Tag Archives: FDI

ILN Today Post

Changing landscape of the Indian Foreign Direct Investment Policy

The foreign direct investment (“FDI”) policy of India has in the recent past witnessed a series of reforms introduced by the Government with the aim of increasing FDI inflows into India inter alia by liberalizing FDI in various sectors and streamlining the approvals processes. According to the Ministry of Commerce and Industry, FDI inflows hit an all-time high of USD 60.1 billion in 2016-17 as compared to FDI inflows of USD 55.6 billion for the year ending March 2016, (as against record high of USD 139 billion FDI inflows in China in 2016).

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Foreign Exchange Management Act (“FEMA”)/Foreign Investment

Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director

The Reserve Bank of India (“RBI”) has clarified that keeping deposits with an Indian company by persons resident outside India, in accordance with section 160 of the Companies Act, 2013, is a current account (payment) transaction and, as such, does not require any approval from the RBI. Refunds of such deposits, arising in the event of selection of the person as director or getting more than twenty-five (25) percent votes, will be accorded the same treatment. (Reference: A.P. (DIR Series) Circular No.59 of April 13, 2016). 

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ILN Today Post

RBI notifies new FDI Policy for railways infrastructure & defence sector

The Reserve Bank of India (“RBI”) has recently notified the Government of India’s decision to permit 100% foreign direct investment (“FDI”) in railways infrastructure (effective August 27, 2014), and increase FDI in the defence sector (effective August 26, 2014) as under:

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ILN Today Post

RBI Issues New Pricing Guidelines for FDI

The Reserve Bank of India (“RBI”) has recently modified the existing pricing guidelines governing subscription to, or transfer of, shares of unlisted Indian companies by, or to, non-residents, and for exit from investment in equity shares with or without optionality clauses of unlisted Indian companies, vide its A.P. (DIR Series) Circular No. 4 dated July 15, 2014.

In terms of the above circular, henceforth, the issue and transfer of shares of unlisted Indian companies, including compulsorily convertible preference shares and compulsorily convertible debentures with or without optionality clauses, would be at a price worked out as per “any internationally accepted pricing methodology” on arm’s length basis, while ensuring that non-resident investors are not guaranteed any assured exit price on their investments. The investments with optionality clauses will, however, continue to be subject to a lock-in period of 1 (one) year in accordance with the A.P. (DIR Series) Circular No. 86 dated January 9, 2014 (refer our newsletter of January 31, 2014).

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Union Budget 2014 – 15: Key Highlights in Education and Changes in Foreign Direct Investment

The Union Budget 2014-15 was presented by Finance Minister Arun Jaitley in the Parliament on July 10, 2014. Here are some of the key highlights of the Budget relating to the education sector and to foreign direct investments in India:

Education – Waiver of Service Tax Exemption:

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ILN Today Post

NDRC Simplifies Approval Process for Overseas Investment

On 8 April 2014, the National Development and Reform Commission (“NDRC”) promulgated the Measures on the Administration of the Verification and Registration of Overseas Investment Projects (“Measures”). The Measures, which took effect on 8 May 2014, aim to promote overseas investment by Chinese companies and allow Chinese investors to be more competitive abroad by lowering transaction costs and limiting the time for completing the Chinese government’s overseas investment approval process. In a fundamental change, the Measures simplify the approval process by replacing the “verification” procedure with a “registration” (or filing) procedure, except in regard to proposed investments where the total amount of investment exceeds US$ 1 billion or projects involving sensitive countries and regions and/or sensitive industries. The Measures define “total amount of investment” as the aggregate sum of cash, securities, in kind contributions, intellectual property rights or technology, equity, debt and guarantees. The term “sensitive countries and regions” refers to countries or regions with which China has no diplomatic relations, or which are under international sanction or are in a state of conflict. “Sensitive industries” include basic telecommunications operations, cross-border water resources development and utilization, large-scale land development, transmission lines, power grids and news media, etc. As a result, many Chinese overseas investments now only require registration. It should be noted, however, that under the Measures the NDRC and its counterparts at the local level retain their broad discretionary powers on all overseas investment, and the NDRC still maintains a project information reporting regime for overseas acquisitions or bids over USD 300 million. More…

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SAFE Simplifies Forex Rules for Direct Investment

The Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Control Policies on Direct Investment (Circular 59) took effect on December 17, 2012. Circular 59 continues China’s policy of relaxing its foreign exchange control requirements and procedures. Of particular importance, it abolishes SAFE’s verification requirements for (1) foreign exchange capital account opening and settlement of preliminary direct investment costs, (2) reinvestment in China by foreign investors and foreign invested enterprises, including foreign invested “holding companies,” of foreign exchange profits and proceeds from equity transfers, (3) conversion of “foreign debt” (i.e. a properly registered foreign loan) to registered capital, and (4) conversion to and payment in foreign exchange by onshore companies for the purchase of offshore assets. In most cases, China’s designated foreign exchange banks are now charged with supervising these activities and SAFE retains extensive powers to supervise and discipline the banks. Circular 59 also simplifies capital verification procedures for foreign invested enterprises and registration procedures for the purchase by foreign investors and foreign invested enterprises of equity interests in onshore companies. More…

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ILN Today Post

FDI Policy of India Relaxed

The Department of Industrial Policy & Promotion, Ministry of Commerce and Industry, Government of India (“DIPP”) issued five Press Notes on September 20, 2012, to give effect to the Government of India’s (“GoI”) recent decision to relax foreign direct investment (“FDI”) in various sectors. We provide below, in brief, the key amendments effected by the Press Notes to the FDI Policy of India (“FDI Policy“):

Single Brand Retail Trading – The GoI had earlier permitted 100% FDI in single brand retail trading subject to certain restrictive conditions and riders, which were proving to be a deterrent for the brands wanting to enter the Indian retail segment. Given the industry’s lukewarm response thereto, GoI has finally relaxed some of the rather restrictive conditions and introduced new conditions as well:

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Multi Brand Retail and Other Big Ticket FDI Reforms on Track

The Government of India (“GoI”) on September 14, 2012 has finally decided to permit Foreign Direct Investment (“FDI”) in multi brand retail, a decision much awaited by the industry players and foreign investors. The decision to permit 51% FDI in multi brand retail will clear the way for a number of multi brand retailers to open stores in India. However, subject to final release of the notification for amending the FDI Policy of India, the permission to bring in FDI in multi brand retail is reportedly expected to come with certain conditions, which would, inter alia, include:

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ILN Today Post

The Government of India has on January 10, 2012 relaxed the Foreign Direct Investment (“FDI”) policy to allow 100% FDI in single brand retail trading activities.

A.   Policy Revision:In terms of the press note issued in this regard, FDI of upto 100% is now permitted in single brand retail trading activities. The policy now creates two categories of investment in single brand retail:

(i)     FDI upto 51% (permitted since October 2006): All investments require prior Government approval, with conditions such as the products being branded during manufacturing, sold internationally under the same brand, the investor being owner of the brand.

The current press note does not seek to change FDI conditions for upto 51% investment category.

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