Escrow Rbi Rules

Schedule 5
(See Regulation 5(5))
Terms and conditions for opening of Escrow Account
An Escrow account in INR can be opened jointly and severally with an Authorised Dealer in India as an Escrow Agent in
the following cases subject to the terms and conditions specified in this schedule.
1. By non-resident corporates for acquisition/ transfer of shares/ convertible debentures through open offers/
delisting/ exit offers.
a. Permitted Credits in the Escrow account are:
i. Foreign Inward remittance through banking channels
b. Permitted debits in the Escrow account are:
i. As per SEBI (SAST) Regulations or any other regulations issued by the Security Exchange
Board of India (SEBI).
c. The resident mandatee empowered by the overseas acquirer for this purpose, may operate the
Escrow account in accordance with SEBI (SAST) Regulations or any other regulations issued by the
SEBI.
d. The Escrow account shall be closed immediately after completing the requirements as outlined
above.
2. By resident and non-resident acquirers for acquisition/ transfer of shares
a. Permitted Credits in the Escrow account are:
i. Foreign Inward remittance through banking channels;
ii. Receipt of rupee consideration through banking channels by the resident acquirer of shares
who proposes to acquire from non-resident holders by way of transfer.
b. Permitted debits in the Escrow account are:
i. Remittance of consideration for issue/ transfer of shares directly into the bank account of
the beneficiary (issuer in India or transferor of shares in India or abroad);
ii. Remittance of consideration for refund to the initial remitter of funds in case of failure/
non-materialisation of FDI transaction for which the Escrow account was opened.
c. The securities kept/ linked with the Escrow account may be linked with demat account maintained
with SEBI authorised Depositary Participants as Escrow agents.
d. The Escrow account shall remain operational for a maximum period of six months only and the
account shall be closed immediately after completing the requirements as outlined above or on
completion of six months from the date of opening of such account, whichever is earlier. In case the
Escrow account is required to be maintained beyond six months, specific permission from the
Reserve Bank has to be sought.
e. Notwithstanding what has been stated in paragraph d. above, in case of transfer of shares between
a resident buyer and a non-resident seller or vice-versa, if so agreed between the buyer and the
seller, an escrow arrangement may be made between the buyer and the seller for an amount not
more than twenty five per cent of the total consideration for a period not exceeding eighteen
months from the date of the transfer agreement.
3. Acquisition/ transfer shall be in accordance with the provisions of Foreign Exchange Management (Transfer
or Issue of Security by a person resident Outside India) Regulation 2000, as amended from time to time and
Security Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 [SEBI
(SAST) Regulations] or any other regulations issued by the SEBI.
4. The Escrow account shall be non-interest bearing.
5. No fund or non-fund based facilities would be permitted against the balances in the Escrow account.
6. Requirement of compliance with KYC guidelines issued by the Reserve Bank shall rest with the Authorised
Dealer.
7. Balance in the Escrow account, if any, may be repatriated at the then prevailing exchange rate (i.e., the
exchange rate risk will be borne by the person resident outside India acquiring the shares), after all the
formalities in respect of the said acquisition are completed.
8. In cases, where proposed acquisition/ transfer does not materialise, the authorised dealer may allow
repatriation/ refund of the entire amount lying to the credit of the Escrow account on being satisfied with the
bonafides of such remittances.
9. For the purpose of FDI reporting, date of transfer of funds into the bank account of the issuer or transferor of
shares, as the case may be, shall be the relevant date of remittance.

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Escrow Rbi Rules

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Schedule 5

(See Regulation 5(5))

Terms and conditions for opening of Escrow Account

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