Do you being a software company wish to acquire an overseas software company ?
1.Note the following :
(a) Government has by Circular F.No : 15/22/99 – NRI dated 27.12.1999 issued by the Ministry of Finance. The investment division decided to liberalize the working norms ruling overseas mode of financing and investment assets by software companies.
(b) to provide an automatic and flexible way for Indian software companies to get foreign software companies as a part of their business strategy, funded through the issue of American Depository Receipts (ADRs) or Global Depository Receipts (GDRs). An automatic route has been allowed only for the cause of assets of software companies abroad.
(c) for such acquisition your company will not need either the approval of the notable committee for foreign investment. The government of India for accessing the ADR/GDR proceeds would be used for acquisition on a back to back basis.
(d) if your company has not already floated ADRs/GDRs then you have to get one time complete approval from the special composite committee as mentioned above. Such a composite committee will be both for the purpose of foreign investments as well as for approving ADR/GDR flotation.
(f) the said committee would while considering the value of the proposal, also take into account the privacy of the plan. If required, would give flexibility for negotiations within exact parameters.
(g) ADR/GDRs to be issued by your company under the same scheme would be by way of expansion in the capital base that is by issue of fresh underlying shares of the company.
2. Check whether your company has already floated ADRs/GDRs and thus has your company’s track recorded reviewed. It is currently listed in the foreign exchange as the said automatic facility is only available to such companies.
3. Keep the value limit for the said scheme up to US$ 100 million which will be an annual limit for your company for one or more acquisitions.
4. Acquire the shares of the foreign software company by giving adequate ADRs/GDRs. So as to cover the cost of acquisition.
5. Ensure that the said proposal conforms to the evaluation norms as per the proposal of an investment banker. In case of a listed company will be formed on the current market capitalization of the foreign company ( found on the monthly average trading on the foreign exchange). If any, as per the guidance of the investment banker in the due-diligence reports.
(a) for the plan of the similar scheme, an investment banker would be specified as an investment banker registered with the exchange commission in the USA or securities. The proper regulatory controls in France, Germany, Singapore or in Japan. The financial services authority in UK.
(b) on receipt of same particulars, RBI will issue certain identification number in respect of each foreign company is received. Your company will have to follow the existing needs repatriation of entitlements from the foreign concerns, regarding submission of annual performance reports,etc.
(c) the similar flexibility in the regulatory framework has been assigned to encourage The Indian software industry is totally utilize their intrinsic strengths to become global players.
(d) under the existing rules for foreign investments by Indian companies. The automatic approval routes available without mention to the RBI/Government. Such foreign investments are funded up to a maximum of 50% out of incomes of the said ADR/GDR issue. It has been confirmed by the Government.
(e) But, the issue of ADR/GDR is still needed. It is approved by the government in all cases. The investment for acquiring the foreign software company through 100% proceeds of the said ADR/GDR. A company has the automatic route.
(f) for such cases not verifying to the criteria required above. The application for consideration of the special composite committee have to be made to the RBI in the current forms for foreign shares. For ADR/GDR together by an applicant, the option to increase the information.
(g) the aforesaid liberalized norms will treat assets of foreign software companies only by Indian software companies. It is registered in India. They engaged in production of software or manufacturing where 80% of the turnover is from software activities in the 3 previous financial years.
7. Ensure that the details of the transaction/acquisition involving the total of ADRs/GDRs issued. The share of foreign equity level in your company on account of such issue as :
The related documents like valuation report by the invest banker in furnished to the Overseas Investment Division, RBI Exchange Control Department, Mumbai. The Ministry of Finance Department of Economic Affairs within thirty days of completion of such transactions.
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