Regulation 2 - Definitions - Foreign Exchange Management (Transfer or Issue Of Security By A Person Resident Outside India) Regulations, 2000

These rules have been superseded vide New Regulations New Regulations of 2017 2. Definitions :- In these Regulations, unless the context requires otherwise, - (i) 'Act' means the Foreign Exchange Management Act,1999 (42 of 1999); 5 [(ia) '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).] 7 [(ii) 'Capital' means equity shares, preference shares and convertible debentures 17 [Explanation: The equity shares issued in accordance with the provisions of the Companies Act, as applicable, shall include equity shares that have been partly paid. Preference shares and convertible debentures shall be required to be fully paid, mandatorily and fully convertible.]] 27 [(iiA) Category I Alternative Investment Fund (Cat-I AIF) means an Alternative Investment Fund registered under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 which raises money and invests in such funds or sectors or activities or areas in accordance with the said Regulations.] 30 [(iiA) convertible note means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such 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.] 4 [iia. 'entity incorporated outside India means an entity incorporated/registered under the relevant statutes, laws of the host country.] 8 [(iib) 'preference shares' mean compulsorily and mandatorily convertible preference shares.] 9 [(iic) 'debenture' means compulsorily and mandatorily convertible debenture.] 20 [(iicc) 'Domestic Custodian' means a custodian of securities, an Indian depository, a depository participant, or a bank and having permission from SEBI to provide services as custodian.] 10 [ (iid) 'Domestic Depository' shall have the meaning as assigned to it in the Companies (Issue of Indian Depository Receipts) Rules, 2004 ; 21 [(iidd) 'Depository Receipt' means a foreign currency denominated instrument, whether listed on an international exchange or not, issued by a foreign depository in a permissible jurisdiction on the back of eligible securities issued or transferred to that foreign depository and deposited with a domestic custodian and includes 'global depository receipt' as defined in section 2(44) of the Companies Act, 2013.] 31 [(ii E) E-commerce: a. E-commerce means buying and selling of goods and services including digital products over digital electronic network. b. E-commerce entity means a company incorporated under the Companies Act, 1956 or the Companies Act, 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in Section 2 (v) (iii) of FEMA 1999 , owned or controlled by a person resident outside India and conducting the e-commerce business. c. Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly. d. Market place model of e-commerce means providing of an information technology platform by an ecommerce entity on a digital electronic network to act as a facilitator between buyer and seller.] (iie) Eligible Company means a Company eligible to issue Indian Depository Receipts under rule 4 of the Companies (Issue of Indian Depository Receipts) Rules, 2004 ; ] 22 [ (iif) employees stock option means the option given to the directors, officers or employees of a company or of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price; ] 23 [ (ii g) Investment Vehicle shall mean an entity registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose and shall include Real Estate Investment Trusts (REITs) governed by the SEBI (REITs) Regulations, 2014, Infrastructure Investment Trusts (InvIts) governed by the SEBI (InvIts) Regulations, 2014 and Alternative Investment Funds (AIFs) governed by the SEBI (AIFs) Regulations, 2012. ] iii. 'registered Foreign Institutional Investor (FII)' means the foreign institutional investor registered with SEBI 14 [Any foreign institutional investor who holds a valid certificate of registration from SEBI shall be deemed to be a registered foreign portfolio investor (RFPI) till the expiry of the block of three years]; 1 [iiia.'Foreign Venture Capital Investor' means an investor incorporated and established outside India which proposes to make investment in Venture Capital Fund(s) or Venture Capital Undertaking(s) in India and is registered with SEBI under SEBI (Foreign Venture Capital Investors) Regulations, 2000;] 6 [iii] (b) Foreign Central Bank means an institution/organization/body corporate established in a country outside India and entrusted with the responsibility of carrying out central bank functions under the law for the time being in force in that country.] iv. 'Government approval' means approval from the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Government of India or as the case may be , Foreign Investment Promotion Board (FIPB) of the Government of India, 12 [(iva) 'Group company' means two or more enterprises which, directly or indirectly, are in a position to : (i) exercise twenty-six per cent, or more of voting rights in other enterprise; or (ii) appoint more than fifty per cent, of members of board of directors in the other enterprise. ] v. 'Indian company' means a company incorporated in India; 1 [va. 'Indian Venture Capital Undertaking' means a company incorporated in India whose shares are not listed on a recognized stock exchange in India and which is not engaged in an activity under the negative list specified by SEBI;] 28 [ (vb) *** ] vi. 'Investment on repatriation basis' means an investment the sale proceeds of which are, net of taxes, eligible to be repatriated out of India, and the expression 'Investment on non-repatriation basis', shall be construed accordingly; vii. Joint Venture (JV) and Wholly Owned Subsidiary shall have the meanings respectively assigned to them in the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000; 16 [(viiA) 'Limited Liability Partnership (LLP)' means a partnership formed and registered under the Limited Liability Partnership Act, 2008 .] 26 [ (vii AA) Manufacture , with its grammatical variations, means a change in a non-living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.] 25 [ (viia) Non-Resident Indian (NRI) means an individual resident outside India who is citizen of India or is an Overseas Citizen of India cardholder within the meaning of section 7 (A) of the Citizenship Act, 1955.] viii 3 (***)'Overseas Corporate Body (OCB)', shall have the meanings respectively assigned to them in the Foreign Exchange Management (Deposit) Regulations, 2000; 13 [(viiia) 'Qualified Foreign Investor' (QFI) means (a) during the period from 9th day of August, 2011 to 15th day of July, 2012, a person who satisfied the following criteria at the relevant time, (i) resident of a country, that is compliant with the Financial Action Task Force (FATF) standards and is a signatory to the IOSCO's Multilateral Memorandum of Understanding (MMoU); and (ii) satisfied the KYC requirements stipulated by SEBI: Provided that such a person is not registered with SEBI as a Foreign Institutional Investor (FII) or Foreign Venture Capital Investor (FVCI). (b) With effect from 16th day of July, 2012, a person who satisfies the following criteria at the relevant time: (i) Resident in a country that is a member of FATF or a member of a group which is a member of FATF; and (ii) Resident in a country that is a signatory to IOSCO's MMoU (and referred to as Appendix A Signatories therein) or a signatory of a bilateral MoU with SEBI: Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on jurisdictions having strategic AML/CFT deficiencies to which counter measures apply or that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies: Provided that such person is not resident in India: Provided further that such person is not registered with SEBI as a FII or Sub-Account of an FII or FVCI. Explanation - For the purposes of this clause : 1. 'bilateral MoU with SEBI' shall mean a bilateral MoU between SEBI and the overseas regulator that, inter alia, provides for information sharing arrangements. 2. Member of FATF shall not mean an associate member of FATF. ] 15 [(viiib). A Registered Foreign Portfolio Investor (RFPI) means a person registered in accordance with the provisions of Securities Exchange Board of India (SEBI) (Foreign Portfolio Investors) Regulations, 2014, as amended from time to time. 19 [***]] ix. 'SEBI' means the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992 ( 15 of 1992); x. 'Secretariat for Industrial Assistance means Secretariat for Industrial Assistance in the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Govt. of India; 29 [(xA) startup shall mean an entity, incorporated or registered in India not prior to five years, with an annual turnover not exceeding INR 25 Crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property, Provided that such entity is not formed by splitting up, or reconstruction of a business already in existence. For this purpose, (i) entity shall mean a private limited company (as defined in the Companies Act, 2013 ), or a registered partnership firm (registered under section 59 of the Partnership Act, 1932 ) or a limited liability partnership (under the Limited Liability Partnership Act, 2008 ). (ii) the expression turnover shall have the same meaning as assigned to it under the Companies Act, 2013 . (iii) An entity is considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize (a) a new product or service or process; or (b) a significantly improved existing product or service or process that will create or add value for customers or workflow. Provided that it will not include the mere act of developing (a) products or services or processes which do not have potential for commercialization; or (b) undifferentiated products or services or processes or (c) products or services or processes with no or limited incremental value for customers or workflow.] 22 [(xa) sweat equity shares means such equity shares as issued by a company to its directors or employees at a discount or for consideration other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;] xi. 'Transferable Development Rights (TDR)' shall have the same meaning as assigned to it in the Regulations made under sub-section (2) of section 6 of the Act; 24 [(xi A) Unit shall mean beneficial interest of an investor in the Investment Vehicle and shall include shares or partnership interests.] 1 [xia.'Venture Capital Fund' means a fund established in the form of a trust, a company including a body corporate and registered under the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996 which has a dedicated pool of capital raised in a manner specified under the said Regulations and which invests in venture Capital Undertakings in accordance with the said Regulations;] Provided that the Foreign Venture Capital Investor shall not purchase shares or convertible debentures of an Indian company which is engaged in the print media sector. 18 [(xib) Warrant includes Share Warrant issued by an Indian Company in accordance to provisions of the Companies Act, as applicable. Such warrants shall be treated as security within the meaning of Section 2(za) of FEMA, 1999 .] xii. The words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act. *************************** Note : 1. Clause iii (a), v (a), and xi (a) has been inserted vide Notification No. 032/2000 dated 26/12/2000 2. Substituted by Notification No. 122/2004 dated 30/8/2004 , before it was read as, Non-resident Indian (NRI) shall have the meaning assigned to it in clause (iv) of Regulation 2 of the Foreign Exchange Management (Investment in Firm or Proprietary Concern in India) Regulations, 2000. inserted vide Notification No. 094/2003 dated 18/6/2003 , 3. The words 'Non-resident Indian (NRI)' shall be deleted vide Notification No. Supra 4. Has been inserted vide Notification NO. 100/2003 dated 3/10/2003 5. Has been inserted vide Notification No. 149/2006-RB dated 9/6/2006 6. Has been inserted vide Notification No. 166/2007 dated 17/10/2007 7. Has been substituted vide Notification No. 179/2008 dated 22/08/2008 w.e.f. 1-5-2007, earlier it was read as: [ii. 'Capital' means equity shares, preference shares, convertible preference shares, and convertible debentures;] 8. Has been inserted vide Notification No. 179/2008 dated 22/08/2008 w.e.f. 1-5-2007 9. Has been inserted vide Notification No. 179/2008 dated 22/08/2008 w.e.f. 8-6-2007 10. Inserted vide Notification No. FEMA 224/2012-RB, Dated 7-3-2012 11. Inserted vide Notification No. FEMA 224/2012-RB, Dated 7-3-2012 existing clause (va) has been renumbered as (vb). 12. Inserted vide NOTIFICATION No. FEMA. 292/2013-RB October 4, 2013 13. Inserted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 9th day of August, 2011 14. Inserted vide Notification No. FEMA. 297/2014-RB dated March 13, 2014 15. Inserted vide Notification No. FEMA. 297/2014-RB dated March 13, 2014 16 . Inserted vide Notification No. FEMA. 298/2014-RB dated March 13, 2014 17. Inserted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 18. Inserted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 19. Deleted vide NOTIFICATION NO. 323/2014-RB , dated 17th October, 2014 before it was read as, Explanation: For the purpose of this regulation, the expressions, person , resident in India , non-resident shall have the same meaning as assigned to them in Section 2(u) , 2(v) and 2(w) of Foreign Exchange Management Act (FEMA), 1999 , respectively. 20. Inserted vide Not. 330/RB-2014 - Dated 15-12-2014 w.e.f. December 15, 2014 21. Inserted vide Not. 330/RB-2014 - Dated 15-12-2014 w.e.f. December 15, 2014 22. Inserted vide Not. 344/2015-RB - Dated 11-6-2015 23. Inserted vide Not. 355/2015-RB - Dated 16-11-2015 24. Inserted vide Not. 355/2015-RB - Dated 16-11-2015 25. Substituted vide Not. 361/2016-RB - Dated 15-2-2016 , before it was read as, 2 [(viia) NRI shall have the same meaning assigned to him under the Foreign Exchange Management (Deposit) Regulations, 2000. ] 26. Inserted vide Not. 362/2016-RB - Dated 15-2-2016 27. Inserted vide Not. 363/2016-RB - Dated 28-4-2016 28. Omitted vide Not. 363/2016-RB - Dated 28-4-2016 before it was read as, ' 11 [ (vb) Indian Depository Receipts (IDRs) shall have the meaning as assigned to it in the Companies (Issue of Indian Depository Receipts) Rules, 2004 ; ] 29. Inserted vide Not. 363/2016-RB - Dated 28-4-2016 30. Inserted vide Not 377/ 2016-RB - Dated 10-1-2017 31. Inserted vide Not. 387/2017-RB - Dated 9-3-2017