Earlier this month, we had highlighted some legal issues pertaining to Bitcoin, as that form of virtual currency has been gaining ascendancy the world over. We had stated that the Reserve Bank of India (RBI), as the currency regulator, would certainly be seized of the issue. It now emerges that it is indeed the case. Yesterday, the RBI issued a press release warning users, holders and traders of...
Unlisted Companies: Raising Capital Abroad
In the late 1990s, it was possible for Indian unlisted companies to raise capital overseas and list on overseas stock exchanges without having a primary listing in India. Companies such as Rediff and Sify had taken advantage of this mechanism and listed on the US stock exchanges. However, a few years ago, this route was effectively blocked when the Government of India stipulated that a primary...
RBI Clarification on Overseas Investment Norms
In a previous post, Satyajit had discussed the Reserve Bank of India’s (RBI) policy measures announced on August 14, 2013 to restrict overseas direct investments (ODI). Primarily, it was decided to reduce the ODI limits of a company from 400% of its net worth to 100%. Yesterday, the RBI announced some clarifications that mitigate the severity of the above restrictions. First, it clarified that...
RBI revises overseas investment norms
The RBI has just announced the following measures today: (i) It has reduced the limit for Overseas Direct Investment (ODI) under automatic route for all fresh ODI transactions, from 400% of the net worth of an Indian Party to 100% of its net worth. These provisions shall come into effect with immediate effect and would apply to all fresh Overseas Direct Investment proposals on a prospective basis...
Royalty Payments and Corporate Governance
In the past, the corporate governance discourse pertaining to Indian companies has revolved substantially around family owned businesses and government-owned (public sector) companies. Another type of companies that is quite prevalent in the corporate scenario, but usually does not receive specific attention, is Indian listed subsidiaries of multinational companies (MNCs). A significant...
RBI: Liberalisation in Capital Account Transactions
The Reserve Bank of India has taken measures to liberalise the process with respect to certain types of current account transactions. The measures announced include the following: – manufacturing and infrastructure companies can avail of external commercial borrowings (ECB) to repay rupee loans towards capital expenditure; this is under the approval route with an overall ceiling of USD 10...
Black Money: Corporate Entities and Securities Markets
The Government yesterday tabled its White Paper on Black Money in Parliament. Billed as the first document to comprehensively tackle the issue, it cites various studies and is replete with data. However, it has already been subjected to criticism from various quarters owing to the lack of details and clarity in solutions to deal with the issue. This post, however, briefly touches upon the role of...
Miscellaneous
1. Put Options & Foreign Exchange Regulations We have in the past discussed the questions regarding the enforceability of put and call options under securities laws and regulations, primarily the Securities Contracts (Regulation) Act, 1956. In addition, if put options are entered into by foreign investors, the Foreign Exchange Management Act, 1999 and regulations issued by the Reserve Bank of...
The Impact of Tightening Financial Regulation
The last week has witnessed tighter financial regulations emerging out of the U.S. and European markets. While some of the reforms are expected to result in migration of investments into more liberal markets in Asia (including India), others represent introduction of stringent measures that are already in place in India. Possible Regulatory Arbitrage First, the European Union finance ministers...
The Policy Over ECBs
Satyajit Gupta has an interesting column in The Mint that reviews the changes in the external commercial borrowings (ECBs) policy over the last few years in the context of changing economic conditions both within India and around the world. As for recent efforts by the Reserve Bank of India (RBI), Satyajit notes: “ECBs have suffered in view of the adverse economic conditions coupled with the...
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