Startup Regulatory Relaxations - Issue of shares

RBI has vide its notification dated 11/2/2016 made a couple of clarifications w.r.t. issue of shares in case of start ups. One of the points is issue of shares without cash payment through sweat equity or issue of shares in lieu of payments due which are permissible transactions under FEMA. 

Accordingly, the following is clarified:

a. Issue of shares without cash payment through sweat equity: Reserve Bank of India vide Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 in respect of listed companies or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies.

b. Issue of shares against legitimate payment owed: Reserve Bank of India vide Notification No. FEMA.315/2014-RB dated July 10, 2014, has permitted Indian companies to 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 Reserve Bank of India under FEMA, 1999 subject to conditions relating to adherence to FDI policy including sectoral caps, pricing guidelines, etc. and applicable tax laws (cf. paragraph 3 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2015).