The Hindu Business Line : Some cos get relief from revised pref shares norms

New Delhi Jun 26 The Finance Ministry has given relief to some companies that were at an advanced stage of issuing preference shares when the guidelines for foreign investment in preference shares underwent a change on April 30.

It has now said that exemption from the purview of the revised guidelines would be granted so long as the institution/corporate had taken "verifiable" and "effective steps" prior to April 30 for issuance of preference shares.

An official release said that "verifiable steps" would be actions that have footprints in public domain and hence verifiable with reference to those footprints.

Effective steps would be actions that go beyond simple intention to act and should be such that they bind the parties conclusively.

Such cases would cover a) action under Section 81(1A) of the Companies Act should have been taken prior to April 30, 2007 or b) application for permission from the Government, where necessary, should have been received before April 30.

The release also said that parties claiming benefit under the above exemption should complete the process of issuing the shares and receipt of money in lieu of issue of such shares by July 31, 2007.

The major implication of the revision in guidelines for foreign investment in preference shares was that the foreign investment coming as fully convertible preference shares would be treated as part of share capital.

The other types of preference shares, namely non-convertible and optionally convertible shares, would be required to conform to ECB guidelines/caps.

Following the revision, the Government had received several representations that the revision of guidelines has adversely affected the business plans of entities that were at an advanced stage of issuing preference shares.

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