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TMI BlogForeign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Ninth Amendment) Regulations, 2013X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) (Ninth Amendment) Regulations, 2013. (ii) Save as otherwise provided in these Regulations, they shall come into force from the February 13, 2009. 2. New Regulation In the principal Regulations, after Regulation 13, the following new Regulation 14 shall be added, namely:- "14. Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies Definitions: for the purpose of this regulation, 1 (i) Ownership and Control shall mean a) Company Owned by resident Indian citizens shall be an Indian company if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens; Company shall be considered Controlled' by resident Indian citizens if the residents Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company; b) Company Owned by non-residents means an Indian company where more than 50% of the capital in it is beneficially owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment if the Indian investing company has foreign investment in it. The indirect investment can also be through multi-layered structure. Guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in an Indian company. 3.(i) Counting of Direct foreign investment: All investments made directly by non-resident entities into the Indian company would be counted towards 'Direct foreign investment'. (ii) Counting of indirect foreign Investment: The entire indirect foreign investment by the investing company into the other Indian Company would be considered as indirect foreign investment for the purpose of computation of indirect foreign investment. However, as an exception, the indirect foreign investment in the 100% owned subsidiaries of operating-cum-investing/investing companies will be limited to the foreign investment in the operating-cum-investing/ investing company. This exception has been made since the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. This exception, however, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling interest. (ab) In the case of an Indian company, (abi) The Indian company (abii) A group of Indian companies under the same management and ownership control. (b) For the purpose of this Clause, Indian company shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956 / HUF, either singly or in combination holding at least 51% of the shares. (c) Provided that, in case of a combination of all or any of the entities mentioned in sub-clauses (aa) and (ab) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. (E) If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non-resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment. 4. The above mentioned 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 a rule there under. The above methodology of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12, investment as on March 31, 2011 would be taken into account. Besides, investments in the form of Foreign Direct Investment, Foreign Venture Capital investment, ADRs/GDRs, Foreign Currency Convertible Bonds (FCCB) will also be taken in account. Thus, regardless of the investments having been made under Schedule 1, 2, 3, 6 and 8, the same will be taken into account. Downstream investment by an Indian company which is not owned and/or controlled by resident entity /ies. 6. (i) Downstream investment by an Indian company, which is not owned and/ or controlled by 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. Note : With effect from 31st day of July 2012, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 entry route, conditionalities and caps. (e) The FDI recipient Indian company at the first level which is responsible for ensuring compliance with the FDI conditionalities like no indirect foreign investment in prohibited sector, entry route, sectoral cap / conditionalities, etc. for the downstream investment made by in the subsidiary companies at second level and so on and so forth would obtain a certificate to this effect from its statutory auditor on an annual basis as regards status of compliance with the instructions on downstream investment and compliance with FEMA provisions. The fact that statutory auditor has certified that the company is in compliance with the regulations as regards downstream investment and other FEMA prescriptions wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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