MS Sahoo Committee has also suggested that companies (listed or unlisted) should be allowed to issue DRs against any underlying securities, which may be equity or debt.
Depository Receipts, used by companies to raise capital from overseas investors, will be soon treated as shares if they have voting rights. The Finance Ministry today said it has accepted the recommendations of the MS Sahoo Committee that was set up in September to review of rules governing foreign currency nconvertible bonds (FCCBs) and depository receipts (DRs).
The Committee has recommended that the DRs should be counted as "public shareholding if they have attached voting rights for the holders". It has also suggested that companies (listed or unlisted) should be allowed to issue DRs against any underlying securities, which may be equity or debt.
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It further said that DRs can be issued for raising funds by issuing new shares or against the existing equity. According to the committee, the tax treatment of DRs should be similar to that of underlying securities. "The conversion of a DR into the underlying securities and vice versa should not be taxable events. The trading of DRs outside India should not attract any tax in India," it said.
The Committee was set up under ICSI Secretary and former Sebi member Sahoo to review the decade-old Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993. The Finance Ministry said it has decided to accept the recommendations of the committee and the new scheme and tax related amendments would be notified later.
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