9911796707
TMI BlogGuidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companiesX X X X Extracts X X X X X X X X Extracts X X X X ..... s if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately owned and controlled by resident Indian citizens and such resident Indian citizens and entities have majority of the profit share; (b) A company owned by non-residents shall mean an Indian company that is not owned by resident Indian citizens. (ia) Control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. For the purpose of Limited Liability Partnership, control shall mean right to appoint majority of the designated partners, where such designated partners, with specific exclusions to others, have control over all the policies of Limited Liability Partnership.] (ii) Direct foreign investment shall mean investment received by an Indian Company from non-resident entities regardless of whether the said investments have been made under 6 [Schedule 1,2,2A,3, 6 and 8] of the Notification No. FEMA.20/2000-RB dated May 3, 2000 , as amended from time to time; (iii) Downstream investment me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise both resident and non-resident investments. 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 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) 12 [ Counting of indirect foreign investment: For the purpose of computation of indirect foreign investment, foreign investment in an Indian company shall include all types of foreign investments regardless of whether the said investments have been made under Schedules 1, 2 (FII holding as on March 31), 2A (FPI holding as on March 31), 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 . FCCBs and DRs having underlying of instruments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholder within the meaning of Section 2 (77) of Companies Act, 2013. (cc) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (ii) In the case of an Indian company, (aa) The Indian company (bb) 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 2 (77) of Companies Act, 2013 / 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 (i) and (ii) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 will be deemed to be domestic investment at par with the investment made by residents. (vii) A company, trust and partnership firm incorporated outside India and owned and controlled by nonresident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations, 2000 and such investment will also be deemed domestic investment at par with the investment made by residents.] 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 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and without FDI linked performance conditions, Indian company which does not have any operations and also does not have any downstream investments, will be permitted to have infusion of foreign investment under automatic route. However, approval of the Government will be required for such companies for infusion of foreign investment for undertaking activities which are under Government route, 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 effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. FEMA. 297/2014-RB dated March 13, 2014 before it was read as FIIs, NRIs or QFIs 8. Substituted vide Notification No. FEMA. 297/2014-RB dated March 13, 2014 before it was read as Schedule 1, 2, 3, 6 and 8 9. Deleted vide NOTIFICATION NO. 319/2014-RB Mumbai, dated 5th September, 2014 w.e.f. August 26, 2014, before it was read as, and Defence sectors 10. Substituted vide Not. 330/RB-2014 - Dated 15-12-2014 w.e.f. December 15, 2014, before it was read as, under 8 [Schedule 1, 2, 2A, 3, 6 and 8] 11. Inserted vide Not. 354/2015-RB - Dated 30-10-2015. 12. Substituted vide Not. 354/2015-RB - Dated 30-10-2015. before it was read as, 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 subsidiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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. 15. Amended vide Not. 362/2016-RB - Dated 15-2-2016 before it was read as, 5. In sectors/activities with caps, including, inter-alia, defence production, air transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, 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 not owned by a resident entity or (ii) An Indian company is being established with foreign investment and is not controlled by a 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 resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Directors as also a Shareholders Agreement, if any; (c) issue/transfer/pricing/valuation of shares shall continue to be in accordance with extant SEBI/RBI guidelines; (d) For the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This would, however, not preclude downstream operating companies, from raising debt in the domestic market. 2 [Downstream investments through internal accruals are permissible by an Indian company, subject to the provisions of clause (i) above and as also elaborated below: ] A. 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 Annex-B of Schedule 1 to these Regulations; B. Those companies, which are Core Investment Companies (CICs), will have to additionally follow RBI‟s Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
