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TMI BlogCONSOLIDATED FDI POLICY (EFFECTIVE FROM 10-4-2012) updated upto 22-09-2012X X X X Extracts X X X X X X X X Extracts X X X X ..... ce & Industry, Government of India makes policy pronouncements on FDI through Press Notes/Press Releases which are notified by the Reserve Bank of India as amendments to the Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000). These notifications take effect from the date of issue of Press Notes/Press Releases, unless specified otherwise therein. In case of any conflict, the relevant FEMA Notification will prevail. The procedural instructions are issued by the Reserve Bank of India vide A.P. Dir. (series) Circulars. The regulatory framework, over a period of time, thus, consists of Acts, Regulations, Press Notes, Press Releases, Clarifications, etc. 1.1.3. The present consolidation subsumes and supersedes all Press Notes/Press Releases/Clarifications/Circulars issued by DIPP, which were in force as on April 09, 2012, and reflects the FDI Policy as on April 10, 2012. This Circular accordingly will take effect from April 10, 2012. Reference to any statute or legislation made in this Circular shall include modifications, amendments or re-enactments thereof. 1.1.4 Notwiths ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pee denominated equity shares of the company held as deposit by a Custodian bank in India. DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg, etc. DRs listed and traded in the US markets are known as American Depository Receipts (ADRs) and those listed and traded anywhere/elsewhere are known as Global Depository Receipts (GDRs). 2.1.9 'Erstwhile Overseas Corporate Body' (OCB) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by non-resident Indian and includes overseas trust in which not less than sixty percent beneficial interest is held by non-resident Indian directly or indirectly but irrevocably and which was in existence on the date of commencement of the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) ) Regulations, 2003 (the Regulations) and immediately prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Regulations. 2.1.10 'Foreign Currency Convertible Bond'(FCCB) means a bond issued by an Indian company expressed in foreign currency, the principal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the negative list by the SEBI, with approval of Central Government, by notification in the Official Gazette in this behalf. 2.1.20 'Investing Company' means an Indian Company holding only investments in other Indian company/(ies), directly or indirectly, other than for trading of such holdings/securities. 2.1.21 'Investment on repatriable basis' means investment, the sale proceeds of which, net of taxes, are eligible to be repatriated out of India and the expression 'investment on non-repatriable basis' shall be construed accordingly. 2.1.22 'Joint Venture' (JV) means an Indian entity incorporated in accordance with the laws and regulations in India in whose capital a non-resident entity makes an investment. 2.1.23 "Limited Liability Partnership" means a Limited Liability Partnership firm, Formed and registered under the Limited Liability Partnership Act, 2008. 2.1.24 'Non resident entity' means a 'person resident outside India' as defined under FEMA. 2.1.25 'Non Resident Indian' (NRI) means an individual resident outside India who is a citizen of India or is a person of Indian origin. 2.1.26 A company is considered as 'Owned' by resident Indian citizens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1.32 'A Qualified Foreign Investor (QFI)' means a non-resident investor (other than SEBI registered FII and SEBI registered FVCI) who meets the KYC requirements of SEBI for the purpose of making investments in accordance with the regulations/orders/circulars of RBI/SEBI. 2.1.33 'RBI' means the Reserve Bank of India established under the Reserve Bank of India Act, 1934. 2.1.34 'Resident Entity' means 'Person resident in India' excluding an individual. 2.1.35 'Resident Indian Citizen' shall be interpreted in line with the definition of 'person resident in India' as per FEMA, 1999, read in conjunction with the Indian Citizenship Act, 1955. 2.1.36 'SEBI' means the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992. 2.1.37 'SEZ' means a Special Economic Zone as defined in Special Economic Zone Act, 2005. 2.1.38 'SIA' means Secretariat of Industrial Assistance in DIPP, Ministry of Commerce & Industry, Government of India. 2.1.39 'Transferable Development Rights' (TDR) means certificates issued in respect of category of land acquired for public purposes either by the Central or State Government in consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an company which has issued shares to FIIs under the FDI Policy for which the payment has been received directly into company's account should report these figures separately under item no. 5 of Form FC-GPR (Annex-1). (iii) A daily statement in respect of all transactions (except derivative trade) has to be submitted by the custodian bank in floppy /soft copy in the prescribed format directly to RBI. 3.1.5. Only SEBI registered FII and NRIs as per Schedules 2 and 3 respectively of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000, can invest/trade through a registered broker in the capital of Indian Companies on recognised Indian Stock Exchanges. 3.1.6. A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an Indian Venture Capital Undertaking (IVCU) and may also set up a domestic asset management company to manage the fund. All such investments can be made under the automatic route in terms of Schedule 6 to Notification No. FEMA 20. A SEBI registered FVCI can invest in a domestic venture capital fund registered under the SEBI (Venture Capital Fund) Regulations, 1996. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edited to the single rupee pool bank account. In case dividend payments are credited to the single rupee pool bank account they shall be remitted to the designated overseas bank accounts of the QFIs within five working days (including the day of credit of such funds to the single rupee pool bank account). Within these five working days, the dividend payments can be also utilized for fresh purchases of equity shares under this scheme, if so instructed by the QFI. 3.2. ENTITIES INTO WHICH FDI CAN BE MADE 3.2.1. FDI in an Indian Company: Indian companies can issue capital against FDI. 3.2.2. FDI in Partnership Firm /Proprietary Concern: (i) 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; (a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers /Authorized banks. (b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector. (c) Amount invested shall not be eligible for repatriation outside India. (ii) Investments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions. (d) LLPs with FDI will not be eligible to make any downstream investments. (e) Foreign Capital participation in LLPs will be allowed only by way of cash consideration, received by inward remittance, through normal banking channels or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank. (f) Investment in LLPs by Foreign Institutional Investors (FIls) and Foreign Venture Capital Investors (FVCIs) will not be permitted. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs). (g) In case the LLP with FDI has a body corporate that is a designated partner or nominates an individual to act as a designated partner in accordance with the provisions of Section 7 of the LLP Act, 2008, such a body corporate should only be a company registered in India under the Companies Act, 1956 and not any other body, such as an LLP or a trust. (h) For such LLPs, the designated partner "resident in India", as defined under the 'Explanation' to Section 7(1) of the LLP Act, 2008, would also have to satisfy the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under from time to time. (ii) A company can issue ADRs /GDRs if it is eligible to issue shares to persons resident outside India under the FDI Policy. However, an Indian listed company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue ADRs/GDRs. (iii) Unlisted companies, which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued ADRs/GDRs in the international market, have to list in the domestic market on making profit or within three years of such issue of ADRs/GDRs, whichever is earlier. ADRs /GDRs are issued on the basis of the ratio worked out by the Indian company in consultation with the Lead Manager to the issue. The proceeds so raised have to be kept abroad till actually required in India. Pending repatriation or utilization of the proceeds, the Indian company can invest the funds in:- (a) De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Scheme, a stock broker in India, registered with SEBI, can purchase shares of an Indian company from the market for conversion into ADRs/GDRs based on instructions received from overseas investors. Re-issuance of ADRs /GDRs would be permitted to the extent of ADRs /GDRs which have been redeemed into underlying shares and sold in the Indian market. (ii) Sponsored ADR/GDR issue: An Indian company can also sponsor an issue of ADR /GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs /GDRs can be issued abroad. The proceeds of the ADR /GDR issue are remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion. These proceeds can be kept in Resident Foreign Currency (Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into ADRs /GDRs. 3.4 ISSUE/TRANSFER OF SHARES 3.4.1. The capital instruments should be issued within 180 days from the date of receipt of the inward remittance received through normal banking channels including escrow account opened and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of sale or gift, the shares or convertible debentures to any person resident outside India (including NRIs). (b) NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI. (c) A person resident outside India can transfer any security to a person resident in India by way of gift. (d) A person resident outside India can sell the shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a stock broker registered with stock exchange or a merchant banker registered with SEBI. (e) A person resident in India can transfer by way of sale, shares/convertible debentures (including transfer of subscriber's shares), of an Indian company under private arrangement to a person resident outside India, subject to the guidelines given in para 3.4.5.2 and Annex-2. (f) General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the guidelines given in para 3.4.5.2 and Annex-2. (g) The above General Permission also covers transfer by a resident to a non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-residents. 3.4.5 Prior permission of RBI in certain cases for transfer of capital instruments 3.4.5.1 Except cases mentioned in paragraph 3.4.5.2 below, the following cases require prior approval of RBI: (i) Transfer of capital instruments from resident to non-residents by way of sale where : (a) Transfer is at a price which falls outside the pricing guidelines specified by the Reserve Bank from time to time and the transaction does not fall under the exception given in para 3.4.5.2. (b) Transfer of capital instruments by the non-resident acquirer involving deferment of payment of the amount of consideration. Further, in case approval is granted for a transaction, the same should be reported in Form FC-TRS, to an AD Category-I bank for necessary due diligence, within 60 days from the date of receipt of the full and final amount of consideration. (ii) Transfer of any capital instrument, by way of gift by a person resident in India to a person resident outside India. While forwarding applications to Reserve Bank for approval for transfer of capital instruments by way of gift, the documents mentioned in Annex-3 should be enclosed. Reserve Bank considers the following factors w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idelines subject to the adherence with the pricing guidelines and documentation requirements as specified by Reserve Bank of India from time to time. (iii) where the transfer of shares does not meet the pricing guidelines under the FEMA, 1999 provided that:- (a) The resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization, etc.), reporting requirements, documentation etc.; (b) The pricing for the transaction is compliant with the specific/explicit, extant and relevant SEBI regulations /guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/substantial acquisition /SEBI SAST); and (c) Chartered Accountants Certificate to the effect that compliance with the relevant SEBI regulations /guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank. (iv) where the investee company is in the financial sector provided that : (a) NOCs are obtained from the respective financial sector regulators/regulators of the investee company as well as transferor and transferee entities and such NOCs are filed along with the form FC-TRS with the AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip and identity of the Importer Company as well as overseas entity. (d) Applications complete in all respects, for conversions of import payables for capital goods into FDI being made within 180 days from the date of shipment of goods. (II) pre-operative/pre-incorporation expenses (including payments of rent etc.), subject to compliance with the following conditions: (a) Submission of FIRC for remittance of funds by the overseas promoters for the expenditure incurred. (b) Verification and certification of the pre-incorporation/pre-operative expenses by the statutory auditor. (c) Payments should be made by the foreign investor to the company directly or through the bank account opened by the foreign investor as provided under FEMA Regulations. (d) The applications, complete in all respects, for capitalization being made within the period of 180 days from the date of incorporation of the company General conditions: (i) All requests for conversion should be accompanied by a special resolution of the company. (ii) Government's approval would be subject to pricing guidelines of RBI and appropriate tax clearance. 3.5 SPECIFIC CONDITIONS IN CERTAIN CASES 3.5.1 Issue of Rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions that: (i) the percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the sectoral cap, and (ii) the transferor company or the transferee or the new company is not engaged in activities which are prohibited under the FDI policy . 3.5.5 Issue of shares under Employees Stock Option Scheme (ESOPs) - (i) Listed Indian companies are allowed to issue shares under the Employees Stock Option Scheme (ESOPs), to its employees or employees of its joint venture or wholly owned subsidiary abroad, who are resident outside India, other than to the citizens of Pakistan. ESOPs can be issued to citizens of Bangladesh with the prior approval of FIPB. Shares under ESOPs can be issued directly or through a Trust subject to the condition that: (a) The scheme has been drawn in terms of relevant regulations issued by the SEBI, and (b) The face value of the shares to be allotted under the scheme to the non-resident employees does not exceed 5 per cent of the paid-up capital of the issuing company. (ii) Unlisted companies have to follow the provisions of the Companies Act, 1956. The Indian company can issue ESOPs to employees who are resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AD bank in India to secure credit facilities being extended to the resident investee company for bonafide business purpose, subject to the following conditions: (i) in case of invocation of pledge, transfer of shares should be in accordance with the FDI policy in vogue at the time of creation of pledge; (ii) submission of a declaration/annual certificate from the statutory auditor of the investee company that the loan proceeds will be /have been utilized for the declared purpose; (iii) the Indian company has to follow the relevant SEBI disclosure norms; and (iv) pledge of shares in favour of the lender (bank) would be subject to Section 19 of the Banking Regulation Act, 1949. (C) Non-resident holding shares of an Indian company, can pledge these shares in favour of an overseas bank to secure the credit facilities being extended to the non-resident investor /non-resident promoter of the Indian company or its overseas group company, subject to the following: (i) loan is availed of only from an overseas bank; (ii) loan is utilized for genuine business purposes overseas and not for any investments either directly or indirectly in India; (iii) overseas investment should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill 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. (v) It is clarified that these guidelines will not apply to sectors/activities where there are no foreign investment caps, that is, 100% foreign investment is permitted under the automatic route. (vi) It is also clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/debentures, regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. 3.7 CAPS ON INVESTMENTS 3.7.1 Investments can be made by non-residents in the capital of a resident entity only to the extent of the percentage of the total capital as specified in the FDI policy. The caps in various sector(s) are detailed in Chapter 6 of this circular. 3.8 ENTRY CONDITIONS ON INVESTMENT 3.8.1 Investments by non-residents can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant sectoral conditions on entry route, conditionalities and caps. Note: Foreign investment into other Indian companies would be in accordance/compliance with the relevant sectoral conditions on entry route, conditionalities and caps. 3.10.4 Downstream investment by an Indian company which is owned and/or controlled by non-resident entity/ies: 3.10.4.1 Downstream investment by an Indian company, which is owned and/or controlled by non-resident entity/ies, into another Indian company, would be in accordance/compliance with the relevant sectoral conditions on entry route, conditionalities and caps, with regard to the sectors in which the latter Indian company is operating. 2[Note: Downstream investment/s made by a banking company, as defined in clause (c) of section 5 of the Banking Regulation Act, 1949, incorporated in India, which is owned and/or controlled by non-residents/ a non-resident entity/non-resident entities, under Corporate Debt Restructuring (CDR), or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults in loans, shall not count towards indirect foreign investment. However, their 'strategic downstream investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and mandatorily convertible Debentures regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEM (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000. 4.1.3. Guidelines for calculation of total foreign investment i.e. direct and indirect foreign investment in an Indian company. (i) Counting the Direct Foreign Investment: All investment directly by a non-resident entity into the Indian company would be counted towards foreign investment. (ii) Counting of indirect foreign Investment: (a) The foreign investment through the investing Indian company would not be considered for calculation of the indirect foreign investment in case of Indian companies which are 'owned and controlled' by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens . (b) For cases where condition (a) above is not satisfied or if the investing company is owned or controlled by 'nonresident entities', the entire investment by the investing company into the subject Indian Company would be considered as indirect foreign investment, Provided that, as an exception, the indirect foreign investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider such inter-se agreements for determining ownership and control when considering the case for approval of foreign investment. (c) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral foreign investment cap, would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens. (d) In the I& B and Defence sectors where the sectoral cap is less than 49%, the company would need to be 'owned and controlled' by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens. (A) For this purpose, the equity held by the largest Indian shareholder would have to be at least 51% of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956. The term 'largest Indian shareholder', used in this clause, will include any or a combination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department of Commerce, Ministry of Commerce & Industry (iv) Secretary to Government, Economic Relations, Ministry of External Affairs (v) Secretary to Government, Ministry of Overseas Indian Affairs. 5.1.2 The Board would be able to co-opt other Secretaries to the Central Government and top officials of financial institutions, banks and professional experts of Industry and Commerce, as and when necessary. 5.2 LEVELS OF APPROVALS FOR CASES UNDER GOVERNMENT ROUTE 5.2.1 The Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs. 1200 crore. 5.2.2 The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 1200 crore would be placed for consideration of CCEA. 5.2.3 The CCEA would also consider the proposals which may be referred to it by the FIPB/the Minister of Finance (in-charge of FIPB). 5.3 CASES WHICH DO NOT REQUIRE FRESH APPROVAL 5.3.1 Companies may not require fresh prior approval of the Government i.e. Minister in-charge of FIPB/CCEA for bringing in additional foreign investment into the same entity, in the following cases: (i) Entities the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automatic route, subject to applicable laws/regulations; security and other conditionalities. Wherever there is a requirement of minimum capitalization, it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement; Sl.No. Sector/Activity % of FDI Cap/Equity Entry Route AGRICULTURE 6.2.1 Agriculture & Animal Husbandry (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 Note: Besides the above, FDI is not allowed in any other agricultural sector/activity 100% Automatic 6.2.1.1 Other conditions: I. For companies dealing with development of transgenic seeds/vegetables, the following conditions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... • Prodution of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons. 6.2.2 Tea Plantation 6.2.2.1 Tea sector including tea plantations Note: Besides the above, FDI is not allowed in any other plantation sector/activity 100% Government 6.2.2.2 Other conditions: (i) Compulsory divestment of 26% equity of the company in favour of an Indian partner/Indian public within a period of 5 years (ii) Prior approval of the State Government concerned in case of any future land use change. 6.2.3 MINING 6.2.3.1 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. 100% Automatic 6.2.3.2 Coal and 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 100% Automatic (2) Setting up coal processing plants like washe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ergy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987. (ii) FDI will not be allowed in mining of "prescribed substances" listed in the Notification No. S.O. 61(E) dated 18.1.2006 issued by the Department of Atomic Energy. Clarification: (1) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce 'Synthetic Rutile or Titanium Slag as an intermediate value added product. (2) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled. 6.2.4 Petroleum & Natural Gas 6.2.4.1 Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm being resident Indians. (iv) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. (v) The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R & D base. (vi) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. (vii) There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs & erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. (xv) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement. SERVICES SECTOR INFORMATION SERVICES 4[6.2.7 Broadcasting 6.2.7.1 Broadcasting Carriage Services 6.2.7.1.1 (1) Teleports (setting up 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) 74% Automatic up to 49% Government route beyond 49% and up to 74% 6.2.7.1.2 Cable Networks [Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)] 49% Automatic 6.2.7.2 Broadcasting Content Services 6.2.7.2.1 Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained. It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors. (iv) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more than 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years. Permission vis-a-vis Security Clearance (v) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn the permission granted is liable to be terminated forthwith. (vi) In the event of security clearance of any of the persons associated with the permission holder/licensee or foreign personnel is denied or withdrawn for any reasons whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection. (xv) The company shall submit such information with respect to its services as may be required by the Government or its authorized representative, in the format as may be required, from time to time. (xvi) The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required. (xvii) The service providers should familiarize/train designated officials or the Government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems. National Security Conditions (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. The Government of India, Ministry of Information and Broadcasting shall have the right to temporally suspend the permission of the permission holder/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time. 6.2.9 Civil Aviation 6.2.9.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: (i) "Airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934; (ii) "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto; (iii) "Air transport service" means a service for the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. (b) 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. (c) Foreign airlines are also, henceforth, allowed to invest, in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. Such investment would be subject to the following conditions: (i) It would be made under the Government approval route. (ii) The 49% limit will subsume FDI and FII investment. (iii) The investments so made would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations. (iv) A Scheduled Operator's Permit can be granted only to a company: (a) that is registered and has its principal place of business within India; (b) the Chairman and at least two-thirds of the Directors of which are citizens of India; and (c) the subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each installment/tranche of FDI or from the date of completion of minimum capitalization, whichever is later. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB. (4) At least 50% of each such project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, "undeveloped plots" will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. (5) The project shall conform to the norms and standards, including land use requirements and provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, excluding the area for common facilities. (b) in the case of built up space- the floor area and built up space utilized for providing common facilities. (c) in the case of a combination of developed land and built-up space-the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities. (v) "Industrial Activity" means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R&D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities. 6.2.12.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 6.2.11 above, provided the Industrial Parks meet with the under-mentioned conditions: (i) it would comprise of a minimum of 10 units and no single unit shall occupy more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications) would be required if such information is to be provided to anybody else. (iii) For security reasons, domestic traffic of such entities as may be identified/specified by the licensor shall not be hauled/routed to any place outside India. (iv) The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected. (v) The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. (vi) The majority Directors on the Board of the company shall be Indian citizens. (vii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. (xx) For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. (xxi) The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this circular irrespective of the level of FDI. (xxii) Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele-education, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed telecom service providers, the security conditions mentioned above shall not be separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , sales made by the wholesaler would be considered as 'cash & carry wholesale trading/wholesale trading' with valid business customers, only when WT are made to the following entities: (I) Entities holding sales tax/VAT registration/service tax/excise duty registration; or (II) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/Local Self-Government Authority, reflecting that the entity/person holding the license/registration certificate/membership certificate, as the case may be, is itself/himself/herself engaged in a business involving commercial activity; or (III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or (IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self-consumption. Note: An Entity, to whom WT is made, may fulfill any one of the 4 conditions. (c) Full records indicating all the details of such sales like name of entity, k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval is being sought. The onus for ensuring compliance with this condition shall rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/franchise/sub-licence agreement, specifically indicating compliance with the above condition. (e) In respect of proposals involving FDI beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years' total value of the goods purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded, the industry shall not qualify as a 'small industry' for this purpose. This procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis. (v) Self-certification by the company, to ensure compliance of the conditions at serial Nos. (ii), (iii) and (iv) above, which could be crosschecked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors. (vi) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking. In States/Union Territories not having cities with population of more than 10 lakh as per 2011 Census, retail sales outlets may be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest Act, 2002 (SARFAESI Act). 49% of paid-up capital of ARC Government 6.2.17.2 Other conditions: (i) Persons resident outside India, other than Foreign Institutional Investors (FIIs), can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the Government Route. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs. (ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest up to 49 per cent of each tranche of scheme of SRs, subject to the condition that investment by a single FII in each tranche of SRs shall not exceed 10 per cent of the issue. (iii) Any individual investment of more than 10% would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 6.2.18 Banking -Private sector 6.2.18.1 Banking -Private sector 74% including investment by FIIs Automatic up to 49% Government route beyond 49% and up to 74% 6.2.18.2 Other conditions: (1) This 74% limit will in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and procedures prescribed from time to time by RBI and other institutions such as SEBI, D/o Company Affairs and IRDA on these matters will continue to apply. (f) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to non-resident investors as well. (ii) Setting up of a subsidiary by foreign banks (a) Foreign banks will be permitted to either have branches or subsidiaries but not both. (b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank's licensing criteria will be allowed to hold 100 per cent paid up capital to enable them to set up a wholly-owned subsidiary in India. (c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank. (d) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) "Forward contract" means a contract for the delivery of goods and which is not a ready delivery contract. (v) "Commodity derivative" means- ♦ a contract for delivery of goods, which is not a ready delivery contract; or ♦ a contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities. 6.2.20.2 Policy for FDI in Commodity Exchange 49% (FDI & FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26%] Government (For FDI) 6.2.20.3 Other conditions: (i) FII purchases shall be restricted to secondary market only and (ii) No non-resident investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies. 6.2.21 Credit Information Companies (CIC) 6.2.21.1 Credit Information Companies 49% (FDI & FII) Government 6.2.21.2 Other Conditions: (1) Foreign investment in Credit Information Companies is subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... US $ 5 million for foreign capital more than 51% and up to 75% to be brought upfront (iii) US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought up front and the balance in 24 months. 10[(iv) NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1 of the above Circular, therefore, shall not apply to downstream subsidiaries.] (v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below. (vi) Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d guidelines and NOC/tax clearance certificate from the Income Tax Department has been produced. (iii) Remittance on winding up/liquidation of Companies AD Category-I banks have been allowed to remit winding up proceeds of companies in India, which are under liquidation, subject to payment of applicable taxes. Liquidation may be subject to any order issued by the court winding up the company or the official liquidator in case of voluntary winding up under the provisions of the Companies Act, 1956. AD Category-I banks shall allow the remittance provided the applicant submits: a. No objection or Tax clearance certificate from Income Tax Department for the remittance. b. Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for. c. Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, 1956. d. In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been complied with; (B) terms and conditions of the Government's approval, if any, have been complied with; (C) the company is eligible to issue shares under these Regulations; and (D) the company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration. Note: For companies with paid up capital with less than Rs. 5 crore, the above mentioned certificate can be given by a practicing company secretary. (b) A certificate from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India. (c) The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD Category-I bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated. (d) Annual return on Foreign Liabilities and Assets (Annex 7) should be filed on an annual basis by the Indian company, directly with the Reserve Bank. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be indicated on top of the Form ECB-2. In the subsequent months, the outstanding balance of ECB shall be reported in Form ECB-2 to DSIM. 7.2.5 Reporting of FCCB/ADR/GDR Issues The Indian company issuing ADRs/GDRs has to furnish to the Reserve Bank, full details of such issue in the Form enclosed as Annex 9, within 30 days from the date of closing of the issue. The company should also furnish a quarterly return in the Form enclosed as Annex 10, to the Reserve Bank within 15 days of the close of the calendar quarter. The quarterly return has to be submitted till the entire amount raised through ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant Reserve Bank guidelines. 7.3 ADHERENCE TO GUIDELINES/ORDERS AND CONSEQUENCES OF VIOLATION FDI is a capital account transaction and thus any violation of FDI regulations are covered by the penal provisions of the FEMA. Reserve Bank of India administers the FEMA and Directorate of Enforcement under the Ministry of Finance is the authority for the enforcement of FEMA. The Directorate takes up investigation in any contravention of FEMA. 7.3.1 Penalties (i) If a person violates/contravenes any FDI Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the orders of the adjudicating authority. 7.3.3 Compounding Proceedings Under the Foreign Exchange (Compounding Proceedings) Rules 2000, the Central Government may appoint 'Compounding Authority' an officer either from Enforcement Directorate or Reserve Bank of India for any person contravening any provisions of the FEMA. The Compounding Authorities are authorized to compound the amount involved in the contravention to the Act made by the person. No contravention shall be compounded unless the amount involved in such contravention is quantifiable. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerns as expeditiously and not later than 180 days from the date of application made to the Compounding Authority. Compounding Authority shall issue order specifying the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flow* 01 Equity 02 Compulsorily Convertible Debentures 03 Compulsorily Convertible Preference shares 04 Others (please specify) Total (i) In case the issue price is greater than the face value please give breakup of the premium received. (ii) *In case the issue is against conversion of ECB or royalty or against import of capital goods by units in SEZ, a Chartered Accountant's Certificate certifying the amount outstanding on the date of conversion (c) Break up of premium Amount Control Premium Non-competition fee Others Total @ please specify the nature (d) Total inflow (in Rupees) on account of issue of shares/convertible debentures to non-residents (including premium, if any) vide (i) Remittance through AD: (ii) Debit to NRE/FCNR A/c with Bank (iii) Others (please specify) Date of reporting of (i) and (ii) above to RBI under Para 9 (1) A of Schedule I to Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. (e) Disclosure of fair value of shares issued** We are a listed company and the market value of a share as on date of the issue is* We are an un-listed company and the fair value of a share is* ** before issue of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-merger or otherwise of an Indian company, duly approved by a court in India. OR Shares are issued under ESOP and the conditions regarding this issue have been satisfied 3. Shares have been issued in terms of SIA/FIPB approval No. ……….. dated ........ 4. We enclose the following documents in compliance with Paragraph 9 (1) (B) of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000: (i) A certificate from our Company Secretary certifying that (a) all the requirements of the Companies Act, 1956 have been complied with; (b) terms and conditions of the Government approval, if any, have been complied with; (c) the company is eligible to issue shares under these Regulations; and (d) the company has all original certificates issued by authorised dealers in India evidencing receipt of amount of consideration in accordance with paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000. (ii) A certificate from Statutory Auditors/SEBI registered Category I Merchant Banker/Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India. 5. Unique Identification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership in its books. 2. Pricing Guidelines 2.1 The under noted pricing guidelines are applicable to the following types of transactions: i. Transfer of shares, by way of sale under private arrangement by a person resident in India to a person resident outside India. ii. Transfer of shares, by way of sale under private arrangement by a person resident outside India to a person resident in India. 2.2 Transfer by Resident to Non-resident (i.e. to incorporated non-resident entity other than erstwhile OCB, foreign national, NRI, FII) Price of shares transferred by way of sale by resident to a non-resident where the shares of an Indian company are: (a) listed on a recognized stock exchange in India ,shall not be less than the price at which the preferential allotment of shares can be made under the SEBI guidelines , as applicable, provided the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date pf purchase or sale of shares, (b) not listed on a recognized stock exchange in India ,shall not be less than the fair value to be determined by a SEBI registered Category I Merchant Banker or a Chartered Accountant as per the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds may be credited to its NRO (Current) Account subject to payment of taxes, except in the case of OCBs whose accounts have been blocked by Reserve Bank. 5. Documentation Besides obtaining a declaration in the enclosed Form FC-TRS (in quadruplicate), the AD branch should arrange to obtain and keep on record the following documents: 5.1 For sale of shares by a person resident in India i. Consent Letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer i.e. number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record. ii. Where Consent Letter has been signed by their duly appointed agent, the Power of Attorney Document executed by the seller/buyer authorizing the agent to purchase/sell shares. iii. The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India showing equity participation of residents and non-residents category-wise (i.e. NRIs/OCBs/foreign nationals/incorporated non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically handle such transactions. These branches could be staffed with adequately trained staff for this purpose to ensure that the transactions are put through smoothly. The ADs may also designate a nodal office to coordinate the work at these branches and also ensure the reporting of these transactions to the Reserve Bank. 6.2 When the transfer is on private arrangement basis, on settlement of the transactions, the transferee/his duly appointed agent should approach the investee company to record the transfer in their books along with the certificate in the Form FC-TRS from the AD branch that the remittances have been received by the transferor/payment has been made by the transferee. On receipt of the certificate from the AD, the company may record the transfer in its books. 6.3 The actual inflows and outflows on account of such transfer of shares shall be reported by the AD branch in the R-returns in the normal course. 6.4 In addition the AD branch should submit two copies of the Form FC-TRS received from their constituents/customers together with the statement of inflows/outflows on account of remittances received/made in connection with transfer of shares, by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not exceed 5 per cent of the paid up capital of the company. viii. An undertaking from the resident transferor that the value of security to be transferred together with any security already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 50,000 during a financial year.9 ANNEX - 4 Definition of "relative" as given in Section 6 of Companies Act, 1956. A person shall be deemed to be a relative of another, if, and only if: (a) they are members of a Hindu undivided family ; or (b) they are husband and wife ; or (c) the one is related to the other in the manner indicated in Schedule IA (as under) 1. Father. 2. Mother (including step-mother). 3. Son (including stepson). 4. Son's wife. 5. Daughter (including step-daughter). 6. Father's father. 7. Father's mother. 8. Mother's mother. 9. Mother's father. 10. Son's son. 11. Son's son's wife. 12. Son's daughter. 13. Son's daughter's husband. 14. Daughter's husband. 15. Daughter's son. 16. Daughter's son's wife. 17. Daughter's daughter. 18. Daughter's daughter's husband. 19. Brother (including step-brother). 20. Brother's wife. 21. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn to be filled under A.P. (DIR Series) Circular No.45 dated March 15, 2011 to the Department of Statistics and Information Management, RBI, Mumbai) Please read the guidelines/definitions carefully before filling-in the Return Section I: Identification Particulars For RBI's use 1. Name and Address of the Indian Company COMPANY CODE _______________________________________________ _______________________________________________ _______________________________________________ City: Pin: State: __________________________________________ 2. Income-Tax allotted PAN Number of Company: 3. Registration No. given by the Registrar of Companies: 4. Name of the CONTACT PERSON : ________________________________ DESIGNATION: ______________ Tel.No. (with STD code): _______________________ Fax: ______________________ e-mail: ______________________________ 5. Account closing date: (dd/mm/yy) Web-site (if any): _______________ 6. In case of change in Company Name and\or activity, specify the old and new Company Name and activity: Old Company Name : _______________________ New Company Name __________________________ Effective Date ________________________________ Old Acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn Fund of Book Value (OFBV) Method should be used (see the attached guidelines for details) Block 2A: Foreign Direct Investment in India (10% or more Equity Participation) [Please furnish here the outstanding investments made under the FDI Scheme in India by Non-resident Direct investors, who were individually holding 10 per cent or more ordinary/equity shares of your company on the reporting date] If this block is Non-NIL, then please give the Name & Addresses of your subsidiary in India, if any, in BLOCK 9. Name of the non-resident Company/ Individual Type of Capital Country of non-resident investor Equity holding (%) Amount in Rs. lakh as at the end of March Previous FY December Current FY March Current FY 1.0 Equity Capital (1.0 = 1.2-1.1) 1.1 Claims on Direct Investor 1.2 Liabilities to Direct Investor 2.0 Other Capital(2.0 = 2.2-2.1) 2.1 Claims on Direct Investor 2.2 Liabilities to Direct Investor 3.0 Disinvestments in India during the year Note: (i) if investor is a company, then country is the country of incorporation; (ii) Please use different sheet using same format to report different non-resident company/individual. Block 2B: Foreign Direct Investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Notional Value (ii) Mark to market value Note: If more countries are involved to report the data for the particular type(s) of investment, it should be reported in the same format using additional sheets separately for each country. Block 3C: Other Investments: This is a residual category that includes all financial outstanding not considered as direct investment or portfolio investment (outstanding liabilities with Unrelated Parties) Other Investment Country of non-resident lender Amount in Rs. lakh as at the end of March Previous FY March Current FY 4.0 Trade Credit (4.0 = 4.1+4.2) 4.1 Short Term (4.1= 4.1.1+4.1.2) 4.1.1. Up to 6 Months 4.1.2. 6 Months to 1 Year 4.2. Long Term 5.0 Loans (5.0 = 5.1+5.2) 5.1 Short Term 5.2 Long Term 6.0 Other Liabilities (6.0 = 6.1+6.2) 6.1 Short Term (Up to 1 yr.) 6.2 Long Term Note: (i) Data pertaining to each type of investment are to be reported consolidating the information country wise. If more countries are involved to report the data for the particular type(s) of investment, it should be reported in the same format using additional sheets separately for each country. (ii) At item 5.0, loan should include the ECB lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prise abroad 2.2 Liabilities to non-resident Enterprise abroad 3.0 Disinvestments made abroad during the year Note: Please use separate sheets in the above format to report different non-resident fellow enterprises. Portfolio and Other Assets Abroad (i.e., position with unrelated parties) Block 5A: Portfolio Investment Abroad 1. Please furnish here the outstanding investments in non-resident enterprises, other than those made under Overseas Direct Investment Scheme in India (i.e., other than those reported in Block 4A & 4B). 2. In case overseas companies are listed, equity should be valued using share price on closing date of reference period, while in case of unlisted companies, use Own Fund of Book Value Method (OFBV) (see the attached guidelines for details) Portfolio Investment Country of non-resident enterprise Amount in Rs. lakh as at the end of March Previous FY December Current FY March Current FY 1.0 Equity Securities 2.0 Debt Securities (2.0=2.1+2.2) 2.1 Bonds and Notes (original maturity more than 1year) 2.2 Money Market Instruments (original maturity up to 1year) 3.0 Disinvestments Abroad during the year Note: Data pertaining to each type of investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of your Profit retained by DIE during the year Note: If your company is a Direct Investor in more than one DIE, the data should be provided in the same format in respect of each such DIE using additional sheets. Block 7: Contingent Foreign Liabilities [Please report here the relevant details about the contingent foreign liabilities of your company] Description of Contingent Liability Country Currency# Amount in Foreign Currency as at the end of (in actual) March Previous FY March Current FY (1) (2) (3) (4) (5) Note: # Currency of denomination of the contingent foreign liability should be mentioned in Col. 3. Refer to the details on Contingent liabilities given in Annex. Block 8: Employee Information of reporting Indian company As at the end-March of No. of Employees on Payroll Previous FY Current FY BLOCK 9: Name(s) & Address (es) of your subsidiary in India Sr. Nos. Name of Subsidiary in India* Your Equity holding in subsidiary % Address Retained profit/loss of your subsidiary in India during the current FY (Amount in Rs. lakh ) Certificate We hereby certify that all the facts and figures furnished in this schedule reflect the accurate position of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in India (Liabilities), Section II of the return. If the non-resident entity holds the 10 per cent or more equity/ordinary shares in the reporting Indian company, then it should reported under Block 2A (item 1.2, liabilities to direct investment). However, if the non-resident entity holds less than 10 per cent of the equity capital of reporting Indian company, then it should be reported under Block 2B (item 1.2, liabilities to direct investment). In both the cases, the investing non-resident entity is called as the Direct Investor (DI) while the reporting Indian company is called as Direct Investment Enterprise (DIE). If the reporting Indian company also holds the equity shares in its DI company abroad and if its share is less than 10 per cent of equity capital of DI company, then it is called as reverse investment and same should be reported under item 1.1 (claim on direct investor) of the respective block i.e. Block 2A or 2B. (b) Foreign Direct Investment abroad by Indian companies (Block 4A and 4B) If the reporting Indian company invest in equity shares of non-resident company, under the Overseas Direct Investment scheme in India, i.e. investment in Joint venture or W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... participating preference shares, depository receipts (ADRs/GDRs) denoting ownership of equity securities issued to non-residents, shares/units in mutual funds & investment trusts, equity securities that are sold under repurchase agreement, equity securities that are sold under securities lending arrangement. (iii) Debt Securities (Block 3A & 5A, Item 2.0) These include bonds and notes, money market instruments. (iv) Bonds and Notes (Block 3A & 5A, Item 2.1) This category includes debt securities with original contractual maturities of more than one year (long-term). It includes the long-term securities such as Debentures, Non-participating preference shares, Convertible bonds, Negotiable certificates of deposit, Perpetual bonds, Collateralized mortgage obligations, Dual currency, Zero coupon and other Deep discounted bonds, Floating rate bonds and Index-linked bonds. (v) Money Market Instruments (Block 3A & 5A, Item 2.2) These short-term instruments include treasury bills, commercial paper, banker's acceptances, short-term negotiable certificates of deposit and short-term notes issued under note issuance facilities. It may be noted that the instruments that share the characte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Item 6.0) These are the residual items that include all external financial liabilities and assets not recorded elsewhere in the liabilities/assets. These are miscellaneous accounts receivable and payable such as accounts relating to interest payments in arrears, loan payments in arrears, wages and salaries outstanding, prepayments of insurance premiums, taxes outstanding & the like. (iv) Long-term and Short-term Investment (Block 3C & 5C) Long-term investment is defined as investment with an original contractual maturity of more than one year. Short-term investment includes currency, investment payable on demand or with an original contractual maturity of one year or less. E. Disinvestments in India and Abroad (Item 3.0 in Block 2A, 2B, 3A, 4A, 4B & 5A) Any disinvestments made by non-resident direct investor of the reporting Indian company during the year should be reported in Block 2A and Block 2B and portfolio disinvestments in Block 3A. Likewise, any disinvestment made by the reporting Indian company in its DIE abroad during the year should be reported in Block 4A and 4B and portfolio disinvestments by reporting company should be reported in Block 5A. F. Contingent Liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares/compulsorily and mandatorily convertible preference shares/debentures by a person resident outside India vii. If the sellers are NRIs/OCBs, the copies of RBI approvals, if applicable, evidencing the shares held by them on repatriation/non-repatriation basis. viii. No Objection/Tax Clearance Certificate from Income Tax Authority/Chartered Account. 1 Name of the company Address (including e-mail, telephone Number, Fax no.) Activity NIC Code No. 2 Whether FDI is allowed under Automatic route Sectoral Cap under FDI Policy 3 Nature of transaction (Strike out whichever is not applicable) Transfer from resident to non-resident/ Transfer from non-resident to resident 4 Name of the buyer Constitution/Nature of the investing Entity Specify whether 1. Individual 2. Company 3. FII 4. FVCI 5. Foreign Trust 6. Private Equity Fund 7. Pension/Provident Fund 8. Sovereign Wealth Fund (SWF) 9. Partnership/Proprietorship firm 10. Financial Institution 11. NRIs/PIOs 12. Others Date and Place of Incorporation Address of the buyer (including e-mail, telephone number. Fax no.) 5 Name of the seller Constitution/Nature of the disinvesting entity Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from non-resident to resident the declaration has to be signed by the non-resident seller. Certificate by the AD Branch It is certified that the application is complete in all respects. The receipt/payment for the transaction are in accordance with FEMA Regulations/Reserve Bank guidelines. Signature Name and Designation of the Officer Date: Name of the AD Branch AD Branch Code ANNEX - 9 Form DR [Refer to paragraph 4(2) of Schedule 1] Return to be filed by an Indian Company who has arranged issue of GDR/ADR Instructions : The Form should be completed and submitted to the Reserve Bank of India, Foreign Investment Division, Central Office, Mumbai. 1. Name of the Company 2. Address of Registered Office 3. Address for Correspondence 4. Existing Business (please give the NIC Code of the activity in which the company is predominantly engaged) 5. Details of the purpose for which GDRs/ADRs have been raised. If funds are deployed for overseas investment, details thereof 6. Name and address of the Depository abroad 7. Name and address of the Lead Manager/Investment/Merchant Banker 8. Name and address of the Sub-Managers to the issue 9. Name and address of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GDRs/ADRs have not been invested in stock market or real estate. Sd/- Sd/- Chartered Accountant Authorised Signatory of the Company ----------------- Notes:- 1. Substituted vide Press Note No. 3 (2012 Series), dated 1-8-2012, w.e.f. 1-8-2012. Before it was read as:- "3.1.1 A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route." 2. Inserted vide Press Note No. 2 (2012 Series), dated 31-7-2012, w.e.f. 31-7-2012. 3. Substituted vide Press Note No. 5 (2012 Series), dated 20-9-2012, w.e.f. 20-9-2012. Before it was read as:- "6.1 PROHIBITED SECTORS. FDI is prohibited in: (a) Retail Trading (except single brand product retailing) (b) Lottery Business including Government /private lottery, online lotteries, etc. (c) Gambling and Betting including casinos etc. (d) Chit funds (e) Nidhi company (f) Trading in Transferable Development Rights (TDRs) (g) Real Estate Business or Construction of Farm Houses (h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Non-News & Current Affairs TV Channel 100% Government (3) Up-linking a News & Current Affairs TV Channel subject to the condition that the portfolio investment from FII/NRI shall not be "persons acting in concert" with FDI investors, as defined in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 26% (FDI & FII) Government 6.2.7.5.1 Other conditions: (i) All the activities at (1), (2) and (3) above will be further subject to the condition that the Company permitted to uplink the channel shall certify the continued compliance of this requirement through the Company Secretary at the end of each financial year. (ii) FDI for Up-linking TV Channels will be subject to compliance with the Up-linking Policy notified by the Ministry of Information & Broadcasting from time to time." 5. Substituted vide Press Note No. 6 (2012 Series), dated 20-9-2012, w.e.f. 20-9-2012. Before it was read as:- "Sl.No. Sector/Activity % of FDI Cap/Equity Entry Route 6.2.9.3 Air Transport Services (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. (b) No foreign air ..... X X X X Extracts X X X X X X X X Extracts X X X X
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