Companies Act, 2013--Share Capital

Issue of Equity Shares to Overseas company or NRI : Raising Funds through Private Placement

Pragya Lalwani

Learned Author in this article discusses the process of issue of shares to person resident outside India, be it a NRI or company, by way of private placement in case of private companies.

1. Introduction

An Indian Company being a private company can easily issue shares to a person resident outside India, after checking the FEMA Regulations subject to FDI policy of the Government of India and Guidelines issued by Reserve Bank of India (RBI) in that respect. Private Placement is one of a tool for raising additional capital in case of private companies. It is a method of raising capital through offering the issue of securities to a selected group of persons (other than public offer), by a private company. Such persons are shortlisted and identified by the Board of Directors of the company making offer. Securities include shares(both equity and preference), debentures, etc. as described under section 2(h) of the SCRA Act, 1956. In this article we will discuss about issue of shares to NRIs and other bodies corporate incorporated outside India through private placement which is governed by section 42 of the Companies Act, 2013.