Understanding the FDI Framework – Investment into India

Foreign Direct Investment is a concept where a controlling investment is made by a company based in one country into a company based in another company. Not all businesses in India can attract FDI and hence, the rules and regulations differ for companies from different sectors and industries.INVESTMENT IN INDIA

Wed Apr 06 2022 | Business Law | Comments (0)

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During the past few years, it has been  observed that investment into India has been a  major non- debt financial force behind the rise  of the Indian Economy. FDI in India is done  through a wide range of industries and it reflects the remarkable scope, faith  and trust that foreign investors have in the Indian economy.
 
To ensure an uninterrupted inflow of  investment, the Indian government has created conducive trade atmosphere and effective  business policy measures.  This strategy  is reflected in the steps taken by the government, such as easing out the  restrictions levied on sectors like stock exchanges, power exchanges, defence,  telecommunications, aviation etc.

ENTRY  ROUTES FOR INVESTMENT

Investments can be made by non-residents in the equity  shares/fully, compulsorily and mandatorily convertible debentures/fully,  compulsorily and mandatorily convertible preference shares of an Indian  company, through the following routes:

Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the  investment.
 
The investment activities, which are  not covered under the automatic route, require prior approval of the Government  which are considered by the Foreign Investment Promotion Board (FIPB), the Department  of Economic Affairs, and the Ministry of Finance. The application has to be  filed in the Form FC-IL and has to be addressed  to the FIPB. Interestingly, the Board has also  allowed and started entertaining  applications which are written in plain paper  with the only conditions that it should carry all the relevant details.  Another important element  is that no fees are to be paid to the Board.  The main objective behind these is to make the process hassle free so that foreign  investment  can easily thrive into the  Indian Market, which would result into the rise of the  of Indian Economy.
 
Subsequently, the  Indian companies having  foreign investment approved through FIPB route  do not require any further clearance from the Reserve Bank of India for  receiving inward remittance and for the issue of shares to the non-resident  investors.

ENTITIES   ELIGIBLE FOR INVESTMENT

     
  1. FDI in an Indian Company
  2.  
    • Indian companies can issue capital against FDI.
    •  
  3. FDI in Partnership Firm/Proprietary Concern
    •    
    • A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest in the capital of a firm or a proprietary concern in India on non repatriation basis provided that;

a) Amount is  invested by inward remittance or out of NRE/FCNR(B)/NRO
b) Account is  maintained with Authorized Dealers/Authorized banks.
c) The firm  or proprietary concern is not engaged in any agricultural/plantation or real  estate business or print media sector.
d) Amount  invested shall not be eligible for repatriation outside India.    

    • Investments with repatriation option: NRIs/PIO may seek prior permission of the Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.
    • Investment by non-residents other than NRIs/PIO: A person residing  outside India,   other than NRIs/PIO, may make an application and seek prior approval of the        Reserve Bank for making investment in the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India.
    • Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media.         
     
  1. FDI in Trusts

FDI is not  permitted in Trusts other than in the ones  registered and regulated by SEBI  and investment vehicle? 

  1. FDI in Limited Liability Partnerships (LLPs)

FDI in LLPs  is permitted, subject to the following conditions:    

    • FDI is permitted under the automatic route in Limited Liability Partnership (LLPs) operating in sectors/activities where 100%  FDI is allowed, through the automatic route and there are no FDI-linked performance conditions.
    • An Indian company or an LLP, having foreign investment, is also permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions.
    • FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008.

PROHIBITED  SECTORS IN FDI
 
a) Lottery Business, including  Government/private lottery, online lotteries, etc.

b) Gambling and Betting, including casinos etc.

c) Chit funds: As per Chit Fund Act, 1982, Chit means a transaction whether called chit, chit  fund, chitty, kuree or by any other name by or under which a person enters into  an agreement with a specified number of persons that every one of them shall  subscribe a certain sum of money (or a certain quantity of grain instead) by  way of periodical installments over a definite period and that each such  subscriber shall, in his turn, as determined by lot or by auction or by tender  or in such other manner as may be specified in the chit agreement, be entitled  to the prize amount". 

d) Nidhi company: These  companies belong to the non-banking Indian Finance sector and their main  business is borrowing and lending money only between their members. They are  also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual  Benefit Company.

e) Trading in Transferable Development Rights (TDRs)

a) Real Estate Business or  Construction of Farm Houses  shall not  include development of townships, construction of residential /commercial  premises, roads or bridges and Real Estate Investment Trusts (REITs) registered  and regulated under the SEBI (REITs) Regulations 2014.

b) Manufacturing of cigars, cheroots, cigarillos and  cigarettes, of tobacco or of tobacco substitutes.

c) Activities/sectors not open to private sector investment e.g. (I) Atomic Energy and (II) Railway  operations (other than permitted activities)

d) Foreign technology collaboration in any form including licensing for franchise, trademark,  brand name, management contract is also prohibited for Lottery Business and  Gambling and Betting activities.

PERMITTED  SECTORS OF INVESTMENTS AGRICULTURE  SECTOR                          

                               

      Sector

% of  Equity/ FDI Cap

Entry Route

a) Floriculture,     Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms    under  controlled conditions;
      b) Development  and    Production of seeds and planting material;
      c) Animal  Husbandry    (including breeding of dogs), Pisciculture, Aquaculture, under controlled     conditions; and   
      d) Services  related to agro    and allied sectors

100

Automatic


Besides the above, FDI  is not allowed in any other agricultural sector/activity.
 
  PLANTATION  SECTOR                              

                               

      Sector

% of  Equity/ FDI Cap

Entry Route

(i) Tea sector  including tea    plantations
           
      (ii) Coffee  plantations
           
      (iii) Rubber  plantations
           
      (iv) Cardamom  plantations
         
      (v) Palm oil  tree    plantations
         
      (vi) Olive oil  tree plantations

100

Automatic


*Besides the above, FDI is not allowed in any other  plantation sector/activity. 
 
  *Prior approval of the State Government concerned is  required in case of any future land use change.
 
  MINING  AND PETROLEUM & NATURAL GAS                              

                               

      Sector

% of  Equity/ FDI Cap

Entry Route

Mining and  Exploration of metal and non-metal ores including diamond, gold, silver and  precious    ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957.
           
      Coal &  Lignite
           
      (1) Coal &  Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject    to the  provisions of Coal Mines (Nationalization) Act, 1973.
           
       (2) Setting up coal processing plants, like  washeries, subject to the condition that the company shall not do coal mining  and shall not sell washed coal or seized coal from its coal processing plants    in  the open market and shall supply the washed or seized  coal to those parties who  are    supplying raw coal to coal processing plants for washing or sizing.
           
      Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
           
      Mining and  mineral separation of titanium bearing minerals & ores, its value addition  and  integrated activities, subject to sectoral regulations and the Mines and Minerals (Development and Regulation Act 1957)
         

100

Automatic


PETROLEUM & NATURAL GAS

                                               

    Sector

% of  Equity/ FDI Cap

Entry Route

Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and  natural  gas, marketing of natural gas and petroleum products, petroleum  product  pipelines, natural gas/pipelines, LNG Regasification  infrastructure, market  study and formulation and Petroleum refining in    the private sector, subject to  the existing sectoral policy and regulatory framework in the oil marketing sector  and the policy of the    Government on private participation in exploration of oil  and the    discovered fields of national oil companies.

100

Automatic

Petroleum  refining by the    Public Sector Undertakings (PSU), without any disinvestment or  dilution    of domestic equity in the existing PSUs.

49

Automatic


DEFENCE
                              

                               

      Sector

% of  Equity/ FDI Cap

Entry Route

Defence Industry subject to Industrial license  under    the Industries (Development & Regulation) Act, 1951

49

Automatic  up to 49%
           
 Above 49% under
         
 Government route on case to case basis, wherever  it is likely to result in access to modern and state of    the art  technology in the     country


BROADCASTING SERVICES
                                                                

                                                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

 

 

 

 (1)Teleports(settingup of up-linking HUBs/Teleports);
             
      (2)Direct to Home (DTH);
           
      (3)Cable Networks (Multi    System operators    (MSOs) operating at National or State or    District level and undertaking    upgradation of networks towards    digitalization and addressability);
           
      (4)Mobile TV;
           
      (5)Headend-in-the Sky    Broadcasting Service(HITS)

100%

AUTOMATIC

Cable Networks (Other    MSOs not undertaking upgradation of    networks towards digitalization and addressability    and Local    Cable Operators (LCOs))

Infusion of fresh foreign    investment, beyond 49% in a    company not seeking license/permission    from sectoral Ministry, resulting in    change in the ownership    pattern or transfer of stake by existing investor to    new foreign    investor, will require FIPB approval


NON-BANKING  FINANCE COMPANIES  (NBFC)
                                

                               

     
        Sector

     
        %    of Equity/ FDI Cap

        
        Entry Route

      
        Foreign    investment in    NBFC is allowed under the automatic route in only the following       activities:
             
        (i)Merchant    Banking
             
        (ii) Under    Writing
             
        (iii)    Portfolio    Management Services
             
         (iv) Investment Advisory    Services
             
        (v) Financial       Consultancy
             
         (vi) Stock Broking
             
        (vii)Asset    Management
             
        (viii) Venture       Capital
             
        (ix) Custodian       Services
             
        (x) Factoring
             
        (xi) Credit    Rating    Agencies
             
        (xii)Leasing    &    Finance
             
        (xiii) Housing       Finance
             
         (xiv) Forex Broking
             
        (xv) Credit    Card    Business
             
        (xvi) Money    Changing    Business
             
         (xvii) Micro Credit
             
         (xviii) Rural Credit

      
        100

    
      AUTOMATIC


WHITE  LABEL ATM OPERATIONS
                                

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

    
        White Label    ATM    Operations

    
        100

      
        AUTOMATIC


POWER
 EXCHANGES                                

                               

   
      Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        Power    Exchanges    registered under the Central Electricity Regulatory Commission       (Power Market) Regulations, 2010.

      
        49

        
        AUTOMATIC


PENSION   SECTOR
                              

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        Pension Sector

      
        100

      
        AUTOMATIC


INSURANCE   SECTOR
                                

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        (i) Insurance    Company
             
        (ii) Insurance       Brokers
             
        (iii) Third    Party    Administrators
             
        (iv) Surveyors    and    Loss Assessors
             
        (v)Other    Insurance    Intermediaries appointed under the provisions of Insurance       Regulatory and Development Authority Act, 1999 (41 of 1999)
             

      
        49

      
        AUTOMATIC


INFRASTRUCTURE   COMPANY IN THE SECURITIES MARKET
                                

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

   
        Infrastructure companies in Securities Markets, namely, stock exchanges, commodity       exchanges, depositories and clearing corporations, in compliance    with SEBI    Regulations
             

      
        49

    
        AUTOMATIC


CREDIT   INFORMATION C
OMPANIES  (CIC)                              

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

   
        Credit Information Companies

      
        100

      
        AUTOMATIC


BANKING-   PUBLIC SECTOR
                                

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        Banking-  Public    Sector subject to Banking Companies (Acquisition & Transfer of       Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to    the    State Bank of India and its associate Banks.

      
        20

      
        GOVERNMENT


BANKING-   PRIVATE SECTOR
                             

                               

     
        Sector

     
        %    of Equity/ FDI Cap

    
        Entry Route

     
        Banking-  Private    Sector
             

    
        74

      
        Automatic  up to 49%
             
        Government    route    beyond 49% and up to 74%.


ASSET   RECONSTRUCTION COMPANIES
                              

                               

   
        Sector

       
        %    of Equity/ FDI Cap

      
        Entry Route

     
        Asset  Reconstruction    Company (ARC) means a company registered with the Reserve    Bank    of India under Section 3 of the Securitisation and Reconstruction of       Financial Assets and Enforcement of Security Interest Act, 2002    (SARFAESI    Act).
             

      
        100

      
        AUTOMATIC


RAILWAY   INFRASTRUCTURE
                            

                               

     
        Sector

       
        %    of Equity/ FDI Cap

      
        Entry Route

     
        Construction, operation and maintenance of the following:
                  (i) Suburban    corridor    projects through PPP, (ii) High speed train projects,
                  (iii)    Dedicated freight    lines,
                  (iv) Rolling    stock including    train sets, and locomotives/coaches manufacturing and       maintenance facilities,
                  (v) Railway    Electrification,
                  (vi) Signaling    systems,
                  (vii) Freight    terminals,
                  (viii)    Passenger terminals,
                   (ix) Infrastructure in industrial    park    pertaining to railway line/sidings including electrified    railway lines and    connectivities to main railway line and
                  (x) Mass Rapid    Transport    Systems.
             

      
        100

      
        AUTOMATIC


DUTY   FREE
SHOPS                                       

                                       

   
        Sector


      %   of Equity/ FDI Cap

 
   
Entry Route


      Duty Free    Shops

 
   
100

 
   
AUTOMATIC

    
        (i) Duty Free Shops would mean    shops set up in custom bonded area at  International    Airports/International Seaports and Land Custom Stations where       there is transit of international passengers.
             
        (ii) Foreign investment in Duty    Free Shops is subject to compliance of  conditions stipulated    under the Customs Act, 1962 and other laws, rules and       regulations.
             
      (iii) Duty Free Shop entity shall    not engage into any retail trading  activity in the Domestic    Tariff Area of the country.


MULTI  BRAND RETAIL TRADING
                                       

                                       

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

       
        Multi Brand    Retail    Trading

        
        51

      
        GOVERNMENT

      
        (i) Fresh agricultural produce,    including fruits, vegetables, flowers,    grains, pulses, fresh    poultry, fishery and meat products, may be unbranded.
             
        (ii) Minimum amount to be brought    in, as FDI, by the foreign investor,    would be US $ 100 million.
             
        (iii) Retail trading, in any form,    by means of e-commerce, would not be    permissible, for companies    with FDI, engaged in the activity of multi-brand    retail trading.


SINGLE  BRAND RETAIL TRADING

                                           

                                       

     
        Sector

     
      %    of Equity/ FDI Cap

      
        Entry Route

     
        Single Brand   Retail    Trading

      
        100

      
        Automatic    up to 49%
             
        Government    route    beyond 49%

 


E-COMMERCE  ACTIVITIES
                          

                               

   
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

       
        E-Commerce    Activities
             

      
        100

      
        AUTOMATIC


TRADING

                                  

                               

     
        Sector

     
        %    of Equity/ FDI Cap

    
      Entry Route

     
        Cash &    Carry    Wholesale Trading/Wholesale Trading (including sourcing from MSEs)

      
        100

      
        AUTOMATIC


TELECOM   SERVICES
                        

                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        Telecom    Services    (including Telecom Infrastructure Providers Category-I)
             
        All telecom    services    including Telecom Infrastructure Providers Category-I, viz. Basic,       Cellular, United Access Services, Unified License (Access Services),    Unified    License, National/International Long Distance, Commercial    V-Sat, Public    Mobile Radio Trunked Services (PMRTS), Global    Mobile Personal Communications    Services (GMPCS), All types of    ISP licenses, Voice Mail/Audiotex/UMS, Resale    of IPLC, Mobile    Number Portability Services, Infrastructure Provider    Category-I    (providing dark fibre, right of way, duct space, tower) except       Other Service Providers.
             

      
        100

      
        Automatic up to 49%
             
        Government route beyond 49%


PRIVATE  SECURITY AGENCIES
                                

                               

     
        Sector

     
      %    of Equity/ FDI Cap

      
        Entry Route

     
        Private Security Agencies
             

      
      49

    
        GOVERNMENT

*  "Private  Security Agency" means a person or body of persons  other than a government  agency, department  or organisation engaged in the business of providing private  security  services including training to private security guards or their   supervisor or providing private security guards to any industrial or  business  undertaking or a company or any other person or property
 
 
SATELLITES-  ESTABLISHMENT AND  OPERATION                            

                               

     
        Sector

     
        %    of Equity/ FDI Cap

        
        Entry Route

     
        Satellites-  establishment and operation, subject to the sectoral guidelines of    Department    of Space/ISRO

      
        100

      
        GOVERNMENT


INDUSTRIAL   PARKS
                              

                               

       
        Sector

       
        %    of Equity/ FDI Cap

      
        Entry Route

       
        Industrial Parks -new and existing
             

      
        100

      
        GOVERNMENT


CONSTRUCTION  DEVELOPMENT: TOWNSHIPS, HOUSING,  BUILT-UP INFRASTRUCTURE
                          

                               

     
        Sector

     
        %    of Equity/ FDI Cap

        
        Entry Route

     
        Construction-development       projects (which would include development of townships, construction of       residential/commercial premises, roads or bridges, hotels,    resorts,    hospitals, educational institutions, recreational    facilities, city and    regional level infrastructure, townships)

 
   
     
        100

 

     

       
        AUTOMATIC


CIVIL   AVIATION
Airport                                               

                                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        (a) Greenfield       projects

      
        100

      
        AUTOMATIC

     
        (b) Existing    projects

      
        100

   
        100% Automatic up to 74%    Government route    beyond 74%


AIR  TRANSPORT SERVICES
                                                                  

                                                               

     
        Sector

     
        %    of Equity/ FDI Cap

      
        Entry Route

     
        (1) (a)    Scheduled Air    Transport Service/ Domestic Scheduled Passenger Airline
                  (b) Regional    Air Transport    Service Automatic
             

      
        49
             
      (100% for NRIs)

      
        AUTOMATIC
             
        100% Automatic up to 74%    Government route    beyond 74%

     
        (2)Non-Scheduled    Air    Transport Service

        
        100

      
        AUTOMATIC

     
        (3)Helicopter       services/seaplane services requiring DGCA approval

      
        100

      
        AUTOMATIC


OTHER  SERVICES UNDER CIVIL AVIATION SECTOR
                                               

                                               

     
        Sector

       
        %    of Equity/ FDI Cap

      
        Entry Route

     
        (1)Ground    Handling    Services subject to sectoral regulations and security clearance 100%       Automatic

      
        100

        
        AUTOMATIC

     
        (2)Maintenance    and    Repair organizations; flying training institutes; and technical training       institutions.

        
        100

   
        AUTOMATIC


*Air Transport Services would include  Domestic Scheduled Passenger  Airlines; Non-Scheduled Air Transport Services,  helicopter and seaplane  services. 
 
  *Foreign airlines are allowed to  participate in the  equity of companies operating Cargo airlines, helicopter and  seaplane  services, as per the limits and entry routes mentioned above.
 
PRINT  MEDIA                                                                                  

                                                                               

   
        Sector

     
        %    of Equity/ FDI Cap

    
        Entry Route

     
 Publishing of newspaper and periodicals dealing with news and current affairs

      
        26

      
        GOVERNMENT

       
 Publication of Indian editions of foreign magazines dealing with news and current affairs

      
        26

     
        GOVERNMENT

     
 Publishing/printing  of scientific and technical magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and   guidelines    issued in this regard from time to time by Ministry of Information and    Broadcasting

 

     

       
        100

 

     

       
        GOVERNMENT

     
 Publication of  facsimile edition of foreign newspapers

      
        100

     
        GOVERNMENT


PROCEDURE   AFTER
INVESTMENT MADE THROUGH AUTOMATIC  ROUTE OR GOVERNMENT APPROVAL
 
  I.On  receipt of share application money
 
Within 30 days of receipt of the share application , the  Indian company is required to report to the Regional Office concerned of the  Reserve Bank of India.

II.  Upon issue of shares to non-resident investors:
 
Within 30 days from the date of issue of shares, a report in Form FC-GPR along with the following documents should be filed with the  Regional Office concerned of the Reserve Bank of India: 

     
  1. Certificate from the Company Secretary of the company that the company has followed the procedure for issue of shares and the investment is within the sectoral cap / statutory ceiling  permissible under the Automatic Route of the Reserve Bank and it  fulfills all the conditions laid down for investments under the Automatic Route
  2.  
  3. Certificate from SEBI indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

GUIDELINES  FOR TRANSFER OF  EXISTING SHARES FROM NON-RESIDENTS TO RESIDENTS OR RESIDENTS TO   NON-RESIDENTS
 
Following are the two ways:

     
  1. Transfer of shares or fully and mandatorily convertible debentures from Non-Resident to Resident:

The FEMA Regulations give specific permission covering the following forms of transfer i.e. transfer by way  of  sale and gift:
 
  i. Transfer of shares or fully and mandatorily convertible debentures by way of sale:
 
  a) Any person resident  outside India (not being a Non Resident Indian (NRI)  or  erstwhile Overseas  Corporate  Bodies), can transfer by way of sale the shares or fully and  mandatorily  convertible debentures to any person resident outside India or an NRI  may  transfer by way of sale.
 
  b) Any person resident  outside India may sell shares or  fully and mandatorily convertible debenture  acquired in accordance with  the FEMA Regulations.
 
ii. Transfer of shares or fully and mandatorily convertible debentures by way of Gift:

     
  1. Any person resident outside India, (not  being a  NRI or an erstwhile Overseas Corporate Bodies), can transfer by way of        gift the shares or fully and mandatorily convertible debentures to  any person  resident outside India;

2. An NRI  may transfer by way of gift, the  shares or convertible debentures held by  him to another NRI only provided that  the person to whom the shares are  being transferred has obtained prior  permission of the Central Government  to acquire the shares.

3. Any  person resident outside India may  transfer share or fully and mandatorily  convertible debentures to a person  resident in India by way of gift.
 
  B. Transfer  of  shares or fully and mandatorily convertible debentures from Resident to Non-Resident:
 
  A person resident  in India may  transfer by way of sale to a person resident outside India any  shares or  fully and mandatorily convertible debenture of an Indian company  whose  activities (other than financial service sector activities) fall under   the Automatic Route of the FDI Scheme.
 
  However, the above general  permission is  not available where:
 
  a) The transfer of shares or fully and  mandatorily  convertible debentures falls within the provisions of SEBI.
  b) The transfer of shares or fully and  mandatorily  convertible debentures is at a price which does not adhere to the  pricing  guidelines specified by the Reserve Bank of India from time to time
  c) The activity of the Indian investee  company falls  outside the automatic route and where Foreign Investment  Promotion Board  (FIPB) approval has been obtained for the said transfer.
  C. Transfer  of security by way  of gift to a person resident outside India by a person  resident in India:
 
A person resident in India who  proposes  to transfer security by way of gift to a person resident outside  India shall  make an application to the Central Office of the Foreign  Exchange Department, by  submitting the following information, such as:

i.    The donee is  eligible to hold such security.
  ii.   The gift does not exceed  5 per cent of the  paid up capital of the Indian company
  iii.  The applicable sectoral  cap/ foreign direct  investment limit in the Indian company is not  breached.
  vi.  Such other conditions as  specified by the  Reserve Bank.
 
  Guidelines on issue and  valuation of shares in case of existing companies:

b)  The price of shares  transferred from  resident to a non-resident and vice versa should be  determined as under:
 
  i.Transfer  of shares from a  resident to a non-resident:
 
  a) In case of listed shares, at a  price which is not less than  the price at which a preferential allotment  of shares would be made
  b)  In case of unlisted shares  at a price which is not less than  the fair value as per the Discount Free  Cash Flow (DCF) Method to be determined  by a SEBI.
 
  ii)Transfer of shares from a  non-resident to a resident - The  price should not be more than the  minimum price at which the transfer of shares  would have been made from a  resident to a non-resident.
 
Documents to be submitted by a  person  resident in India for transfer of shares to a person resident  outside India by  way of gift:

     
         
    1. Name and address of the transferor (donor) and the transferee (donee). 
    1. Relationship between the transferor  and the transfere   
    1. Reasons for making the gift.
    1. A declaration from the donee accepting partly paid shares or warrants that donee is aware of the liability.
    2.  

Investment  in  sectors/activities under government approval route will be subject to   government approval where:

     
  1. An Indian company is being established with foreign investment and is not owned by a resident entity        or
  1. An Indian company is being established with foreign investment and is not controlled by a resident  entity or
  1. The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian  citizens, will be/is being  transferred/passed on to a non-resident entity  as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. or
  1. It is clarified that any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as a investment.
  1. Investment by NRIs under FEMA Regulations  will be deemed to be domestic investment at par with the investment made  by residents.
  1. A company, trust and partnership  firm incorporated outside India and owned and controlled by non-resident Indians will be eligible for investments under FEMA regulations. 
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