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Loan from a foreign body corporate

Swati Sharma (TRAINEE) (328 Points)

26 February 2018

Dear Members,

Can a Pvt. Ltd. Indian Company takes loan from a Foreign Company?? who is not a shareholder of Indian Company.

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27 Replies

Tejas Tak (315 Points)
Replied 26 February 2018

yes it can

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Tejas Tak (315 Points)
Replied 26 February 2018

yes it can

CS M Pota (Company Secreatary) (3186 Points)
Replied 26 February 2018

Sorry, as per FEMA it can not

Swati Sharma (TRAINEE) (328 Points)
Replied 26 February 2018

can you please mention the provision of fema, which restricts the same..I think under ECM Guidelines a indian company can take loan from any foreign company

CS M Pota (Company Secreatary) (3186 Points)
Replied 26 February 2018

As per ECB guide lines the following are the approved lenders if your lender falls any of the following then can take else can not.

Borrowers can raise ECB from internationally recognized sources such as
international banks
international capital markets
multilateral financial institutions (such as IFC, ADB, CDC, etc.) / regional financial institutions and Government owned development financial institutions, (iv) export credit agencies
suppliers of equipments
foreign collaborators
foreign equity holders (other than erstwhile Overseas Corporate Bodies (OCBs).

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Swati Sharma (TRAINEE) (328 Points)
Replied 26 February 2018

But in RBI guidelines it is mentioned that ECB can be taken from overseas organisation and individuals.

Extrat below

Track III: All entities listed under Track I but for overseas branches / subsidiaries of Indian banks. In case of NBFCs-MFIs, other eligible MFIs, not for profit companies and NGOs, ECB can also be availed from overseas organisations3 and individuals4.

Swati Sharma (TRAINEE) (328 Points)
Replied 05 March 2018

Can Loan from Foreign Body Corporate be raised by Convertible notes??

CS M Pota (Company Secreatary) (3186 Points)
Replied 05 March 2018

What is convertible NOTES?

J. Manivannan (Advocate & IP) (242 Points)
Replied 05 March 2018

If that Foreign Body Corporate has Financial or Technical Collaboration with Indian Entity then it can be provided the credit facility subject ECB guidelines.

No foreign body corporate can provide credit facility without any collaboration or without equity stake 25% or more in Indian entity.

For the above, first enter collaboration agreement with them and file Form 83 with RBI through AD-Bank in order to get Loan Registration Number.

CS M Pota (Company Secreatary) (3186 Points)
Replied 06 March 2018

As per FEMA convertible note can be issued by a Startup Compamy.This is not applicable to other company which is not start up Company.This is introduce under Startup India Programm.

No collaboration is agreement is required to be entered into a person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered / incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian startup company for an amount of twenty five lakh rupees or more in a single tranche.

an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument;

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CS M Pota (Company Secreatary) (3186 Points)
Replied 06 March 2018

Swati Sharma (TRAINEE) (328 Points)
Replied 06 March 2018

For Convertible notes plz read below link...In 2017 RBI has allowed startup to raise money through convertible notes which is kind of promissory notes having option of conversion it will also not be counted as Deposits..hence less compliances and easy to raise money from foreign person or entity..

https://blog.ipleaders.in/convertible-notes-fdi/