Query on Foreign Investment Viz-aViz MSME Act

Muralidharan (Self Employed) (1034 Points)

29 January 2009  

BACKGROUND OF OUR COMPANY 

Ø       We would like to inform that our company was incorporated on 7th March 2006 under the provisions of the Companies Act, 1956, for the manufacture and sale of power and distribution transformers, control & protection panels,  and is catering to both export and domestic markets. The paid-up share capital of the Company is Rs.3,48,86,640/-. The shareholding pattern of the company is as follows:
 
Particulars of Members
No. of Shares
Face Value
Percentage
Foreign Individual Investors
34,78,664
10.00
99.72%
Resident Indians (subscriber shares)
10,000
10.00
0.28%
Total
34,88,664
 
100.00%
 
Ø       From the above it shall be noted that 99.72% of capital is held by foreign individual investors and the balance 0.28% of capital is held by resident individuals. The company has duly complied with the regulations as stipulated by RBI in respect of its foreign direct investment, which is falling under the automatic route. The Company has obtained necessary acknowledgement from RBI for its above said foreign direct investment.
 
Ø       Our Company is not a Small Scale Industry. The necessary declaration was also submitted with RBI alongwith Form FC-GPR stating that the company is not a small scale industry.
 
OUR QUERY / CLARIFICATION REQUIRED
 
v       We wish to register our company under the provisions of MSME Act, 2006.
 
v       We request you to kindly clarify whether registration of our company under the MSME Act 2006 will be in accordance with the provisions FEMA guidelines as well as rules laid down by RBI in respect of foreign direct investment under automatic route.
 
v       The value of plant & machinery of our company is more than Rs.25 lacs but less than 5.00 crores. As per Section 7 of MSME Act, 2006, our Company could be categorised as a Small Enterprises.
 
v       As 99.72% of our share capital is held by foreign investors and since there is a FDI cap of 24% under automatic route for investing in small scale industry the above question arises.

with regards

Muralidharan