What changed
Previously, pricing for shares allotted to non-residents under FDI was governed by general issue price rules. Now, for subscription to Memorandum of Association, the issue price can be at face value, subject to compliance with the Companies Act and FDI eligibility.
What it means for you
Banks can process share allotments to foreign investors at face value when they subscribe to the MoA, reducing valuation disputes. This eases early-stage foreign investment in Indian companies, but banks must verify FDI eligibility and Companies Act compliance.
What you must do
- Update internal FDI processing guidelines to allow face-value pricing for MoA subscriptions.
- Verify non-resident investor eligibility under the FDI scheme before processing such allotments.
- Ensure compliance with Companies Act, 1956 provisions for MoA subscriptions.
- Advise customers on the new pricing option for initial share allotments.
Who it affects
AD Category-I banks, Indian companies receiving FDI via MoA subscription, Non-resident investors (including NRIs)
Can any non-resident invest at face value under this circular?
Only those eligible under the FDI scheme can invest at face value via MoA subscription. NRIs are included if they meet FDI eligibility criteria.
Does this apply to subsequent share allotments?
No, this circular specifically covers initial subscription to the Memorandum of Association. Subsequent allotments follow standard FDI pricing guidelines.