Finance Ministry eases rules for bonus share issue by companies in FDI-barred sectors

The finance ministry has amended guidelines to permit Indian corporations, engaged in sectors the place the overseas direct funding (FDI) is barred, to challenge bonus shares to their pre-existing non-resident shareholders.

Nonetheless, the stakes of such shareholders should stay unchanged even after the bonus share challenge, the ministry mentioned whereas notifying the International Change Administration (Non-debt Devices) (Modification) Guidelines, 2025. The brand new guidelines take impact from June 11.

The transfer, specialists mentioned, will permit the businesses flexibility to go for fairness restructuring and in addition enhance capital administration with out breaching the extant FDI coverage.

The notification comes after an analogous aid was introduced within the FDI coverage in April by the Division for Promotion of Business and Inside Commerce (DPIIT) in April.

The ministry has now introduced concerning the change by introducing a brand new sub-rule within the International Change Administration (Non-debt Devices) Guidelines, 2019.

The notification additionally mentioned any “bonus shares issued to such shareholders previous to the date of graduation of this sub-rule shall be deemed to have been issued in accordance with the provisions of those guidelines” or another associated laws.The transfer is a part of the broader authorities efforts to additional liberalise the principles on fairness investments to allow India to draw extra overseas capital.Sandeep Jhunjhunwala, Sandeep Jhunjhunwala, companion at Nangia Andersen LLP, mentioned the notification makes it clear that “bonus points finished up to now would (additionally) get a retrospective advantage of this clarificatory modification”.

It additionally goals to take away any ambiguity over the retrospective utility of such a rest launched within the FDI coverage by the DPIIT in April, he added. The paradox had arisen because of the truth that FDI rule modifications are often applied prospectively.

Finance secretary Ajay Seth had in February advised ET that the finance ministry and the Reserve Financial institution of India have been in talks to additional ease overseas change guidelines, particularly with regard to non-debt devices, and replace them to trendy requirements.

On condition that sector-specific limits for FDI have already been considerably relaxed, the federal government is popping its consideration to easing restrictive laws to woo overseas buyers amid international headwinds.

Having scaled a peak of just about $85 billion in FY22, complete FDI inflows into India fell over two years to the touch $71 billion in FY24. It once more rebounded to $81 billion final fiscal.