ARC’s exempted to hold minimum 26% shareholding in borrower companies
Under the Securitization Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003 (“Guidelines”), every Reconstruction Company (“RC”) is required to frame a policy, duly approved by its board of directors for conversion of debt into shares of the borrower company. The shareholding of the RC as per Guidelines shall not exceed 26% of the post converted equity of the borrower company.
RBI pursuant to its circular dated November 23, 2017 has now exempted Asset Reconstruction Companies (“ARCs”) from the requirement of holding minimum 26% shareholding in any company, subject to the following conditions:
The extent of shareholding post conversion of ‘debt’ into ‘equity’ shall be in accordance with the Foreign Direct Investment limit, applicable to any specific sector.