Exchange rate for conversion of foreign currency liabilities into equity clarified: use rate on agreement date; fair value at conversion. Where an Indian company converts a foreign currency liability into equity, the rupee equivalent shall be calculated by applying the exchange rate prevailing on the date of the agreement; the borrower may, by mutual agreement with the non resident, issue shares for a lower rupee amount, and the fair value of the equity is to be determined with reference to the date of conversion. The same principle applies, mutatis mutandis, to conversion of lump sum fees, royalties and similar payables into equity or securities.
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Exchange rate for conversion of foreign currency liabilities into equity clarified: use rate on agreement date; fair value at conversion.
Where an Indian company converts a foreign currency liability into equity, the rupee equivalent shall be calculated by applying the exchange rate prevailing on the date of the agreement; the borrower may, by mutual agreement with the non resident, issue shares for a lower rupee amount, and the fair value of the equity is to be determined with reference to the date of conversion. The same principle applies, mutatis mutandis, to conversion of lump sum fees, royalties and similar payables into equity or securities.
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