Question 1

What does Alternative Investment Funds stand for?

Accepted Answer

Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

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Question 2

Can the registration of Venture Capital Funds be done again under SEBI (AIF)?

Accepted Answer

The venture capital funds (VCF) registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996 shall continue to be regulated by the said regulations until existing fund is wound up and no new fund or scheme shall be launched after that under the said regulations.

However, the existing VCF may seek re-registration under SEBI (Alternative Investment Funds) Regulations, 2012 subject to approval of two-third of its investors by the value of their investment.

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Question 3

What is the limit specified under AIF regulations for number of investors?

Accepted Answer

No scheme of an AIF (other than angel fund) shall have more than 1000 investors. (Please note that the provisions of the Companies Act, 1956 shall apply to the AIF if it is formed as a company). In case of an angel fund, no scheme shall have more than two hundred angel investors. However, an AIF cannot make invitation to the public at large to subscribe its units and can raise funds from the sophisticated investors only through private placement.

Please refer to section 4(b), 10(f) and 19E(4) of SEBI (Alternative Investment Funds) Regulations, 2012 at the link for more information

Question 4

What is included in fund of funds?

Accepted Answer

Fund of Funds, in general, is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of Alternative Investment Funds (AIF), a Fund of Fund is an AIF which invest in another AIF.

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Question 5

What does debt fund mean?

Accepted Answer

Debt fund is an Alternative Investment Fund (AIF) which invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated objectives of the Fund. These funds are registered under Category II.

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Question 6

What is the meaning of Angel Fund?

Accepted Answer

"Angel Fund” is a sub-category of Venture Capital Fund under Category I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of AIF Regulations.



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Question 7

What are Category III AIFs?

Accepted Answer

Alternate Investment Funds (AIFs), which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.

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Question 8

What are Category II AIFs?

Accepted Answer

Alternative Investment Funds (AIF) which do not fall in Category I and III and which do not undertake borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012 are Category II AIF.

Various types of funds such as real estate funds, private equity funds, funds for distressed assets, etc. are registered as Category II AIF.

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Question 9

What are Category I AIFs?

Accepted Answer

Category I of the Alternative Investment Funds (AIF) include funds which invest in start-up, early stage ventures, social ventures, small & medium enterprises (SME), infrastructure or other sectors or areas which the Government or regulators consider as socially or economically desirable.

It shall include venture capital funds, SME funds, social venture funds, infrastructure funds and such other AIF.

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Question 10

What is an Angel Investor?

Accepted Answer

"Angel investor" means any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely,


	 Net tangible assets of at least INR 2 cr excluding value of his principal residence, and who:

	
		 has early stage investment experience, or
		 has experience as a serial entrepreneur, or
		 is a senior management professional with at least ten years of experience
	
	



	A body corporate with a net worth of at least INR 10 cr, or
	An AIF/ VCF registered under these regulations.


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Question 11

How can one channel External Commercial Borrowing loans?

Accepted Answer

External Commercial Borrowing (ECB) can be raised either under the automatic route or under the approval route. For the automatic route, a case is examined by the Authorised Dealer (AD) Category-I bank. Under the approval route, the borrower is required to send the request to the Reserve Bank of India (RBI) through the AD for examination. While the regulatory provisions are mostly similar, some differences between the two routes include the amount of borrowing, eligibility of the borrowers and the permissible end-uses.

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Question 12

Could a qualified borrower raise crisp External Commercial Borrowings under Track II for reimbursement of existing Rupee named External Commercial Borrowings?

Accepted Answer

Refinancing of Rupee denominated ECB with Foreign Currency denominated ECB under Track II is not permitted.

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Question 13

Can External Commercial Borrowing be used for making contribution in Limited Liability Partnership?

Accepted Answer

No, it is not permitted under any track.

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Question 14

Can External Commercial Borrowing be used for importing services?

Accepted Answer

No, ECB is not permitted for import of services.

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Question 15

What are the various types of ECB?

Accepted Answer

ECB includes Loans, Securitized instruments, Buyers’ and supplier’s credit, Foreign Currency Convertible Bonds (FCCBs). Financial Lease and Foreign Currency Exchangeable Bonds (FCEBs). 

For more information, click here.

Question 16

Can External Commercial Borrowing be used for funding real estate?

Accepted Answer

No, no activity under real estate is permitted as eligible end use for raising ECB.

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Question 17

What is the earliest when an External Commercial Borrowing can be matured?

Accepted Answer

Minimum average maturity period (MAMP) is three years for all external commercial borrowings (ECB). However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in sub-section 2.1 of the Annex, the MAMP is five years. Similarly, for ECB up to INR 3.5 b per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP is one year.

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Question 18

Are the shipping/airline companies allowed to raise External Commercial Borrowing for import of second hand vessels?

Accepted Answer

Yes, shipping and airline companies can raise external commercial borrowings (ECB) for import of vessels and aircrafts, however, only under Track I of the ECB framework.

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Question 19

What does External Commercial Borrowing (ECB) denote?

Accepted Answer

ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities conforming to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

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Question 20

Are Non-Resident Indians allowed to make investments in India?

Accepted Answer

An NRI can invest in capital of Indian companies on non-repatriation basis provided:


	The amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks. 
	The entity is not engaged in agricultural/plantation or real estate business or construction of farmhouses or dealing in Transfer of Development Rights.
	Amount invested not eligible for repatriation outside India. For investments on a repatriable basis, provisions of FDI policy apply.


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Question 21

What documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift?

Accepted Answer

Documents to be submitted by a resident person for transfer of shares to a person resident outside India by way of gift:

i) Name and address of the transferor (donor) and the transferee (donee).

ii) Relationship between the transferor and the transferee.

iii) Reasons for making the gift.

iv) In case of Government dated securities and treasury bills and bonds, a certificate issued by a CA on market value of such security.

v) In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.

vi) In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by Securities & Exchange Board of India or as per any internationally accepted pricing methodology on arm’s length basis for listed companies and unlisted companies, respectively.

vii) Certificate from the concerned Indian company certifying that the proposed transfer of shares/convertible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.

viii) An undertaking from resident transferor that value of security to be transferred together with any security already transferred by transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of $ 50,000during a financial year*.

ix) A declaration from donee accepting partly paid shares or warrants that donee is aware of the liability as regards calls in arrear and consequences thereof.

Please refer to 'section 2' of Annexure-3 Consolidated FDI Policy at link for more information.

*RBI’s A.P. (DIR Series) Circular No. 14 Dated 15.09.2011

Question 22

What is Sponsored American Depository System/ Global Depository System issue?

Accepted Answer

An Indian company can sponsor an issue of ADR/ GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs/ GDRs can be issued abroad. The proceeds of the ADR/ GDR issue are remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion.

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Question 23

What documents are required for sale of shares by a person resident in India?

Accepted Answer

The following documents are required for sale of shares by a person resident in India:

(i) Consent letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer i.e. number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record.

(ii) Where consent letter has been signed by their duly appointed agent, the Power of Attorney Document executed by the seller/buyer authorizing the agent to purchase/sell shares.

(iii) The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India showing equity participation of residents and non-residents category-wise (i.e. NRIs/OCBs/foreign nationals/incorporated non-resident entities/FIIs, FPIs) and its percentage of paid up capital obtained by the seller/buyer or their duly appointed agent from the company, where the sectoral cap/limits have been prescribed.

(iv) Certificate indicating fair value of shares from a Chartered Accountant.

(v) Copy of Broker’s note if sale is made on Stock Exchange.

(vi) Undertaking from the buyer to the effect that he is eligible to acquire shares/convertible debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.

(vii) Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as prescribed by SEBI has not been breached, till it gets registered as FPI.

Please refer to subsection 5.1 of 'section 1' of Annexure-3 of Consolidated FDI Policy at link for more information.

Question 24

What is the list of case where prior approval is needed by RBI to transfer capital instruments?

Accepted Answer

The following cases require prior approval of RBI:


	Transfer of capital instruments from resident to non-residents by way of sale where:
	
		Transfer is at a price which falls outside the pricing guidelines specified by RBI
		Transfer of capital instruments by the non-resident acquirer involving deferment of payment of the amount of consideration.
	
	
	Transfer of any capital instrument, by way of gift by a person resident in India to a person resident outside India. 


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Question 25

What is the duration within which capital instruments need to be issued, post receiving inward remittances?

Accepted Answer

The capital instruments should be issued within 180 days from the date of receipt of the inward remittance received through normal banking channels including escrow account or by debit to the NRE/FCNR (B) account of the non-resident investor. In case, the capital instruments are not issued within this time, the amount received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. Non-compliance to this would be reckoned as a contravention under the Foreign Exchange Management Act and would attract penal provisions. In exceptional cases, refund of the amount outstanding beyond 180 days from the date of receipt may be considered by the Reserve Bank of India on the merits of the case.

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Question 26

What is the procedure for reporting the issue of shares against conversion of External Commercial Borrowing?

Accepted Answer

In case of partial or full conversion of external commercial borrowing (ECB) into equity, the reporting to the Reserve Bank of India (RBI) happens as under:


	For partial conversion -  Converted portion to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR, while monthly reporting to the Department of Statistics and Information Management (DSIM) in ECB 2 Return (Annex III)
	For full conversion - Entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return.
	For conversion in phases - Reporting through ECB 2 Return will also be in phases


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Question 27

What is the procedure for reporting of transfer of shares?

Accepted Answer

Reporting of transfer of shares between residents and non-residents and vice- versa is to be done in Form FC-TRS (Section-4). The Form FC-TRS should be submitted to the AD Category-I bank, within 60 days from the date of receipt of the amount of consideration.

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Question 28

Is it possible for Indian Companies to issue employees' stock option and/or sweat equity shares?

Accepted Answer

Yes, an Indian company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/ directors or employees/ directors of its holding company or joint venture or wholly owned overseas subsidiary/ subsidiaries who are resident outside India subject to provisions contained in Companies Act 2013 and SEBI Act 1992.

For more information, click here

Question 29

Would I be able to get financing support from Make in India?

Accepted Answer

The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-building initiatives.

For more information, click here

Question 30

What are the project funding options available in India?

Accepted Answer

Projects in India can be financed through sources such as Bank loans, Private equity, Public subscriptions, Debt instruments and Government bonds.
If you are a start-up or a SME, then you can register on Startup India. You can also register on India Investment Grid, which is our repository of investible projects.

Question 31

What are the guidelines for interest rates on loans disbursed by commercial banks in India?

Accepted Answer

As part of the financial sector liberalisation, all credit related matters of banks including charging of interest have been deregulated by the Reserve Bank of India (RBI) and are governed by the banks' own lending policies. With a view to enhancing transparency in the methodology followed by banks for determining interest rates on advances and the efficiency of monetary policy transmission, from 1 April 2016, banks are required to sanction all their advances with reference to marginal cost of fund-based lending rates (MCLR).

Banks shall have to provide an option to the customers to switch to the MCLR from Base rate/Benchmark Prime Lending Rate (BPLR) and this should not be treated as a foreclosure of existing facility. 

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Question 32

Why do small borrowers need to have credit rating?

Accepted Answer

With a view to facilitating credit flow to the micro, small and medium enterprises (MSME) and enhancing the comfort-level of the lending institutions, the credit rating of MSMEs done by reputed credit rating agencies should be encouraged. The banks are advised to consider these ratings as per availability and wherever appropriate structure their rates of interest depending on the ratings assigned to the borrowing MSMEs.

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Question 33

Is credit rating mandatory for the MSE borrowers?

Accepted Answer

Credit rating is not mandatory but it is in the interest of the micro, small and medium enterprises (MSME) to get their credit rating done as it would help in credit pricing of the loans taken by them from the banks.

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Question 34

What are the guidelines for delayed payment of dues to the MSE borrowers?

Accepted Answer

The buyer is to make payment on or before the date agreed on between him and the supplier in writing or, in case of no agreement, before the appointed day. The agreement between seller and buyer shall not exceed more than 45 days. If the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank. For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised above. In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government. To take care of the payment obligations of large corporate borrowers to MSEs, banks have been advised that while sanctioning/ renewing credit limits to their large corporate borrowers (i.e. borrowers enjoying working capital limits of $ 1.5 million and above from the banking system), to fix separate sub-limits, within the overall limits, specifically for meeting payment obligations in respect of purchases from MSEs either on cash basis or on bill basis. Banks are also advised by RBI to closely monitor the operations in the sub-limits, particularly with reference to their corporate borrowers’ dues to MSE units by ascertaining periodically from their corporate borrowers, the extent of their dues to MSE suppliers and ensuring that the corporate pay off such dues before the ‘appointed day’ /agreed date by using the balance available in the sub-limit so created. In this regard the relevant RBI circular; IECD/5/08.12.01/2000-01 dated October 16, 2000 (reiterated on May 30, 2003, vide circular No. IECD.No.20/08.12.01/2002-03 ) available on RBI website.

For further details please visit link1 or link2.

Question 35

What are the various types of loan options available under Pradhan Mantri MUDRA Yojana?

Accepted Answer

Under MUDRA scheme, the following loans are available to eligible company:


	Shishu: covering loans upto INR 50,000
	Kishor: covering loans above INR 50,000 and upto INR 5 lakh
	Tarun: covering loans above INR 5 lakh and upto INR 10 lakh


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Question 36

What is Pradhan Mantri Mudra Yojana?

Accepted Answer

Pradhan Mantri Mudra Yojana (PMMY) is a scheme launched by the Hon’ble Prime Minister for providing loans upto INR 10 Lakhs to non-corporate, non-fam small/ micro enterprises.

For more information, click here.

Question 37

Which are the registered Infrastructure Investment Trusts under Securities and Exchange Board of India?

Accepted Answer

The list of SEBI registered InvITs can be accessed from here.

Question 38

Once the shares are issued, how can one report it?

Accepted Answer

An Indian company should file Form , not later than 30 days from the date of issue of shares. The Form should be duly filled and signed by the Managing Director/Director/ Secretary of the company and submitted to the Authorised Dealer of the company who will forward it to the RBI.

For detailed list of documents, refer to Sub-section 2.2 of Annexure 6 of the FDI policy.

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Question 39

What is the qualification criteria with regard to the Sponsor(s) in ReITs?

Accepted Answer

The term ‘sponsor group’ has been defined to include:

• The sponsor

• Where the sponsor is a body corporate.

• Entities/persons controlled by such body corporate.

• Entities/persons controlling such body corporate.

• Entities/persons controlled by entities/persons controlling such body corporate. 

• Where the sponsor is an individual.

• Relatives of such individual.

• Entities/controlled by such individual for each sponsor group, not less than one person shall be identified as the 'sponsor'. Sponsors and the sponsor group shall collectively hold.

• A minimum of 25% of the total units on a post issue basis

• A minimum of 15% of the outstanding units of the REIT at all times.

• Minimum holding of 5% of outstanding units of REIT at all time.

• Net worth of at least US$ 15.38 mn on consolidated basis and US$307,692  on individual basis.

• Minimum experience of 5 years in real estate industry for each sponsor and where sponsor is a developer, at least 2 projects of sponsor should be completed.

Please refer to section 4(d) and chapter IV of SEBI (Real Estate Investment Trusts) Regulations 2014 at link for more information.

Question 40

What is meant by 'real estate' or 'Property'?

Accepted Answer

'Real estate' or 'property' means land and any permanently attached improvements to it, whether leasehold or freehold and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car parks, etc. and any other assets incidental to the ownership of real estate but does not include mortgage. However, any asset falling under the purview of 'infrastructure' as defined vide Notification of Ministry of Finance dated October 07, 2013 including any amendments or additions made thereof shall not be considered as 'real estate' or 'property'. Notwithstanding the above, following captured within the above mentioned definition of infrastructure shall be considered under “real estate” or “property”:

i) Hotels, hospitals and convention centers, forming part of composite real estate projects, whether rent generating or income generating

ii) Common infrastructure" for composite real estate projects, industrial parks and SEZ.

Please refer to section 2(zi) of SEBI (Real Estate Investment Trusts) Regulations 2014 at link for more information.

Question 41

What is the capability criteria concerning the Trustee in ReITs?

Accepted Answer

The eligibility criteria for the trustee of a Real Estate Investment Trust (ReIT) includes:


	That the trustee is registered with SEBI under SEBI (Debentures Trustees) Regulations, 1993 and is not an associate of the sponsor or manager
	That the trustee has such wherewith with respect to infrastructure, personnel, etc. to the satisfaction of SEBI and in accordance with circulars specified by the Board.


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Question 42

What is the qualification criteria for Managers in REITs?

Accepted Answer

The qualification criteria for managers in REITs include:


	The manager has a net worth of not less than $1.53 mn if the manager is a body corporate or a Company or net tangible assets of value not less than $1.53 mn in case the manager is a LLP. 
	The manager or its associate has not less than 5 years’ experience in fund management or advisory services or property management in the real estate industry or in development of real estate.
	The manager has not less than 2 key personnel who each have not less than 5 years’ experience in fund management or advisory services or property management in the real estate industry or in development of real estate.
	The manager has not less than half, of its directors in the case of a Company or of members of the governing Board in case of an LLP, as independent and not directors or members of the governing Board of another REIT


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Вопросы?

В чем заключается проблема спонсируемой американской депозитарной системы / глобальной депозитарной системы?