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ILN Today Post

October 5, 2011

Fallout of New FDI Policy: “In built Options”– When Foreign Investments can become Loans

By LexCounsel Law Offices

Background

Section 3.3.2.1 of the new FDI Policy states that only:

(i) equity shares,

(ii) fully, compulsorily and mandatorily convertible debentures; and

(iii) fully, compulsorily and mandatorily convertible preference shares,

in each case with no in-built options of any type, would qualify as eligible instruments for FDI. Equity instruments issued/transferred to non-residents having in-built options or supported by options sold by third parties would lose their equity character and such instruments would have to comply with the extant external commercial borrowings (“ECB”) guidelines.

Posted in Asia Pacific | Legal Updates

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ILN Today Post

October 3, 2011

Fourth Edition of the Consolidated FDI Policy Released by DIPP

By LexCounsel Law Offices

The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India (“DIPP”) on September 30, 2011 released the fourth edition of the consolidated FDI Policy of India vide Circular 2 of 2011.

As per the DIPP, some of the major revisions to the FDI Policy:

1. Exemption to Educational Institutions and Old Age Homes – FDI in construction development activities with respect to educational institutions and old-age homes has been exempted from the conditions imposed on FDI in Construction Development Sector, viz. the minimum area and built-up area requirement; minimum capitalization requirement; and lock-in period.

The exemption has been granted with an intent to augment the physical infrastructure (with respect to educational institutions as well as old-age homes) and bring it up to global standards.