The Reserve Bank of India (RBI) has amended the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (TISPRO), through a notification on 10 January to allow startups to issue convertible notes to foreign investors.
Definition of “convertible note”
Regulation 2 of TISPRO has been amended to include the definition of “convertible note” as an instrument issued by a startup company showing a receipt of money as debt, repayable at the option of the holder, or an instrument which is convertible into a number of equity shares of a startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument.
Minimum investment amount
The minimum investment amount needs to be equal to or more than ₹2.5 million (US$37,000) receivable in a single tranche.
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