Govt amends rules regulating allotment of securities by companies

New Delhi: The government has amended rules governing companies with respect to prior approval being mandatory for investments by entities and individuals from countries that share a land border with India.

The rules pertaining to prospectus and allotment of securities under the Companies Act, 2013 were amended by the corporate affairs ministry on May 5.

"... no offer or invitation of any securities under this rule shall be made to a body corporate incorporated in, or a national of, a country which shares a land border with India, unless such body corporate or the national, as the case may be, have obtained government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019," the ministry said in a notification.

The rule refers to Rule 14 in the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022.

The approval should be attached with the private placement offer cum application letter, the notification said.

About the amended rules, Akila Agarwal, Partner and Head M&A at Cyril Amarchand Mangaldas, said "this is a procedural change in the relevant forms consequent to Press Note 3".

In April 2020, the Department for Promotion of Industry and Internal Trade (DPIIT) had issued Press Note 3 regarding foreign investments.

With the press note, the government had made its prior approval mandatory for foreign investments from countries that share land border with India to curb opportunistic takeovers of domestic firms following the Covid pandemic.