The government today exempted companies who are at an advanced stage of issuing partially convertible or non-convertible shares prior to April 30, from the purview of meeting overall external commercial borrowing (ECB) cap and guidelines.This has come as a big relief to companies, whose capital raising plans were adversely affected.However, the companies claiming benefit under the above exemption would have to complete the process of issuing the shares and mobilising resources by the end of next month.The government received representations that the revision of the guidelines has adversely affected business plans of corporations, which were at an advanced stage of issuing preference shares."The government has examined the representations, and has decided that in respect of such companies, which have taken verifiable and effective steps prior to April 30, exemption could be granted from the purview of the revised guidelines announced in the press note of April 30, 2007," an official release said.To be eligible for the exemption, a company must have shown clear intention of raising funds through such instruments by conducting general body meetings or by passing special resolutions under Section (81)1A of the Companies Act or the application for permission from the government should have been received before the notified date.On April 30, the government had issued revised guidelines for foreign investment in preference shares. It said foreign investment coming in as fully convertible preference shares, would be treated as part of the share capital. Other types of preference shares like non-convertible and optionally convertible, will be treated as debt and are required to conform to ECB guidelines and caps.
