Message-ID: <12975122.1075844555172.JavaMail.evans@thyme> Date: Mon, 12 Jun 2000 02:58:00 -0700 (PDT) From: sara.shackleton@enron.com To: samantha.boyd@enron.com Subject: Genesys : Sale of Shares : RBI approvall Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Sara Shackleton X-To: Samantha Boyd X-cc: X-bcc: X-Folder: \Sara_Shackleton_Dec2000_June2001_1\Notes Folders\Sent X-Origin: SHACKLETON-S X-FileName: sshackle.nsf ----- Forwarded by Sara Shackleton/HOU/ECT on 06/12/2000 09:58 AM ----- Donna Lowry 06/09/2000 04:45 PM To: Sara Shackleton/HOU/ECT@ECT, Sheila Glover/HOU/ECT@ECT cc: Subject: Genesys : Sale of Shares : RBI approvall fyi ---------------------- Forwarded by Donna Lowry/HOU/ECT on 06/09/2000 04:44 PM --------------------------- Lauren Hagerty@ENRON_DEVELOPMENT 06/09/2000 01:56 PM To: Donna Lowry@ECT cc: Subject: Genesys : Sale of Shares : RBI approvall FYI. It would seem we still have a lot of ground to cover on selling Genesys. ---------------------- Forwarded by Lauren Hagerty/ENRON_DEVELOPMENT on 06/09/2000 01:55 PM --------------------------- Chandran Bhaskar 06/09/2000 12:15 AM To: Rahul Basu/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Sandeep Katwala/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Raj Thapar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Gopalakrishnan Subramaniam/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Veena Srinivasan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Lauren Hagerty/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Genesys : Sale of Shares : RBI approvall Dear Rahul, Your mail on the above subject refers. As regards to the approvals to be followed in sale of the Genesys shares by Enron Distribution Ventures MHC Ltd., Mauritius, i list below the following: (A) Approvals required: Per section 10 B (1) the FEMA Regulations effective 1 June 2000, transfer by way of sale by a person resident outside India of the shares / debentures held by him to person resident in India will require prior permission of RBI. Veena, your activity chart shows that Form TS 1 is to be filed after the sale is effected, money received and at the time of remittance of sale proceeds. Since, the Act prescribes prior approval, we should sell only after receipt of RBI approval and not before. The requisite form to be filed for seeking approval is Form TS1. If we are effecting the sale through a private arrangement , the application should be supported with the average quotation of the share price ( average of daily high and low) for one week proceeding the date of application, duly certified by a Chartered Accountant. If the sale proposed to be effected on the floor of the exchange to the general public at the prevailing market price, the Chartered Accountant's certification is not required. Since, we intend selling at the floor, this certification is not required. (B) Thinly Traded: I refer to Veena's query on whether Genesys shares are thinly traded. Per section 10 - Explanation i) the share will be treated as thinly traded if the annualised trading turnover in that share, on a main stock exchanges in India, during the six calendar months preceding the month in which the application is made, is less than 2%( by number of shares) of the listed stock. Though we can take a view that Genesys shares are listed for trading only from 5 June 2000, it is to be noted that the new shares issued to (a) the erstwhile Genesys shareholders are issued as a result of the scheme of amalgamation approved by the High Court, Mumbai & (b) the applicants of the private placement ( incl. Enron) and the new amalgamated company, Genesys International Corporation Limited, whose previous name was Aeke Trading and Investments Limited, was a listed Company at the Mumbai Stock Exchange. Hence, it is advisable to check whether the shares of AEKE were thinly traded or not. FYI, the Paid - Up Equity of AEKE prior to the Amalgamation was 2,40,000 Equity Shares of Rs. 10/- each aggregating Rs. 24,00,000/-. We can apply the test as explained above on the AEKE shares prior to Genesys amalgamation just to satisfy ourselves that it was not thinly traded. It is better to check this provision. (C) Formalities for remittance: Per section 11of the FEMA Regulations, remittance of sale proceeds shall be made by a authorised dealer upon: satisfying himself that the security was held by the seller on repatriation basis ( we need to submit the Foreign Collaboration Approval Letter No. 3/9 SIA/NFC 99 NRI to the AD) submission of the contract note of the Broker effecting the sale and submission of a No Objection Certificate/ tax clearance certificate. (D) Income Tax - NoC / TCC: I understand from Veena that there is a current thinking that through a Chartered Accountants Certificate stating the double taxation treaty, we need not obtain the NoC of the IT. In my view, since the regulation stipulates an NoC / TCC from the IT Department, i doubt whether it is doable without a BoC / TCC of the IT. In the past, this was followed and with an Undertaking from the Company, supported with a Chartered Accountants Certificate,confirming there are no tax implications in the underlying transaction, one could remit the funds without a NoC/TCC from IT. But, given a very specific statement u/s 11 of the FEMA Regulations and the same being introduced only from 1 June and hasn't been time tested, i doubt whether the Authorised Dealer will accept our view and effect fund transfer with an Undertaking and CA Certification. In my view, NoC would be a pre requisite. (E) Bank Account: Assuming that the NoC is required, there will be a timing difference between we receive the sale proceeds and remitting the money to Mauritius after obtaining the NoC from IT. It is certainly not advisable to hold the instrument without encashing it. Hence, opening of a Bank Account in India to encash the instrument is warranted. I refer to Mike's mail on allowing the Broker to hold the funds in a trust account for EDVMHC. In my view, instead of the Broker holding the same, the AD himself can hold it on trust for EDVMHC. But this needs to checked and properly documented with the Bank ( Authorised Dealer) and as well at EDVMHC. From Due Diligence and Compliance point of view, i would suggest to take the route of opening of an rupee Bank Account than the trust route. Since it is not a demated shares, opening of an custodial account is not required. This needs to be checked with the authorised dealer. (F) Application to RBI / TS 1: I suggest that while making the RBI Application under TS 1, it is advisable to state and seek their concurrence or keep them informed as to point E above. We could mention in our application to RBI and seek approval as to (a) opening of an rupee account or (b) authorising the AD to hold the same in an trust account for EDVMHC. RBI while according its approval, will look in to the transaction and accord approval for this as well. May be, before filing the application with RBI, we could meet with the concerned official in Exchange Control Department and walk him through with the transaction so that the approval is obtained at the earliest. (G) Original Funds: I understand that while making this investment, the funds have not come in from EDVMHC, Mauritius or it has come from a Company from Caymon Islands. Tax need to confirm whether the money received from Cayco ( though on behalf of an Mauritius Company) would qualify for tax benefits. (H) Confirmation by Genesys on non Lock-in: There are no documents available like the Board Resolution while alloting the Shares to EDVMHC or the application to Stock Exchange which would specify distinctive numbers of the Lock-in Shares nor it is stated in the Information Memorandum as whether shares offered under this IM are freely tradable. Though the SEBI Guidelines are clear that if the shares do not form part of the Promoters Quoto, they are freely tradable, it is advised that we take a certificate from Genesys on this. I have spoken this with Rajesh who confirmed that such a certificate from Genesys can be otained without any difficulty. Please feel free and do call me for any further assistance from my end. Regards Bhaskar ---------------------- Forwarded by Chandran Bhaskar/ENRON_DEVELOPMENT on 06/09/2000 08:01 AM --------------------------- Sandeep Katwala 06/07/2000 12:47 PM To: Chandran Bhaskar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Subject: Genesys : Sale of Shares : RBI approval input into Rahul please. ---------------------- Forwarded by Sandeep Katwala/ENRON_DEVELOPMENT on 06/07/2000 12:36 PM --------------------------- Rahul Basu 06/07/2000 12:37 PM To: Gopalakrishnan Subramaniam/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rajesh Agarwal/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rajesh Shekhar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sandeep Katwala/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Raj Thapar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Subject: Genesys : Sale of Shares : RBI approval Seems to me from a read of the regulations that we are required Clause 10 B (1) to get RBI approval for the transfer on a TS1 form. Please note that the TS1 form requires a CA certificate If we sell on an exchange through a broker, clause 10 B (2) (a) (i) will apply. Since the transfer takes place when its recorded on the register held by the company, there is time from when the sale order is given to the broker. Clause 11 (2) provides the conditions by which the AD will repatriate the money to Mauritius. Please note the requirement for an IT clearance in clause 11 (2) (c). Also, it seems from Clause 11 (2) (b) that if we sell through the exchange, then approval of RBI under the TS1 is not required for the repatriation. Rahul