Finance Ministry Amends FEMA Rules to Allow Bonus Shares for Foreign Shareholders in Prohibited Sectors
Finance Ministry Amends FEMA Rules to Allow Bonus Shares for Foreign Shareholders in Prohibited Sectors
The Ministry of Finance has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, enabling Indian companies operating in sectors where Foreign Direct Investment (FDI) is restricted to issue bonus shares to their existing foreign shareholders.
The new provision, notified under the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2025, allows such companies to issue bonus shares provided that the shareholding pattern remains unchanged post-issuance. This move is aimed at facilitating equity restructuring and improving capital management flexibility for companies in restricted sectors, without contravening FDI policy norms.
According to the notification (S.O. 2549(E)), dated June 11, 2025, an Indian company engaged in an FDI-prohibited sector may now issue bonus shares to non-resident shareholders, as long as the shareholders were already existing before the issuance and the bonus issue does not alter the proportion of shareholding.
Additionally, any bonus shares previously issued under similar conditions before the notification date will be retrospectively treated as valid under the relevant FEMA regulations of 2000 and 2017.
The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 have seen several amendments to accommodate evolving investment environments. This latest change marks the 15th amendment, aligning the rules more closely with business realities, especially for companies in sensitive sectors.
Notification Details
Notification No. F. No. 1/9/2024-EM
Date: 11th June, 2025
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Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
