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RBI liberalises overseas investment under ESOP scheme

By Staff
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Mumbai, Apr 6: In a bid to liberalise overseas investment under the employees stock option (ESOP) scheme, the Reserve Bank of India (RBI) has modified the exsisting regulation that enable authorised banks to allow companies including foreign entities directly to offer shares under the scheme without the prior permission of the Central bank.

Presently, authorised banks have been delegated authority to allow remittances, without any monetary limit, for ESOPs provided that the foreign company offering ESOPs holds not less than 51 per cent stake in the Indian company either directly or indirectly (through a special purpose vehicle -(SPV) or step down subsidiary).

The modified regulations permit authorised banks to allow remittance for acquiring shares under the schemes, irrespective of the method of the operationalisation of the scheme.

It would, therefore, be in order for authorised dealer banks to allow remittance for acquiring ESOP shares under the scheme offered directly by the issuing company or indirectly through a trust / SPV / step down subsidiary, provided the company issuing the shares effectively, directly or indirectly, holds in the Indian company, whose employees / directors are being offered shares, not less than 51% of its equity.

Shares under the ESOP scheme are offered by the issuing company globally on uniform basis, and an annual return is submitted by the Indian company to the RBI through the authorised banks giving details of remittances and beneficiaries.

It has further been decided to grant general permission to foreign companies to repurchase the shares issued to residents in India under any ESOP scheme provided the shares were issued in accordance with the regulations framed under Foreign Exchange Management Act, 1999. The shares are being repurchased in terms of the initial offer document and an annual return is submitted through the banks giving details of remittances and beneficiaries.

In order to keep the designated branches of authorised dealer banks aware of the progress in the investment / disinvestment outside India routed through them, it has been decided that all communications from the Indian parties, to the RBI, relating to the investment outside India should be routed through the branch of the bank that has been designated by the Indian investor for the investment.

The bank, while forwarding the request from their customers to the Central bank, shall also forward its comments and recommendations on the request.

UNI

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