the matter of Right Issue has been provided under the Rule 4 of the FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.<\/li>\n<li>Unless otherwise provided, all reporting with\u00a0relevancy\u00a0issue of right shares shall be made through or by an Authorised Dealer Bank,\u00a0because the\u00a0case\u00a0could also be.<\/li>\n<li>As per Rule 4 of FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, An Indian company issuing equity instruments to\u00a0an individual\u00a0resident outside India and where such issue has been made in accordance with the Foreign Direct Investment,<\/li>\n<li>the same shall report in Form FC-GPR. The Form FC-GPR is required to be filed within 30 days from the date of issuance of such equity shares.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"FAQs_on_Rights_Issue_to_NRIs\"><\/span><span style=\"color: #ff0000;\"><strong>FAQ\u2019s on Rights Issue to NRI\u2019s <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h4><span class=\"ez-toc-section\" id=\"Q_Is_it_possible_to_issue_rightsbonus_shares_to_non-resident_person\"><\/span><span style=\"color: #000080;\"><strong>Q.: Is it possible to issue rights\/bonus shares to non-resident person ?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Yes, Indian corporations are free to issue rights\/bonus shares to existing Non-Residents shareholders. The issuing Co. must required sure that the issuance of such rights\/bonus shares does not exceed the Non-Residents India sectoral cap limit.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Q_Can_a_remote_investor_invest_in_Rights_shares_issued_by_an_Indian_company_at_a_discount\"><\/span><span style=\"color: #000080;\"><strong>Q.: Can\u00a0a remote\u00a0investor invest in Rights shares issued by an Indian company at a discount?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>There\u00a0aren&#8217;t any\u00a0restrictions under FEMA for investment in Rights shares issued at\u00a0a reduction\u00a0by an Indian company under the provisions of\u00a0the companies\u00a0Act, 2013. The offer on a rights basis to the person resident outside India shall be:<\/p>\n<ul>\n<li>just in case\u00a0of shares of\u00a0an organization\u00a0listed on a recognized\u00a0stock exchange\u00a0in India, at a price, as determined by the company; and<\/li>\n<li>within the\u00a0case of shares of\u00a0a corporation\u00a0unlisted\u00a0on a recognized\u00a0exchange\u00a0in India, at a price, which\u00a0isn&#8217;t\u00a0but\u00a0the value\u00a0at which the offer on\u00a0the correct\u00a0basis\u00a0is created\u00a0to resident shareholders.<\/li>\n<\/ul>\n<h4><span class=\"ez-toc-section\" id=\"Q_Whether_the_entity_be_required_to_take_RBI_approval_in_respect_of_renunciation_of_rights_shares\"><\/span><span style=\"color: #000080;\"><strong>Q.: Whether the entity be required to take RBI approval, in respect of renunciation of rights shares?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>No, the renunciation of rights shares can be made and\u00a0carried out, in accordance with the instructions provided in Para 6.11 of Master Direction \u2013 Foreign Investment in India, dated January 4, 2018, along with the Regulation 6 of FEMA, Regulation.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>RIGHTS ISSUE TO NRIS BRIEF INTRODUCTION Right issues refers to the further issuance of securities to existing shareholders and such an approach is used in rasiing additional capital for the corporate entity. A public\u00a0Ltd.\u00a0Entity is allowed to issue rights shares and the same is governed by the section 62(1) of\u00a0the Companies\u00a0Act, 2013. A\u00a0rights issue\u00a0is distinguished &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[647,78],"tags":[872],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/3995"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=3995"}],"version-history":[{"count":5,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/3995\/revisions"}],"predecessor-version":[{"id":3998,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/3995\/revisions\/3998"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=3995"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=3995"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=3995"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}