COMPANY MEETINGS UNDER COMPANY LAW IN INDIA by : DR. T.K. JAIN AFTERSCHO☺OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR PGPSE participants
[email protected] mobile : 91+9414430763 5 DECEMBER 09
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TYPES OF MEETINGS 1. AGM (ANNUAL GENERAL MEETING) 2. STATUTORY MEETING 3. EXTRAORDINARY GENERAL MEETING 4. CLASS MEETING 5. BOARD MEETINGS 5 DECEMBER 09
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STATUTORY MEETING First general meeting of a public company Once in the life of a company only in a public company in period from 1 to 6 month of start of company statutory report is presented with details of issue / preliminary expenditure penalty : 5000 sec. 165 5 DECEMBER 09
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AGM In 18 month from start – there there after every financial year – gap should not be more than 15 months. Ordinary business : 1. annual reports & accounts 2. dividends 3. directors & auditors appointments & terms. Any other special business on any day except public holiday (as per NI act 1881) 5 DECEMBER 09
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Place of AGM
Registered office or in the same city where registered office is located at business hours penalty for not organising (sec. 168) : 50000 + 2500 per day.
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Case : Asia Udyog
When police has seized the books of accounts, the company is exempted from holding AGM
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CASE : MEENASKHI MILLS
THERE MUST BE ONE AGM EVERY YEAR = AS MANY AGM AS THE YEARS OF THE COMPANY
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CASE : WEST COAST PLANNERS
NO AGM IS NECESSARY WHEN ONLY ONE SHAREHOLDER IS LEFT
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EGM (169 TO 186)
Who may call it : Directors shareholders company law board requisitionists 5 DECEMBER 09
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Time period of EGM
The board will call it in 21 days to 45 days from the date of requisition OTHERWISE requisitonists can themselves call it (they must th have 1/10 of shares. 5 DECEMBER 09
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CLASS MEETINGS
BY PARTICULAR CLASS OF SHAREHOLDERS – FOR EXAMPLE BY PREFERENCE SHAREHOLDERS ETC. ON ANY MATTER AFFECTING THAT CLASS OF SHAREHOLDERS – LIKE NON PAYMENT OF DIVIDEND 5 DECEMBER 09
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REQUISITIONS OF A VALID MEETING PROPER NOTICE QUORUM TO BE PRESENT PROPERLY HELD AGENDA PROPERLY CIRCULATED MINUTES PREPARED & PRESENTED IN NEXT MEETING PROPER CHAIRMAN 5 DECEMBER 09
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NOTICE OF MEETING At least 21 day clear notice (less than 21 day notice is permitted if 95% shareholders agree to it ) notice has to be sent to auditor also notice must be sent to legal representative – when the member is not alive / insolvent 5 DECEMBER 09
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QUORUM MINIMUM NUMBER OF MEMBERS REQUIRED 5 MEMBERS FOR PUBLIC COMPANY 2 MEMBERS FOR PRIVATE COMPANY / ADJUOURNED MEETING OF PUBLIC CO. OR AS PER ARTICLES (SEC. 174) IF QUORUM DOESNT COME IN ½ HOUR, THE MEETING IS POSTPONED FOR SAME 5 DECEMBER 09 www.afterschooWEEK. l.tk 14 TIME NEXT
CHAIRMAN SENIORMOST DIRECTOR OR IF NO DIRECTOR IS PRESENT IN 15 MINUTES – MEMBERS TO CHOOSE AMONG THEMSELVES CHAIRMAN WILL HAVE CASTING VOTE 5 DECEMBER 09
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PROXY Right of every shareholder to proxy (send someone else in his place) – proxy form is is sent with notice – must be submitted in company before 48 hours before meeting. Proxy cannot speak in meeting, cannot vote in show of hand– he can only only vote in poll no person / company convass for proxy any member can inspect proxy list 5 DECEMBER 09
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Voting (177 to 185) By show of hand or by poll poll can be demanded by members / proxy / chairman and must be held in 48 hours of demand. Chairman will appoint 2 scrutinizer at poll out of whom one should be a member 5 DECEMBER 09
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Adjournment of meeting
1. when qorum is not present in ½ hours 2. when members demand adjuournment 3. when there is chaos – chairman may adjourn it for short period
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Resolution
Ordinary : 51% speical : 75% motion is a proposal – it is also a lso seconded by someone – when it is passed – it is resolution
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Resoluions requiring special notice (sec. 190) All the matters that require special notice – require that that 14 day notice be given - then then only that matter can be taken up in meeting some matters require special notice are : appointment of auditor (sec. 225) appointment of director (sec. 284) 5 DECEMBER 09
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Registration of resolutions ...
All special resolutions have to be registered with registrar of companies some other resolutions alsohave to be filed with registrar – like resolution to wind up company voluntarily 5 DECEMBER 09
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MINUTES (193 to 197) It is proceedings of the meetings - prepared by the secretary and must be signed by chairman in 30 days of the meeting they should not be in loose leaf - but be in hard bound books/ registers members have the right to inspect minute book / get a copy of it (on payment of fees @1 per 100 words) 5 DECEMBER 09
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Contents of chairman speech : Situation of the country situation of industry situation of company performance of company environment / employee / society welfare measures etc. 5 DECEMBER 09
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Postal Ballot Every member gives vote by post (ballot = vote) Company amendment act (2000) require postalballot on some matter like : alteration of memorandum / articles change in registered office 5 DECEMBER 09
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Definitions Foreign exchange sec 2 (n) : -foreign currency, notes, draft etc. Foreign security sec 2(o) : shares, debentures etc. In foreign company capital account transaction 2(e) : which alters assets / liabilities out of india current account transaction 2(j) : foreign trade payments etc. 5 DECEMBER 09
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Current account transactions They are generally permitted and dont require RBI permission. However, schedule I gives a list of transactions which require prior permission, some of these are : remittances relating to lottery, commission (if rate is more than 10% of export price), payments from NRE (rupee) account etc. 5 DECEMBER 09
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Prior approval of RBI is required in the following cases : Forex more than $10000 for private visit abroad gift over $5000 exchange facilities for emigrants / visitors above $5000 over $100000 per annum for any person purchase of foreign trade mark / franchise 5 DECEMBER 09
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Capital account transactions – require prior permission of RBI Lease of property in India for more than 5 years by foreigner require prior permission transfer of shares / sale of securities to foreigners require RBI approval foreign currency loans out of India by Indian residents transfer of immovable property out of India by residents 5 DECEMBER 09
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FDI
There are two routes : 1. automatic 2. government
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Restricted sectors for FDI
Retail, atomic energy, lottery business, gambling, betting, nidhi company, chi fund, real estate business, agricultural, plantation, trading in transferable development rights agriculture doesnt include floriculture, horticulture, seeds etc. 5 DECEMBER 09
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FDI In SSI
Upto 24% investments in SSI are permitted (even if it is in FTZ)
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ARCs
Investment upto 49% of capital in Asset Reconstruction companies is permitted by FDI
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Infrastructure companies
26% FDI and 23% FII investment is permitted in infrastructure companies
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Reporting of FDI ? AFTER ISSUE OF SECURITIES TO FOREIGNERS, INDIAN COMPANY / FIRM WILL HAVE TO FILE FC-GPR FORM WITHIN 30 DAYS TO AUTHORISED DEALER / RBI ISSUE PRICE OF SECURITIES HAVE TO BE FINALISED AS PER SEBI GUIDELINES 5 DECEMBER 09
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DIRECT INVESTMENT OUT OF INDIA INDIAN RESIDENTS ARE PERMITTED TO INVEST OUT OF INDIA IN COMPANIES IN JOINT VENTURES / WHOLLY OWNED SUBSIDIARIES (WOS) INVESTMENT IN REAL ESTATE BUSINESS/ BANKING BUSINESS IS PROHIBITTED. 5 DECEMBER 09
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HOW TO FUND INVESTMENTS OUT OF INDIA
Use your funds from FCCB, EEFC, foreign exchange funds, capitalisation of exports, swap of shares, foreign currency funds etc.
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Immovable property out of India A person requires RBI permission for acquring ac quring immovable property out of India. He may buy it using his RFC account (Resident foreign currency account) similarly, an NRI will have to take prior permission to acquire agriculture / plantation property in India – (no permission required for other property) 5 DECEMBER 09
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Place of business
As per FEMA prior approval of RBI is required for foreign companies which are opening their offices in India and similarly when Indian companies go out of India and open their office out of India 5 DECEMBER 09
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FCCB
Foreign currency convertible bond – these are permitted upto $500 million as per guidelines of RBI and SEBI
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Bonus and rights issue to NRIs
Indian companies can issue bonus / rights to NRI shareholders without RBI / SEBI permission – subject to sectoral caps. Bonus issue : free issue to a shareholder rights issue : a share issued to existing shareholder 5 DECEMBER 09
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Who is resident?
182 days of stay in India during last financial year.
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Difference between foreign currency and foreign exchange
Foreign currency means currency notes of other countries foreign exchange is a wider word and includes currency, cheque, drafts and other instruments of other countries. 5 DECEMBER 09
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HOW MUCH FOREIGN CURRENCY CAN YOU TAKE?
Authorised dealers can release upto $25000 for a business trip to any country except Nepal and Bhutan. If you want more amount, you have to obtain permission from RBI.
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What is non cooperative countries / territories?
List of the countries where you cannot c annot take foreign exchange – as identified by FATF (FINANCIAL ACTION TASK FORCE) see the website : www.fatf-gafi.org
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For students ... Students going abroad for studies are treated as NRIs and are given all the facilities that are offered to NRIs. They can receive remittances upto $100000 they can take with them $2000 for their expenditure in cash and remaining amount in traveller cheque/ bank draft. 5 DECEMBER 09
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Private visit abroad If you are going for private visit (for example e xample for tourism) you are allowed to take upto $10000 per annum from authorised dealers. You may visit more than once, but the total aggregate foreign exchange withdrawals may be upto $10000, beyond which you have to take permission from RBI. You Can take it for visit for education / employment also. 5 DECEMBER 09
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VISIT TO NEPAL & BHUTAN
No foreign exchange is available for visit to Nepal and Bhutan
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Visit to Iraq & Libya
Normally a person can get foreign currency notes upto $2000 when he visits abroad, but when a person is visiting Iraq or Libya, he can get upto $5000 .
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How to get foreign exchange?
Go to any authorised dealer / money exchanger and collect foreign exchange against rupees. You can do it in cash ca sh upto Rs. 50000. if the amount is more than Rs. 50000, you have to do it against cheque / draft. 5 DECEMBER 09
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ICC
With international credit card, you can make payment of international journals, international payments etc. You can also buy international book and meet personal expenses in foreign exchange through ICC. 5 DECEMBER 09
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Foreign Traveller
A foreign traveller can keep upto Rs. Rs. 5000, and foreign currency upto $5000 and total foreign exchange upto $10000. if the amount is more than this limit, the traveller will have to make declaration at airport in Currency Declaration form at the customs office. 5 DECEMBER 09
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Current account / capital account Current account transaction refers to expenditure on day to day items and other usual transactions. Capital account transactions refers to investments for long term like Debentures / mutual funds etc. Current account transactions in foreign exchange are generally permitted. Capital account transactions generally require prior permission. 5 DECEMBER 09
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Permissible capital account transactions.... Following capital account transactions are permissible : schedule I – for residents in India schedule II – fore persons from out of India Non permissible : - real estate investments, TDR (transferrable development rights), agriculture, plantation,nidhi company, chit fund, etc. 5 DECEMBER 09
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Schedule I for residents in India : insurance policy out of india investment in foreign security export / import of foreign currency etc. 5 DECEMBER 09
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Schedule II – for persons from out of India Foreign currency accounts export / import of foreign currency remittance out of india acquisition of immovable property in India etc. 5 DECEMBER 09
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Restrictions on Indian residents Generally Indian residents are not permitted to give loan in Rupees to a foreign nationals subject to some exceptions. Indian residents can take loan in Rupees on non-repatriation basis from non-residents subject to some conditions like amount has to come from NRE / NRNR/NRO account and period of loan should not be more than 3 year. Rate of interest should not be more than 2% than bank rate. ra te. 5 DECEMBER 09
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Indian companies issueing debentures... If Indian companies issues debentures to nonresidents, they have to inform RBI about a bout it. If they issue non-convertible debentures, they will have to give all the details to RBI in 30 days. Rate of interest should not be more than PLR of SBI + 300 basis points. Minimum duration of such debenture must be 3 years. The company cannot deal in agri / plantation / nidhi / chit fund activities. 5 DECEMBER 09
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Immovable property out of India RBI has made Foreign exchange management (acquisition and transfer of immovable property out of India) regulations 2000 – as per that no person can acquire ac quire immovable property out of India other than as gift without RBI permission. This doesnot apply to NRI or nonresidents. 5 DECEMBER 09
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Repatriation of foreign exchange If you earn any foreign exchange than you have to bring it to India within maximum 60 days (if you resident in India) as per FEM (realisation, repatriation and surrender of foreign exchange) regulations 2000 if you have taken some foreign exchange from an authorised dealer for travel etc, you have to return it back in 90 days from return re turn back to India 5 DECEMBER 09
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Facilities for foreign tourists For a short stay in India, they can open NRO rupee account for maximum 6 months. When they return back they can get it converted into foreign exchange. AD (Authorised dealers) have to ensure that repatriation of money from India is such which is repatriable. A resident in India can repatriate to his relative upto his salary only. Forign nationals living in India can open resident rupee account with banks and can deal in rupees. 5 DECEMBER 09
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Role of AD They have follow all the rules and ensure that they give money as per FEMA. They can release foreign exchange upto $25000 for business trip, $100000 for education / employment / medical purpose and upto $10000 for tourism purpose. They have to ensure that forign exchange is repatriated as per law. 5 DECEMBER 09
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Gifts from residents
You can give gifts upto Rs. 500000 to nonresidents.
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IMPORTANT INFORMATION DOCUMENTS EXIM POLICY HANDBOOK OF IMPORT AND EXPORT PROCEDURE FEMA EXCHANGE CONTROL MANUALS FEDAI DOCUMENTS 5 DECEMBER 09
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IMPORTANT DOCUMENTS AT THE TIME OF IMPORT IMPORT LICENSE FOREIGN EXCHANGE CONTROL COPY BILL OF ENTRY FOR HOME CONSUMPTION CUSTOMS ASSESSMENT CERTIFICATE OR POSTAL ASSESSMENT FORM 5 DECEMBER 09
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OPENING L/C Importer will approach his bank for opening an L/C L/C = Letter of credit the bank of the importer will give a guarantee gua rantee about payment to the bank of the exporter under L/C. When the exporter exports, he can obtain immediate payment from his bank on producing L/C of the importer's bank. The banks will have transaction between themselves. 5 DECEMBER 09 www.afterschool.tk 68
Difference between packing credit and L/C Packing credit is issued to exporter, but L/C is issued to importer. Packing credit covers all the expenditure till export, L/C covers the price of import = and as per this the exporter gets payment as soon as he exports. The bank of the importer provides this facility to the importer against some charges.
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Foreign exchange requirements Importer requires foreign exchange for imports. The banker / authorised dealer provides foreign exchange after looking at the necessary documents like import licence etc. The foreign exchange must be used for the purpose for which it has been obtained. The banker / authorised dealer has to ensure that only that amount is released which is actually required. 5 DECEMBER 09
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Mode of payment Authorised dealers will ensure that payment regarding impor is made in account. Cash payments are not permitted. In case advance payment is made, physical goods must come in 3 months. If the amount a mount is more than $25000 then there must be a guarantee from some international bank. Proper EC copy must be submitted by the importer 5 DECEMBER 09
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Time limit for settlement
Import payments must be settled within 6 months from the date of import. If it is more than 6 months, then it will be treated as ECB (external commercial borrowing) and will require prior permission of RBI/ Government 5 DECEMBER 09
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Export remittances
The exporter has to declare exports to RBI and has to ensure that payments are received within time and as per approved methods of payments. Payments can be collected through bank account / international credit card / FCNR / NRE account / escrow account etc 5 DECEMBER 09
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Exports that dont require declarations.... Demonstrations / sales promotions (UPTO 2% OF TOTAL EXPORTS ONLY) , gifts (upto 1 lakhs), exports for reimports only, goods sent for repairs, goods less than 25000 rupees in value, samples, publicity material, personal goods of travellers. 5 DECEMBER 09
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What is consignment export ?
Consignment means you are sending goods to someone for trade on your responsibility – and if goods are not sold, they are your property and you may get it back. Consignment export means sale or return return back. It has to be be settled in 6 months. 5 DECEMBER 09
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Exports requiring RBI approval
Examples : project exports, export as contract against imports, elongated payment period, exports relating to agrements of government of India or other governments
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Remittances relating to exports...
These include : agency commission, commission, export claims etc.
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SEZ
If you are operating from SEZ you are permitted to have foriegn currency account with an authorised dealer
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Authorised dealers
These are listed with RBI as per FEMA, they have to obtain RBI permission for some specified business transactions. Example: they cannot give guarantee in favour of exporters without RBI permission unless that exporter is listed as non-caution exporter. 5 DECEMBER 09
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Forfaiting
Factoring and forfaiting can be undertaken by EXIM bank / authorised dealers. Under this they collect payments regarding export receivables against commission.
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New trends.... Indian companies are now permitted to have foreign exchange accounts in other countries and to have properties in other coutnries (with prior approval from RBI) and they can acquire a cquire businesses / firms in other countries also as per their business requiremetns (as per govt. Policies) . 5 DECEMBER 09
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PEM
PEM stands for Project Export memorandum – when companies are entering into project exports, they have to follow guidelines relating to this. Project exports generally has deferred payments - therefore prior permission must obtained before enteringi into PEM. 5 DECEMBER 09
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Other provisions
Authorised dealers have to ensure that they get copesof GR Form and other documents required andforeign currency is used for acutal import / export and all required documents are submitted. 5 DECEMBER 09
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FDI Upto 100% Foreign Direct Investment is permitted under automatic route in many sectors. Investors will have to inform regional office of RBI in 30 days of remittances. In some sectors industrial licence is required and in some sectors, FDI is not permitted. But in most of the sector, now it is permitted including atomic energy etc. 5 DECEMBER 09
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Shares issue to NRIs
Within 30 days of share issue to Non-residents, FC – GPR form has to be submitted. They have to submit all the details like they have implemented all the provisions of companies act & FEMA for this purpose. 5 DECEMBER 09
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Transfer from NR Now non residents can transer shares to other non-residents / residents and such transfer can be for consideration / as a gift. This tranfer can be only to an NRI / resident Indian. They can also sell it in stock exchanges through brokers. They will have to take NOC from income tax department 5 DECEMBER 09
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Tranfer by residents As per RBI notification of 2000, residents can also tranfer to non-residents – as per FEMA – so long as it is in automatic route. You have to keep in mind SEBI (Substantial acquisition of shares and takeover) regulation 1997 + required regulations under IRDA or other such laws. 5 DECEMBER 09
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Permission from RBI If it is not falling in automatic route, apply a pply for permission to RBI with a copy of FIPB approval and details like pric, mode of payment etc. Price must not be lower than the higher of the average weekly high / low of last 6 months. FC-GPR form with details of existing shareholding must also be submitted. 5 DECEMBER 09
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FDI in different modes FEMA regulations 2000 give schedule I which gives list of industries for which automatic route is there. It doesnt requre prior RBI permission, for othe industries, take prior permission from RBI. Rate of dividend should not exceed SBI prime lending rate + 300 basis points. For other sectors take permission from SIA / FIPB/ RBI for investments. 5 DECEMBER 09
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PORTFOLIO INVESTMENT
FIIs including asset management companies, mutual funds, hedge funds etc. Are permitted to invest in shares in India. FII have to invest in ratio of 70:30 in equity and debt when they invest in India, they are also permitted to invest as 100% debt. 5 DECEMBER 09
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Limits for FII investment An NRI / PIO can buy upto 5% 5% in a company. All NRI/PIO/OCB can invest upto 10% in a company. A single single FII FII can invest upto upto 10% in a company and all FIIs together can invest upto 24% in a company. Companies can raise this limit by passing board resolution and special resolution in general meeting subject to sectoral cap (like 49'% or 74% etc.) 5 DECEMBER 09
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FII dealings
FII can deal through stock exchanges without RBI permission, but if they are dealing without stock exchanges, they have to obtain permission from RBI.
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NRI dealings
NRIs have to deal through NRE /FCNR account only. Sometimes they are permitted to deal in NRO account also – when they are investing on non-repatriation basis.
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PERMITTED FIIs
FOLLOWNG CAN REGISTER AS FII WITH RBI & SEBI: banks, pension funds, hedge funds, mutual funds, insurance companies, investment funds etc. 5 DECEMBER 09
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ECB
External commercial borrowings : Indian comapnies can raise loans from other countries through various routes like : FRN (floating rate note), ECP (euro commercial paper), FCCB (foreign currency convertible bond), NIF (note issue facility), syndicate loan, etc. 5 DECEMBER 09
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ECB MECHANISMS Companies engage in many ECB mechanisms like : arbitrage hedging underwriting fund raising etc. 5 DECEMBER 09
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ADR /GDR American depository receipt / Global depository receipt are permitted by RBI as per scheme of 1993, companies can also sponsor issue of ADR / GDR. Infosys, Wipro etc. Are some of the companies which went for ADR / GDR during 1990s. After ADR/ GDR company will have to submit return in proforma as per annexure C of RBI notification 2000. 5 DECEMBER 09
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Royalty / technical fees
Upto $2million of royalty upto 5% of domestic sale or 8% of export sale is permitted as royalty.
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EEFC account Exchange Earners Foreign Currency account – a person who has earned foreign currency can retain 50% of the foreign currency earned ea rned in EEFC account with authorised dealers. This account can be used for current account transactions or for permitted capital account transactions. 5 DECEMBER 09
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RFC account
Resident foreign currency account – if an NRI is returning India for ever, he can keep his foreign currency in RFC account and there are no restriction on use of funds in RFC account.
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RFC (DOMESTIC) ACCOUNT
A Resident who lives in India but receives foreign exchange payments / honorarium can open RFC (Domestic) account for retaining such payments.
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Liberalised Remittance Scheme
Residents can use upto $25000 for payments for permitted transactions per annum in this scheme Foreign Exchange Management (current account transactions) rules 2000 schedule I and II. 5 DECEMBER 09
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[email protected] PGPSE – WORLD'S MOST COMPREHENSIVE PROGRAMME IN SOCIAL ENTREPRENEURSHIP 5 DECEMBER 09
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