FEMA requires observation of its provisions in letter and spirit and if any contravention may land in penalties on the erring company and individuals. There are various conditions and stipulations in case of FDI , ODI , investment by individuals in foreign shares , purchase of assets in foreign countries , extending guarantees , availing ECBs , supplier's credit . In this column , I will discuss all intricacies and complications involving the interpretation of FEMA Act provisions in detail.
Thursday, June 30, 2011
Buyback / Prepayment of Foreign Currency Convertible Bonds (FCCBs) Under Automatic Route
Buyback / Prepayment of Foreign Currency Convertible Bonds ( FCCBs) Under Automatic Route
The Reserve Bank is presently considering applications under the approval route for buyback of FCCBs, subject to the issuers complying with the terms and conditions of buyback/ prepayment of FCCBs, as mentioned in the A.P. (DIR Series) Circular No.39 dated December 08, 2008 and A.P. (DIR Series) Circular No.65 dated April 28, 2009.
The designated AD Category - I banks may allow Indian companies to prematurely buyback FCCBs subject to compliance with the terms and conditions set out hereunder:
i) the buyback value of the FCCB shall be at a minimum discount of 8 per cent on the book value;
ii) the funds used for the buyback shall be out of existing foreign currency funds held either in India (including funds held in the EEFC account) or abroad and / or out of fresh ECB raised in conformity with the current ECB norms; and
iii) where the fresh ECB is co-terminus with the outstanding maturity of the original FCCB and is for less than three years the all-in-cost ceiling should not exceed 6 months Libor plus 200 bps as applicable to short term borrowings. In other cases, the all-in-cost for the relevant maturity of the ECB, as laid down in A. P. (DIR Series) No.26 dated October 22, 2008, shall apply.
A. P. (DIR Series) Circular No.75 dated 30th June 2011
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