De-registered MSEs with SSI status can sell stake to foreign investors: RBI
Updated: Feb 21, 2014 12:43:25pm
Mumbai, Feb 21 (KNN) The Reserve Bank of India (RBI) has allowed the micro and small enterprises (MSEs) which are no more registered with their small scale industry status to sell stake to foreign investor to help them finance their expansion programme in the allowed sectors.
“…an Indian company which is a small scale industrial unit and which is not engaged in any activity or in manufacture of items included in Annex A, may issue shares or convertible debentures to a person resident outside India, to the extent of 24 per cent of its paid -up capital provided that such company may issue shares in excess of 24 per cent of its capital, with certain conditions.
The conditions are - it has given up its small scale status; it is not engaged or does not propose to engage in manufacture of items reserved for small scale sector; and it complies with the ceilings specified….” an RBI notification said.
“It has been decided that such companies may issue shares or convertible debentures to a person resident outside India,” it added.
"A company which is reckoned as Micro and Small Enterprises (MSE)... may issue shares or convertible debentures to a person resident outside India, subject to the limits prescribed," the apex bank said.
It also allowed industrial units that are not MSEs to issue shares in excess of 24 per cent of its paid up capital with approval of the government.
"Any Industrial undertaking, with or without FDI, which is not an MSE,...may issue shares in excess of 24 per cent of its paid up capital with prior approval of the Foreign Investment Promotion Board," the RBI said.
Small scale units are not allowed to engage in banking, financial services, civil aviation, petroleum, housing and real estate development for investment, venture capital, investment in infrastructure and service sector, atomic energy/related projects, defence, agriculture, print media, broadcasting and postal services.
As per the existing RBI rules, small units may issue shares or convertible debentures to a person or an entity outside India (other than a citizen of Bangladesh or Pakistan or Sri Lanka) up to 24 per cent of paid-up capital if it has given up its small scale status.
They can also issue shares or debentures if they are not engaged in manufacturing of items reserved for small scale sectors.
The RBI decision will help small units finance their expansion programme in the allowed sectors.
Further, in terms of the provisions of MSMED Act, - in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951, a micro enterprise means where the investment in plant and machinery does not exceed twenty five lakh rupees; a small enterprise means where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; and in the case of the enterprises engaged in providing or rendering services, a micro enterprise means where the investment in equipment does not exceed ten lakh rupees; a small enterprise means where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees. (KNN/SD)
“…an Indian company which is a small scale industrial unit and which is not engaged in any activity or in manufacture of items included in Annex A, may issue shares or convertible debentures to a person resident outside India, to the extent of 24 per cent of its paid -up capital provided that such company may issue shares in excess of 24 per cent of its capital, with certain conditions.
The conditions are - it has given up its small scale status; it is not engaged or does not propose to engage in manufacture of items reserved for small scale sector; and it complies with the ceilings specified….” an RBI notification said.
“It has been decided that such companies may issue shares or convertible debentures to a person resident outside India,” it added.
"A company which is reckoned as Micro and Small Enterprises (MSE)... may issue shares or convertible debentures to a person resident outside India, subject to the limits prescribed," the apex bank said.
It also allowed industrial units that are not MSEs to issue shares in excess of 24 per cent of its paid up capital with approval of the government.
"Any Industrial undertaking, with or without FDI, which is not an MSE,...may issue shares in excess of 24 per cent of its paid up capital with prior approval of the Foreign Investment Promotion Board," the RBI said.
Small scale units are not allowed to engage in banking, financial services, civil aviation, petroleum, housing and real estate development for investment, venture capital, investment in infrastructure and service sector, atomic energy/related projects, defence, agriculture, print media, broadcasting and postal services.
As per the existing RBI rules, small units may issue shares or convertible debentures to a person or an entity outside India (other than a citizen of Bangladesh or Pakistan or Sri Lanka) up to 24 per cent of paid-up capital if it has given up its small scale status.
They can also issue shares or debentures if they are not engaged in manufacturing of items reserved for small scale sectors.
The RBI decision will help small units finance their expansion programme in the allowed sectors.
Further, in terms of the provisions of MSMED Act, - in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951, a micro enterprise means where the investment in plant and machinery does not exceed twenty five lakh rupees; a small enterprise means where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; and in the case of the enterprises engaged in providing or rendering services, a micro enterprise means where the investment in equipment does not exceed ten lakh rupees; a small enterprise means where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees. (KNN/SD)
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