Guidelines for foreign investment in preference shares

New Delhi, June 26 (UNI) The government today issued fresh guidelines for foreign investment in Preference Shares as a result of which foreign investment coming as fully convertible preference shares would be treated as part of share capital.

The other implication of this revision is that other types of preference shares, namely non-convertible, optionally convertible, will be required to conform to ECB guidelines and ECB caps.

''The government has received several representations that the revision of these guidelines has adversely affected the business plans of entities that were at an advanced stage of issuing preference shares,'' an official statement said.

''Government has examined the representations and has decided that in respect of such institutions, corporate or companies which have taken verifiable and effective steps prior to April 30, 2007; exemption could be granted from the purview of the revised guidelines announced in the Press Note of 30.04.07,'' the release added.

To be eligible for such exemptions, the institutions and corporates should have taken verifiable and effective steps.

'Verifiable steps' would be actions that have foot-prints in public domain and hence verifiable with reference to these foot prints, the statement pointed out.

'Effective steps' would be actions that go beyond simple intention to act and should be such that they bind the parties conclusively, the release said.

Such cases would cover the following: a) Action under section 81 (1A) of the Companies Act 1956 should have been taken prior to 30.04.07; b) Application for permission from the Government, where necessary, should have been received before 30.04.07, "Parties claiming benefit under the above exemption should complete the process of issuing the shares and receipt of money in lieu of issue of such shares by July 31,2007.

UNI