Govt. Approval under FEMA Required to Offer shares of Companies of Neighbouring Countries; MCA Amends Rules

To curb unscrupulous activities and to protect the interest of Indian business from Chinese investors Government has amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 wide Notification No. F. No. 1/21/2013-CL-V dated May 5, 2022.

Considering an increasing number of complex money-laundering operations, that allow investors to transfer large amounts of illegal cash are exposed to having a Chinese connection therefore Govt has has amended the Companies (Prospectus and Allotment of Securities) Rules, 2014.

The Ministry of Corporate Affairs [MCA] has notified the Companies (Prospectus and Allotment of Securities ) Amendment Rules, 2022 wide Notification No. F. No. 1/21/2013-CL-V dated May 5, 2022 and has made some changes in Foreign Direct Investment (FDI) rules as well.

Amendment is Given below:

G.S.R. 338(E).—In exercise of the powers conferred by section 42 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Prospectus and Allotment of Securities) Rules, 2014, namely:-

1. (1) These rules may be called the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Companies (Prospectus and Allotment of Securities) Rules, 2014, ―

(i) in rule 14, in sub-rule (1), after the fourth proviso, the following proviso shall be inserted, namely :-

“Provided also that no offer or invitation of any securities under this rule shall be made to a body corporate incorporated in, or a national of, a country which shares a land border with India, unless such body corporate or the national, as the case may be, have obtained Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and attached the same with the private placement offer cum application letter.”.

(ii) in Annexure, in Form PAS-4, in Part-B, after serial number (vii), the following shall be inserted, namely :-

“(viii) Tick whichever is applicable:-

(a) The applicant is not required to obtain Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to subscription of shares. _____;

(b) The applicant is required to obtain Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to subscription of shares and the same has been obtained, and is enclosed herewith.- ______”.

For Notification Download PDF Given Below: