On April 27, 2020, the Central Government notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2020 (“FEMA NDI Amendment”). The FEMA NDI Amendment seeks to modify the position on pricing of rights issue – in case of renunciation of rights in favour of a non-resident by a resident, pricing guidelines will apply. We have analysed the implications of the FEMA NDI Amendment on rights issue of securities in this blogpost.
Why Rights issue?
Rights issue has been a preferred mode of raising capital from the existing shareholders of a company as there are no prescriptive conditions on issue price. Companies have the flexibility to determine issue price in case of rights issue under company law as well as SEBI regulations (applicable to listed companies). This gives companies much-needed flexibility to structure a capital raise from existing investors, especially in times of need.
Continue Reading Rights Issue: Regulatory to and fro on renunciation?