NOTIFICATION [No.FEMA.344/2015-RB]/GSR 484(E), DATED 11-6-2015

FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (FOURTH AMENDMENT) REGULATIONS, 2015 – AMENDMENT IN REGULATION 2 AND SUBSTITUTION OF REGULATION 8

NOTIFICATION [No.FEMA.344/2015-RB]/GSR 484(E)DATED 11-6-2015

In exercise of the powers conferred by clause (b) of sub-section (3) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated 3rd May 2000) namely:—

1. Short title & Commencement

(a) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fourth Amendment) Regulations, 2015.
(b) They shall come into force from the date of its publication in the Official Gazette.

2. Amendment of the Regulations

In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated 3rd May 2000),

I. In Regulation 2:

(a) after clause (iie), the following new clause shall be added, namely:—
‘(iif) “employees’ stock option” means the option given to the directors, officers or employees of a company or of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price;’
(b) after clause (x), the following new clause shall be added, namely :—
“(xa) “sweat equity shares” means such equity shares as issued by a company to its directors or employees at a discount or for consideration other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;”

II. For the existing Regulation 8, the following shall be substituted, namely :

“(1) An Indian company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/directors or employees/directors of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, provided that :

(a) The scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013, as the case may be.
(b) The “employee’s stock option”/sweat equity shares issued to non-resident employees/directors under the applicable rules/regulations are in compliance with the sectoral cap applicable to the said company.
(c) Issue of “employee’s stock option”/sweat equity shares in a company where foreign investment is under the approval route shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.
(d) Issue of “employee’s stock option”/sweat equity shares under the applicable rules/regulations to an employee/director who is a citizen of Bangladesh/Pakistan shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.

(2) The Reserve Bank may require the company issuing “employees’ stock option “and/or “sweat equity shares” to submit such reports and at such frequency as it may consider necessary.

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