RBI/2017-18/101
DNBR.PD(ARC)CC. No.04/26.03.001/2017-18
November
23, 2017
The Chairman/ Managing Director/
Chief Executive Officer
All registered Asset
Reconstruction Companies
Dear Sir/Madam,
Conversion of debt into equity-
Review
Please refer to our Circular
DNBS(PD)CC.No. 35/SCRC/26.03.001/2013-14 dated January 23, 2014 on the
above subject.
2. On a review of the limit
imposed on shareholding of the post converted equity of the borrower
company under reconstruction by Asset Reconstruction Companies (ARCs), it
has been decided to exempt ARCs meeting the criteria set out in paragraph 3
below from the cap of 26% subject to compliance with the provisions of the
SARFAESI Act, 2002, Guidelines/ Instructions issued by Reserve Bank of
India from time to time as applicable to ARCs as well as Foreign Exchange
Management Act, 1999, Reserve Bank of India Act, 1934, Companies Act, 2013,
SEBI Regulations and other relevant Statutes. The extent of shareholding
post conversion of debt into equity shall be in accordance with permissible
Foreign Direct Investment (FDI) limit for that specific sector.
3. ARCs that meet the conditions
mentioned below are exempted from the limit of shareholding at 26% of post
converted equity of the borrower company:
i.
The
ARC shall be in compliance with Net Owned Fund (NOF) requirement of ? 100
crore on an ongoing basis;
ii.
At
least half of the Board of Directors of the ARC comprises of independent
directors;
iii.
The
ARC shall frame policy on debt to equity conversion with the approval of
its Board of Directors and may delegate powers to a Committee comprising
majority of independent directors for taking decisions on proposals of debt
to equity conversion;
iv.
The
equity shares acquired under the scheme shall be periodically valued and
marked to market. The frequency of valuation shall be at least once in a
month.
4. The ARC shall explore the
possibility of preparing a panel of sector-specific management firms/
individuals having expertise in running firms/ companies which could be
considered for managing the companies.
Yours
faithfully,
(C
D Srinivasan)
Chief General Manager
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