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March 2016

A. P. (DIR Series) Circular No. 52 dated February 11, 2016

By Gaurang Gandhi Chartered Accountant
Reading Time 1 mins
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Regulatory Relaxations for Startups – Clarifications relating to Issue of Shares

This circular, with respect to facilities available to start-ups, clarifies as follows: –

1. Issue of shares without cash payment through sweat equity

Indian companies can issue sweat equity under a scheme drawn either in terms regulations issued under: –

a. The Securities Exchange Board of India Act, 1992 in respect of listed companies; or
b. The Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies.

2. Issue of shares against legitimate payment owed

Indian companies can issue equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission of the Government of India or RBI under FEMA, 1999 and complies with the FDI policy and applicable tax laws.

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