RBI Clarifies the Options in the Shareholders Agreements

Reserve Bank of India has recently clarified its position as to the options in the shareholders and share subscription entered into by the Indian Companies allotting instruments to the person resident outside India. Prior to the August 2013, such options were illegal in terms of Securities Contracts Regulation Act but in 2013 Securities Exchange Board of India (SEBI) clarified that such options would be legal prospective to such notification issued by SEBI subject to the conditionalities issued in such notification and the regulations issued under Foreign Exchange Management Act, 1999. Reserve Bank (RBI) being the nodal agency for the same has clarified the said position by issuing the seventeenth amendment to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 wherein RBI has inter alia provided that; "the person resident outside India holding the shares or debentures of an Indian company containing an