1. 1404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

2. Introduction
It was on the occasion of India’s 69th
Independence Day that Prime Minister
Narendra Modi announced the Start-up
India initiative from the ramparts of India’s
iconic Red Fort. Just five months later, on
16th January 2016, the PM unveiled
the historic Start-up Action Plan.
2404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

3. 3404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

4. 4404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

5. Background
Attention of Authorised Dealer Category-I (AD Category-
I) banks is invited to the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident
outside India) Regulations, 2000, notified by the Reserve
Bank vide Notification No. FEMA.20/2000RB dated 3rd
May 2000, as amended from time to time in respect of
regulations to prohibit, restrict or regulate, transfer or
issue security by a person resident outside India.
5404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

6. Background
Pursuant to paragraph 14 of the Sixth Bi-Monthly
Monetary Policy Statement for 2015-16, Reserve Bank of
India vide Press Release dated February 2, 2016, had
announced that in case of Start-ups, certain permissible
transactions under the existing regulatory framework shall
be clarified. One of the issues related to issue of shares
without cash payment by the investor through sweat
equity or against any legitimate payment owed by the
company remittance of which does not require any
permission under FEMA, 1999.
6404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

7. Clarification provided
a. Issue of shares without cash payment through
sweat equity: Reserve Bank of India vide Notification
No.FEMA.344/2015 RB dated June 11, 2015 has
permitted Indian companies to issue sweat equity,
subject to conditions, interalia, that the scheme has
been drawn either in terms of regulations issued
under the Securities Exchange Board of India Act,
1992 in respect of Central Government under the
Companies Act 2013 in respect of other companies.
7404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

8. Clarification provided
b. Issue of shares against legitimate payment owed:
Reserve Bank of India vide Notification No. FEMA
315/2014RB dated July 10, 2014, has permitted
Indian companies to issue equity shares against any
other funds payable by the investee company (e.g.
payments for use or acquisition of intellectual
property rights, for import of goods, payment of
dividends, interest payments, consultancy fees, etc.),
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9. Clarification provided
b. remittance of which does not require prior
permission of the Government of India or Reserve
Bank of India under FEMA, 1999 subject to
conditions relating to adherence to FDI policy
including sectoral caps, pricing guidelines, etc. and
applicable tax laws (cf. paragraph 3 of Schedule 1 to
Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident Outside India)
Regulations, 2015).
9404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

10. Clarification provided
Authorised Dealer banks may bring the contents of this
circular to the notice of their constituents and
customers concerned and advise them to refer to the
above notifications for further details.
The directions contained in this circular have been
issued under sections 10(4) and 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and are
without prejudice to permissions/approvals, if any,
required under any other law.
10404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

11. 11404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

12. Background
Attention of Authorised Dealer Category-I (AD
Category-I) banks is invited to the Foreign
Exchange Management (Foreign currency accounts
by a person resident in India) Regulations, 2000,
notified by the Reserve Bank vide Notification
No.FEMA.10 (R)/2015RB dated January 21, 2016,
as amended from time to time.
12404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

13. Background
Pursuant to paragraph 14 of the Sixth Bi-Monthly
Monetary Policy Statement for 2015-16, Reserve
Bank of India vide Press Release dated February 2,
2016, had announced that in case of Start-ups, to
facilitate ease of doing business, certain permissible
transactions under the existing regime shall be
clarified. One of the issues relate to the Start-ups
accepting payment on behalf of overseas
subsidiaries.
13404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

14. Clarification provided
a. A Start-up in India with an overseas subsidiary is
permitted to open foreign currency account abroad to
pool the foreign exchange earnings out of the
exports/sales made by the concerned Start-up;
b. The overseas subsidiary of the Start-up is also
permitted to pool its receivables arising from the
transactions with the residents in India as well as the
transactions with the non-residents abroad into the
said foreign currency account opened abroad in the
name of the Start-up;
14404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

15. Clarification provided
c. The balances in the said foreign currency account as due to
the Indian Start-up should be repatriated to India within a
period as applicable to realisation of export proceeds
(currently nine months);
d. A Start-up is also permitted to avail of the facility for realising
the receivables of its overseas subsidiary or making the above
repatriation through Online Payment Gateway Service
Providers (OPGSPs) for value not exceeding USD 10,000 (US
Dollar ten thousand) or up to such limit as may be permitted
by the Reserve Bank of India from time to time under this
facility; and
15404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

16. Clarification provided
To facilitate the above arrangement, an appropriate contractual
arrangement between the Start-up, its overseas subsidiary and
the customers concerned should be in place.
Authorised Dealer banks may bring the contents of this circular to
the notice of their constituents and customers concerned and
advise them to refer to the above notifications for further details.
The directions contained in this circular have been issued under
sections 10(4) and 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999) and are without prejudice to
permissions/approvals, if any, required under any other law.
16404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only

17. 17404, Devika Tower, Chander Nagar Ghaziabad 201011 l Confidential l for private circulation only