Sunday, March 24, 2013

PROCEDURE FOR CONVERSION OF ECB INTO EQUITY


CONVERSION OF ECB INTO EQUITY

 

Conversion of ECB into equity is permitted subject to the following conditions:

 

(a) The activity of the company is covered under the Automatic Route for Foreign Direct Investment or Government (FIPB) approval for foreign equity participation has been obtained by the company, wherever applicable.

(b) The foreign equity holding after such conversion of debt into equity is within the sectoral cap, if any,

(c) Pricing of shares is as per the pricing guidelines issued under FEMA, 1999 in the case of listed/ unlisted companies.

 

(ii) Conversion of ECB may be reported to the Reserve Bank as follows:

 

(a) Borrowers are required to report full conversion of outstanding ECB into equity in the form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in form ECB-2 submitted to the DSIM, RBI within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" should be clearly indicated on top of the ECB-2 form. Once reported, filing of ECB-2 in the subsequent months is not necessary.

(b) In case of partial conversion of outstanding ECB into equity, borrowers are required to report the converted portion in form FC-GPR to the Regional Office concerned as well as in form ECB-2 clearly differentiating the converted portion from the unconverted portion. The words "ECB partially converted to equity" should be indicated on top of the ECB-2 form. In subsequent months, the outstanding portion of ECB should be reported in ECB-2 form to DSIM.

Following requirements have to be taken into account:

1.Consent letter from the ECB lenders for the conversion into equity

2. Board Resolution for the conversion

3.Reporting the Conversion to DSIM in ECB-2 Return

4. Filing of FC-GPR
 

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