RBI allows corp debt as bonus to non-residents

Issue would be subject to FDI scheme

The Reserve Bank of India (RBI) on Monday allowed domestic companies to issued non-convertible or redeemable preference shares or debentures to non-resident shareholders from their reserves as bonus. 

In a notification issued on Monday, the RBI said, “On a review and with a view to rationalising and simplifying the procedures, it has been decided that an Indian company may issue non-convertible/ redeemable preference shares or debentures to non-resident shareholders...by way of distribution as bonus from its general reserves.” 

 This facility will also encompass depositories that act as trustees for the ADR/GDR holders, it added. 

Till now, the RBI was granting permission for such issuances on a case-to-case basis. 

Further, it said it has simplified  norms following references from some Indian companies to issue non-convertible or redeemable bonus preference shares or debentures to non-resident shareholders from the general reserve under a scheme of arrangement by a court, under the provisions of the Companies Act. 

The permission was given only for issue of non-convertible/ redeemable preference shares or debentures to non- resident shareholders by way of distribution as bonus from the general reserves.

The issue of preference shares (excluding non-convertible/redeemable preference shares) and convertible debentures (except optionally convertible or partially convertible debentures) would be subject to Foreign Direct Investment Scheme.