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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 ..... n (DIPP), Ministry of Commerce 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-en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Depository Receipt' (DR) means a negotiable security issued outside India by a Depository bank, on behalf of an Indian company, which represent the local Rupee 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 permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Indian Venture Capital Undertaking' (IVCU) means an Indian company:- (i) whose shares are not listed in a recognised stock exchange in India; (ii) which is engaged in the business of providing services, production or manufacture of articles or things, but does not include such activities or sectors which are 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India. 2.1.30 'Person resident outside India' means a person who is not a Person resident in India. 2.1.31 'Portfolio Investment Scheme' means the Portfolio Investment Scheme referred to in Schedules 2 3 of FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000. 2.1.32 '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) An FII may invest in the capital of an Indian Company under the Portfolio Investment Scheme which limits the individual holding of an FII to 10% of the capital of the company and the aggregate limit for FII investment to 24% of the capital of the company. This aggregate limit of 24% can be increased to the sectoral cap/statutory ceiling, as applicable, by the Indian Company concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body and subject to prior intimation to RBI. The aggregate FII investment, in the FDI and Portfolio Investment Scheme, should be within the above caps. (ii) The Indian 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired subject to the relevant SEBI guidelines. 3.1.7.2. The individual and aggregate investment limits for the QFIs shall be 5% and 10% respectively of the paid up capital of an Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India. Further, wherever there are composite sectoral caps under the extant FDI policy, these limits for QFI investment in equity shares shall also be within such overall FDI sectoral caps. 3.1.7.3 Dividend payments on equity shares held by QFls can either be directly remitted to the designated overseas bank accounts of the QFIs or credited 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted, subject to the following conditions: (a) FDI will be allowed, through the Government approval route, only in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions (such as 'Non-Banking Finance Companies' or 'Development of Townships, Housing, Built-up infrastructure and Construction-development projects' etc.). (b) LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business. (c) An Indian company, having FDI, will be permitted to make downstream investment in an LLP only if both-the company, as well as the LLP- are operating in sectors where 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 Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply. Since these instruments would be denominated in rupees, the rupee interest rate will be based on the swap equivalent of London Interbank Offered Rate (LIBOR) plus the spread as permissible for ECBs of corresponding maturity. 3.3.3 The inward remittance received by the Indian company vide issuance of DRs and FCCBs are treated as FDI and counted towards FDI. 3.3.4 Issue of shares by Indian Companies under FCCB/ADR/GDR (i) Indian companies can raise foreign currency resources abroad through the issue of FCCB/DR (ADRs/GDRs), in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India there 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 compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time. (ix) The pricing of sponsored ADRs/GDRs would be determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time. 3.3.5 (i) Two-way Fungibility Scheme: A limited two-way Fungibility scheme has been put in place by the Government of India for ADRs /GDRs. Under this 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares to persons resident outside India under the FDI Policy may be allowed to retain the share subscription amount in a Foreign Currency Account, with the prior approval of RBI. 3.4.4 Transfer of shares and convertible debentures - (i) Subject to FDI sectoral policy (relating to sectoral caps and entry routes), applicable laws and other conditionalities including security conditions, non-resident investors can also invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents/NRIs for acquisition of shares by way of transfer subject to the following: (a) A person resident outside India (other than NRI and erstwhile OCB) may transfer by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-interest bearing Escrow accounts in Indian Rupees in India on behalf of residents and/or non-residents, towards payment of share purchase consideration and/or provide Escrow facilities for keeping securities to facilitate FDI transactions subject to the terms and conditions specified by RBI. SEBI authorised Depository Participants have also been permitted to open and maintain, without prior approval of RBI, Escrow accounts for securities subject to the terms and conditions as specified by RBI. In both cases, the Escrow agent shall necessarily be an AD Category- I bank or SEBI authorised Depository Participant (in case of securities' accounts). These facilities will be applicable for both issue of fresh shares to the non- residents as well as transfer of shares from /to the non-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific/explicit, extant and relevant SEBI regulations/guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/substantial acquisition /SEBI SAST, buy back); and iii. 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. B. Transfer of shares from Resident to Non-Resident: (i) where the transfer of shares requires the prior approval of the FIPB as per the extant FDI policy provided that : (a) the requisite approval of the FIPB has been obtained; and (b) the transfer of share adheres with the pricing guidelines and documentation requirements as specified by the Reserve Bank of India from time to time. (ii) where the transfer of shares attract SEBI (SAST) guidelines 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 ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Issue of equity shares under the FDI policy is allowed under the Government route for the following: (I) import of capital goods/machinery/equipment (excluding second-hand machinery), subject to compliance with the following conditions: (a) Any import of capital goods/machinery etc., made by a resident in India, has to be in accordance with the Export/Import Policy issued by Government of India/as defined by DGFT/FEMA provisions relating to imports. (b) There is an independent valuation of the capital goods/machinery/equipments (including second-hand machinery) by a third party entity, preferably by an independent valuer from the country of import along with production of copies of documents/certificates issued by the customs authorities towards assessment of the fair-value of such imports. (c) The application clearly indicating the beneficial ownership 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.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and mandatorily convertible preference shares over and above their rights share entitlements. The investee company can allot the additional rights share out of unsubscribed portion, subject to the condition that the overall issue of shares to non-residents in the total paid-up capital of the company does not exceed the sectoral cap. 3.5.4 Acquisition of shares under Scheme of Merger/Demerger/Amalgamation - Mergers/ demergers/ amalgamations of companies in India are usually governed by an order issued by a competent Court on the basis of the Scheme submitted by the companies undergoing merger/ demerger/ amalgamation. Once the scheme of merger or demerger or amalgamation of two or more Indian companies has been approved by a Court in India, the transferee company or new company is allowed to issue shares to the shareholders of the transferor company resident outside India, subject to the conditions 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 pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnal commercial borrowing is in line with the extant FEMA regulations for ECBs and that: (i) the loan agreement has been signed by both the lender and the borrower, (ii) there exists a security clause in the Loan Agreement requiring the borrower to create charge on financial securities, and (iii) the borrower has obtained Loan Registration Number (LRN) from the Reserve Bank: and the said pledge would be subject to the following conditions : (a) the period of such pledge shall be co-terminus with the maturity of the underlying ECB; (b) in case of invocation of pledge, transfer shall be in accordance with the extant FDI Policy and directions issued by the Reserve Bank; (c) the Statutory Auditor has certified that the borrowing company will utilized/has utilized the proceeds of the ECB for the permitted end use/s only. (B) Non-resident holding shares of an Indian company, can pledge these shares in favour of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where: (i) An Indian company is being established with foreign investment and is owned by a non-resident entity or (ii) An Indian company is being established with foreign investment and is controlled by a non-resident entity or (iii) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. or (iv) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. (v) It is clarified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (regardless of its ownership or control): 3.10.3.1 Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company/ies, will require prior Government/FIPB approval, regardless of the amount or extent of foreign investment. Foreign investment into Non-Banking Finance Companies (NBFCs), carrying on activities approved for FDI, will be subject to the conditions specified in paragraph 6.2.24 of this Circular. 3.10.3.2 Those companies, which are Core Investment Companies (CICs), will have to additionally follow RBI's Regulatory Framework for CICs. 3.10.3.3 For infusion of foreign investment into an Indian company which does not have any operations and also does not have any downstream investments, Government/FIPB approval would be required, regardless of the amount or extent of foreign investment. Further, as and when such a company commences business(s) or makes downstream investment, it will have to comply with the 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 entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 CALCULATION OF FOREIGN INVESTMENT 4.1 TOTAL FOREIGN INVESTMENT i.e. DIRECT AND INDIRECT FOREIGN INVESTMENT IN INDIAN COMPANIES. 4.1.1. Investment in Indian companies can be made both by non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise of both resident and non-resident investment. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be a cascading investment i.e. through multi-layered structure. 4.1.2. For the purpose of computation of indirect Foreign investment, Foreign Investment in Indian company shall include all types of foreign investments i.e. FDI; investment by FIIs(holding as on March 31); NRIs; ADRs; GDRs; Foreign Currency Convertible Bonds (FCCB); fully, compulsorily and mandatorily convertible preference shares and fully, compulsorily 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 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 75% would be treated as indirect foreign equity and the balance 25% would be treated as resident held equity. The indirect foreign equity in Company X would be computed in the ratio of 75: 25 in the total investment of Company Y in Company X. (iii) The total foreign investment would be the sum total of direct and indirect foreign investment. (iv) The above methodology of calculation would apply at every stage of investment in Indian companies and thus to each and every Indian company. (v) Additional conditions: (a) The full details about the foreign investment including ownership details etc. in Indian company(s) and information about the control of the company(s) would be furnished by the Company(s) to the Government of India at the time of seeking approval. (b) In any sector/activity, where Government approval is required for foreign investment and in cases where there are any inter-se agreements between/amongst share-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed policy and methodology would be applicable for determining the total foreign investment in all sectors, except in sectors where it is specified in a statute or rule there under. The above methodology of determining direct and indirect foreign investment therefore does not apply to the Insurance Sector which will continue to be governed by the relevant Regulation. 4.1.5 Any foreign investment already made in accordance with the guidelines in existence prior to February 13, 2009 (date of issue of Press Note 2 of 2009) would not require any modification to conform to these guidelines. All other investments, past and future, would come under the ambit of these new guidelines. CHAPTER 5 FOREIGN INVESTMENT PROMOTION BOARD (FIPB) 5.1 CONSTITUTION OF FIPB: 5.1.1 FIPB comprises of the following Secretaries to the Government of India: (i) Secretary to Government, Department of Economic Affairs, Ministry of Finance - Chairperson (ii) Secretary to Government, Department of Industrial Policy Promotion, Ministry of Commerce Industry (iii) Secretary to Government, Department of Commerce, Ministry of Commerce Industry (iv) Secretary to Government, Economic Relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAPTER 6 SECTOR SPECIFIC CONDITIONS ON FDI 3 [ 6.1 PROHIBITED SECTORS: FDI is prohibited in: (a) Lottery Business, including Government/private lottery, online lotteries, etc. (b) Gambling and Betting, including casinos etc. (c) Chit funds (d) Nidhi company (e) Trading in Transferable Development Rights (TDRs) (f) Real Estate Business or Construction of Farm Houses (g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes (h) Activities/sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems). Foreign technology collaboration in any form, including licensing for franchise, trademark, brand name, management contract, is also prohibited for Lottery Business and Gambling and Betting activities. ] 6.2 PERMITTED SECTORS In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed, subject to applicable laws/regulations; security and other conditionalities. In sectors/activities not listed below, FDI is permitted upto 100% on the automatic route, subject to applicable laws/reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically. In case of Animal Husbandry, scope of the term 'under controlled conditions' covers Rearing of animals under intensive farming systems with stall-feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems. Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc. In the case of pisciculture and aquaculture, scope of the term 'under controlled conditions' covers - ■ Aquariums ■ Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. ■ In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nite, rutile and leucoxene, and Zirconium bearing minerals including zircon are some of the beach sand minerals which have been classified as "prescribed substances" under the Atomic Energy Act, 1962. Under the Industrial Policy Statement 1991, mining and production of minerals classified as "prescribed substances" and specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 were included in the list of industries reserved for the public sector. Vide Resolution No. 8/1(1)/97-PSU/1422 dated 6th October 1998 issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Ilmenite, Rutile and Leucoxene) and Zirconium minerals (Zircon). Vide Notification No. S.O.61(E) dated 18.1.2006, the Department of Atomic Energy re-notified the list of "prescribed substances" under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Ilmenite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/concentrates including Zircon, were removed from the list of "prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FDI in MSEs (as defined under Micro, Small And Meduim Enterprises Development Act, 2006 (MSMED, Act 2006)) will be subject to the sectoral caps, entry routes and other relevant sectoral regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development Regulation) Act 1951. 6.2.6 DEFENCE 6.2.6.1 Defence Industry subject to Industrial license under the Industries (Development Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted. (xi) Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies. (xii) The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. (xiii) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. (xiv) Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant Up-linking/Down-linking Policy notified by the Ministry of Information Broadcasting from time to time. 6.2.7.4 Foreign Investment (FI) in companies engaged in all the aforestated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting. 6.2.7.5 The Foreign Investment (FI) limit in companies engaged in the aforestated activities shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities. 6.2.7.6 Foreign investment in the aforestated broadcasting carriage services will be subject to the following security conditions/terms: Mandatory Requirement for Key Executives of the Company (i) The majority of Directors on the Board of the Company shall be Indian Citizens. (ii) The Chief Executive Officer (CEO), Chief Officer In-charge of technical network operations and Chief Security Officer shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work/Software related requirement (vii) The officers/officials of the licensee companies dealing with the lawful interception of Services will be resident India citizens. (viii) Details of infrastructure/network diagram (technical details of the network) could be provided, on a need basis only, to equipment suppliers/manufactures and the affiliate of the licensee company. Clearance from the licensor would be required if such information is to be provided to anybody else. (ix) The Company shall not transfer the subscribers' databases to any person/place outside India unless permitted by relevant Law. (x) The Company must provide traceable identity of their subscribers. Monitoring, Inspection and Submission of Information (xi) The Company should ensure that necessary provision (hardware/software is available in their equipment for doing the Lawful interception and monitoring from a centralized location as an when required by Government. (xii) The company, at its own costs, shall, on demand by the government or its authorized representative, provide the necessary equipment, services and facilities at designated place(s) for continuous monitoring or the broadcasti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The company shall not import or utilize any equipment, which are identified as unlawful and/or render network security vulnerable. Other conditions (xx) Licensor reserves the right to modify these conditions or incorporate new conditions considered necessary in the interest of national security and public interest or for proper provision of broadcasting services. (xxi) Licensee will ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulation and public policy .] 6.2.8 Print Media 6.2.8.1 Publishing of Newspaper and periodicals dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Government 6.2.8.2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Government 6.2.8.2.1 Other Conditions: (i) 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights; (iv) "Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward; (v) "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment; (vi) "Helicopter" means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; (vii) "Scheduled air transport service" means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public; (viii) "Non-Scheduled Air Transport service" means any service which is not a scheduled air transport service and will include Cargo airlines; (ix) "Cargo airlines" would mean such airlines which meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 substantial ownership and effective control of which is vested in Indian nationals. (v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment; and (vi) All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation. Note : The FDI limits/entry routes, mentioned at paragraphs 6.2.9.3 (1) and 6.2.9.3 (2) above, are applicable in the situation where there is no investment by foreign airlines. (d) The policy mentioned at (c) above is not applicable to M/s Air India Limited .] 6.2.9.4 Other services under Civil Aviation sector (1) Ground Handling Services subject to sectoral regulations and security clearance 74% FDI (100% for NRIs) Automatic up to 49% Government route beyond 49% and up to 74% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned. (6) The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/Municipal/Local Body concerned. (7) The State Government/Municipal/Local Body concerned, which approves the building/development plans, would monitor compliance of the above conditions by the developer. Note: (i) The conditions at (1) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities; 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 than 50% of the allocable area; (ii) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 6.2.13 Satellites - Establishment and operation 6.2.13.1 Satellites - Establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO 74% Government 6.2.14 Private Security Agencies 49 % Government 6.2.15 Telecom Services Investment caps and other conditions for specified services are given below. However, licensing and security requirements notified by the Department of Telecommunications will need to be complied with for all services. 6.2.15.1 (i) Telecom services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/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 binding on the licensee. (viii) The Company shall not transfer the following to any person/place outside India:- (a) Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature) ; and (b) User information (except pertaining to foreign subscribers using Indian Operator's network while roaming). (ix) The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 separately enforced on OSPs. (3) The above General Conditions and Security Conditions shall also be applicable to the companies operating telecom service(s) with the FDI cap of 49%. (4) All the telecom service providers shall submit a compliance report on the aforesaid conditions to the licensor on 1 st day of July and January on six monthly basis. 6.2.15.2 (a) ISP with gateways (b) ISP's not providing gateways i.e. without gate-ways (both for satellite and marine cables) Note: The new guidelines of August 24, 2007 Department of Telecommunications provide for new ISP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. (d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture (e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. (f) A Whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, incorporated in India, which is the recipient of FDI for the purpose of carrying out single-brand product retail trading. (f) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of single-brand retail trading. (3) Application seeking permission of the Government f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 set up in the cities of their choice, preferably the largest city and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities. The locations of such outlets will be restricted to conforming areas, as per the Master/Zonal Plans of the concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 include investment under the Portfolio Investment Scheme (PIS) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 through a fresh banking license. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any goods and commodity derivative. (iv) "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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xii) Leasing Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit 100% Automatic 6.2.24.2 Other Conditions: (1) Investment would be subject to the following minimum capitalization norms: (i) US $0.5 million for foreign capital up to 51% to be brought upfront (ii) 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 inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REMITTANCE, REPORTING AND VIOLATION 7.1 REMITTANCE AND REPATRIATION 7.1.1 Remittance of sale proceeds/Remittance on winding up/Liquidation of Companies: (i) Sale proceeds of shares and securities and their remittance is 'remittance of asset' governed by The Foreign Exchange Management (Remittance of Assets) Regulations 2000 under FEMA. (ii) AD Category-I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under ESOP)/fully, mandatorily compulsorily convertible debentures/fully, mandatorily compulsorily convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex-1, not later than 30 days from the date of issue of shares. (ii) Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the Reserve Bank. The following documents have to be submitted along with the form: (a) A certificate from the Company Secretary of the company certifying that: (A) all the requirements of the Companies Act, 1956 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as in Form ECB-2 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai - 400 051, within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" shall be clearly indicated on top of the Form ECB-2. Once reported, filing of Form ECB-2 in the subsequent months is not necessary. (ii) In case of partial conversion of ECB, the company shall report the converted portion in Form FC-GPR to the Regional Office concerned as well as in Form ECB-2 clearly differentiating the converted portion from the non-converted portion. The words "ECB partially converted to equity" 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of adjudication of any contravention of FEMA, the Ministry of Finance as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 appoints officers of the Central Government as the Adjudicating Authorities for holding an enquiry in the manner prescribed. A reasonable opportunity has to be given to the person alleged to have committed contraventions against whom a complaint has been made for being heard before imposing any penalty. (ii) The Central Government may appoint as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, an Appellate Authority/Appellate Tribunal to hear appeals 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Percentage of FDI allowed as per FDI policy State whether FDI is allowed under Automatic Route or Approval Route (strike out whichever is not applicable) Automatic Route/Approval Route 3. Details of the foreign investor/collaborator Name Address Country 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/PIO 12. Others (please specify) ] Date of incorporation 4 Particulars of Shares/Convertible Debentures Issued (a) Nature and date of issue Nature of issue Date of issue Number of shares/ convertible debentures 01 IPO/FPO 02 Preferential allotment/private placement 03 Rights 04 Bonus 05 Conversion of ECB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity Compulsorily convertible Preference Shares/ Debentures Investor category No. of shares Amount (Face Value) Rs. % No. of shares Amount (Face Value) Rs. % (a) Non-Resident 01 Individuals 02 Companies 03 FIIs 04 FVCIs 05 Foreign Trusts 06 Private Equity Funds 07 Pension/Provident Funds 08 Sovereign Wealth Funds 09 Partnership/Proprietorship Firms 10 Financial Institutions 11 NRIs/PIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied 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 Numbers given for all the remittances received as consideration for issue of shares/convertible debentures (details as above), by Reserve Bank. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt), (c) duly authorized agent/s of the seller and/or buyer, (d) Authorised Dealer bank (AD) branch and (e) Indian company, for recording the transfer of ownership 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares (net of taxes) sold by an OCB may be remitted outside India directly if the shares were held on repatriation basis and if the shares sold were held on non-repatriation basis, the sale proceeds 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 inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AD Category-I bank, would forward the same to its link office. The link office would consolidate the Forms and submit a monthly report to the Reserve Bank. For the purpose the Authorized Dealers may designate branches to 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 bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall 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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 6 Know Your Customer (KYC) Form in respect of the non-resident investor Registered Name of the Remitter/Investor (Name, if the investor is an Individual) Registration Number (Unique Identification Number* in case remitter is an Individual) Registered Address (Permanent Address if remitter Individual) Name of the Remitter's Bank Remitter's Bank Account No. Period of banking relationship with the remitter *Passport No., Social Security No, or any Unique No. certifying the bonafides of the remitter as prevalent in the remitter's country We confirm that all the information furnished above is true and accurate as provided by the overseas remitting bank of the non-resident investor. (Signature of the Authorised Official of the AD bank receiving the remittance) Date : Place: Stamp : ANNEX - 7 Annual Return on Foreign Liabilities and Assets (Return 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than fertilizers) ( ) 12. Construction ( ) 13. Software and ITES/BPO ( ) 14. Pharmaceutical ( ) 15. Other ( ) For RBI's use (Industry Code) 8. Whether your company is listed in India [please tick (✓)]? Yes No 9. Whether your company has any Foreign Collaboration? Yes No If yes, please indicate whether it is (please tick the appropriate one) (a) Technical collaboration (b) Financial collaboration (foreign equity participation) (c) Both Block 1A : Total Paid up Capital of Indian Company Item End-March of previous FY End-March current FY Number of Shares Amount in Rs. lakh Number of Shares Amount in Rs. lakh 1.0 Total Paid-up Capital [(i)+(ii)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Investment in India (Less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Note : 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. Block 3B: Financial Derivatives (with non-resident entities only) Please furnish here the outstanding foreign liabilities on account of financial derivatives contract entered into with non-residents. Financial Derivatives Country of non-resident investor Amount in Rs. lakh as at the end of March Previous FY March Current FY (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Amount in Rs, lakh as at the end of March Previous FY December Current FY March Current FY 1.0 Equity Capital (1.0 = 1.1-1.2) 1.1 Claims on Direct Investment Enterprise 1.2 Liabilities to Direct Investment Enterprise 2.0 Other Capital(2.0 = 2.1-2.2) 2.1 Claims on Direct Investment Enterprise 2.2 Liabilities to Direct Investment Enterprise 3.0 Disinvestments made abroad during the year Note : Please use separate sheets in the above format to report for separate DIEs Block 4B: Foreign Direct Investment Abroad (Less than 10 % Equity holding) [Please furnish here your outstanding investments in non-resident enterprises (Direct Investment Enterprises DIE), made under the Overseas Direct Investment Scheme, in each of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry wise. If particular type(s) of investment spreads over more than one country, it should be reported in the above format using separate additional sheet for each country. Block 5B: Financial Derivatives (with non-resident entities only) Please furnish here the outstanding claims on non-residents on account of financial derivatives contract entered into with Non-residents. Financial Derivatives Country of non-resident enterprise Amount in Rs. lakh as at the end of March Previous FY March Current FY (i) Notional Value (ii) Mark to market value Note: If particular type(s) of investment spreads over more than one country, it should be reported in the above format using separate additional sheet for each country. Block 5C: Other Investment (Outstanding claims on Unrelated Parties): This is a residual category that includes all financial outstanding claims not considered as direct investment or portfolio investment. Other Investment Country of non-resident enterprise Amount in Rs. lakh as at the end of March Previous FY March Curre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian company has issued the shares to non-resident entities under the FDI scheme in India, then it should be reported under the Foreign Direct Investment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acknowledging the holders' claim to the residual income of the issuing enterprise after the claims of all creditors have been met. These include ordinary shares, stocks, 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be reported under Other Capital of block 4A or 4B. These outstanding loans should be reported under the loan item of Block 3C or 5C. (iii) Other Liabilities and Assets (Block 3C 5C, 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with. vi. Declaration from the FII/sub account to the effect that the individual FII/Sub account ceiling as prescribed has not been breached. Additional documents in respect of sale 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. I/We, am/are eligible to acquire the shares compulsorily and mandatorily convertible preference shares/debentures of the company in terms of the FDI Policy. It is not a transfer relating to shares compulsorily and mandatorily convertible preference shares/debentures of a company engaged in financial services sector or a sector where general permission is not available. iv. The Sectoral limit under the FDI Policy and the pricing guidelines have been adhered to. Signature of the Declarant or his duly authorised agent Date: Note: In respect of the transfer of shares/compulsorily and mandatorily convertible preference shares/compulsorily and mandatorily convertible debentures from resident to non resident the declaration has to be signed by the non resident buyer, and in respect of the transfer of shares/compulsorily and mandatorily convertible preference shares/compulsorily and mandatorily convertible debentures 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Merchant Bankers/Lead Manager (i) Amount (in US$) (ii) Amount as percentage to the total issue (b) Other expenses 17. Whether funds are kept abroad. If yes, name and address of the bank 18. Details of the listing arrangement Name of Stock Exchange Date of commencement of trading 19. The date on which GDRs/ADRs issue was launched 20. Amount raised (in US $) 21. Amount repatriated (in US $) Certified that all the conditions laid down by Government of India and Reserve Bank of India have been complied with. Sd/- Sd/- Chartered Accountant Authorised Signatory of the Company ANNEX - 10 Form DR - Quarterly [Refer to paragraph 4(3) of Schedule 1] Quarterly Return (to be submitted to the Reserve Bank of India, Foreign Investment Division, Central Office, Mumbai) 1. Name of the Company 2. Address 3. GDR/ADR issue launched on 4. Total No. of GDRs/ADRs issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sector/Activity % of FDI Cap/Equity Entry Route "6.2.7 Broadcasting 6.2.7.1 Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations 26% (FDI, NRI PIO investments and portfolio investment) Government 6.2.7.2 Cable Network, subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI PIO investments and portfolio investment) Government 6.2.7.3 Direct-to-Home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20% Government 6.2.7.4 Headend-In-The-Sky (HITS) Broadcasting Service refers to the multichannel downlinking and distribution of television programme in C- Band or Ku Band wherein all the pay channels are downlinked at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in operating Scheduled and Non-Scheduled Air Transport Services except Cargo airlines. (c) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services. (1) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline 49% FDI (100% for NRIs) Automatic (2) Non-Scheduled Air Transport Service 74% FDI (100% for NRIs) Automatic up to 49% Government route beyond 49% and up to 74% (3) Helicopter services/seaplane services requiring DGCA approval 100% Automatic" 6. Substituted vide Press Note No. 4 (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 "6.2.16.4 Single Brand product trading 51% Government (1) Foreign Investment in Single Brand product trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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