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July 2011

A.P. (DIR Series) Circular No. 58, dated 2-5-2011 — Opening of Escrow Accounts for FDI transactions.

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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Presently, banks can open Escrow account and Special account on behalf of non-resident corporates only for acquisition/transfer of shares/convertible debentures of an Indian company through open offers/delisting/exit offers, subject to compliance with the relevant SEBI [Substantial Acquisition of Shares and Takeovers (SAST)] Regulations, 1997 and other applicable SEBI regulations.

This Circular permits, banks to open and maintain, without prior approval of the Reserve Bank, non-interest bearing Escrow accounts in Indian Rupees in India on behalf of residents and/or non-residents, towards payment of share purchase consideration and/or provide Escrow facilities for keeping securities to facilitate FDI transactions. Similarly, permission has been granted to SEBI authorised Depository Participants, to open and maintain, without prior approval of the Reserve Bank, Escrow accounts for securities.

These facilities will be applicable for both issue of fresh shares to the non- residents as well as transfer of shares from/to the non-residents and is subject to the terms and conditions given in the Annex to this Circular.

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