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RBI Notification dt. 10.01.2017 notifying Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fifteenth Amendment) Regulations, 2016:

RBI vide Notification No.FEMA.377/2016-RB on Tuesday, January 10, 2016 notified Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fifteenth Amendment) Regulations, 2016 which shall come into force from the date of publication in Official Gazette.

Following new provisions has been inserted:

  • Regulation 2(iiA): Definition of ‘convertible note’ issued by startup company initially as receipt of money as debt, repayable at an option of holder or convertible into equity within as period not exceeding 5 years from the date of issue .
  • Regulation 6D: Issue of Convertible Notes by Startup Companies
  • NR (other than individual or Co. of Pakistan & Bangladesh) – purchase the said convertible notes for an amount of Rs.25 lakh or more in single tranche and Company shall receive the said amount by inward remittance through banking channels or by debit to the NRE / FCNR (B) / Escrow account.
  • If foreign investment requires Government approval, then can issue convertible notes to NR with Government approval only.
  • NRIs can acquire convertible notes on non-repatriation basis
  • Transfer (between NR and NR/R) of said convertible notes shall takes place in accordance with the pricing guidelines as prescribed by RBI and with prior Government approval, if required
  • Startup Company issuing convertible notes shall require to furnish reports as prescribed by RBI.

The said Notification can be accessed from the following link:FEMA noti. 377 dt 10.01.2017 transferof sec.15th amendment

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