AI Drafter 
TaxTMI 
TaxTMI 
CONSOLIDATED FDI POLICY.
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....in Resident Entities 3.4 Conditions on Issue/Transfer of Shares 3.5 Issue of Instruments CHAPTER-4 CALCULATION, ENTRY ROUTE, CAPS, ENTRY CONDITIONS ETC. OF INVESTMENT 4.1 Calculation of Total Foreign Investment i.e. Direct and Indirect Foreign Investment in Indian Companies 4.2 Entry Routes for Investment 4.3 Caps on Investments 4.4 Entry conditions on Investment 4.5 Other conditions on Investment besides entry conditions 4.6 Downstream Investment by Indian Companies 4.7 Guidelines for consideration of FDI Proposals by FIPB 4.8 Constitution of FIPB 4.9 Approval Levels for cases under Government Route 4.10 Cases which do not require fresh Approval CHAPTER-5 POLICY ON ROUTE, CAPS AND ENTRY CONDITIONS 5.1 Prohibition on Investment In India AGRICULTURE 5.2 Agriculture & Animal Husbandry 5.3 Tea plantation INDUSTRY MINING 5.4 Mining 37 MANUFACTURING 5.5 Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) 5.6 Alcohol - Distillation & Brewing 5.7 Cigars & Cigarettes Manufacture 5.8&nbs....
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....t by the Indian company receiving amount of consideration for issue of shares / convertible debentures under the FDI scheme Annex-6 Know Your Customer (KYC) Form in respect of the non-resident investor Annex-7 Form FC-TRS Annex-8 Form DR Annex-9 Form DR - Quarterly CHAPTER 1: INTENT AND OBJECTIVE 1.1 INTENT AND OBJECTIVE 1.1.1 'Investment' is usually understood as financial contribution to the equity capital of an enterprise or purchase of shares in the enterprise. 'Foreign investment' is investment in an enterprise by a Non-Resident irrespective of whether this involves new equity capital or re-investment of earnings. Foreign investment is of two kinds - (i) Foreign Direct Investment (FDI) and (ii) Foreign Portfolio Investment. 2. 1.1.2 International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) define FDI similarly as a category of cross border investment made by a resident in one economy (the direct investor) with the objective of establishing a 'lasting interest' in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor. The motivation of the direct investor is a s....
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....ulations. This Consolidation deals comprehensively with all aspects of FDI Policy which are covered under the various Press Notes/Press Releases/ Clarifications issued by DIPP. 1.1.6 It has been decided that from now onwards a consolidated circular would be issued every six months to update the FDI policy. This consolidated circular will, therefore, be superseded by a circular to be issued on September 30, 2010. 1.1.7 All earlier Press Notes/Press Releases/Clarifications on FDI issued by DIPP which were in force and effective as on March 31, 2010 stand rescinded as on March 31, 2010. The present circular consolidates and subsumes all such/these Press Notes/Press Releases/Clarifications as on March 31, 2010. 1.1.8 Notwithstanding the rescission of earlier Press Notes/Press Releases/Clarifications, anything done or any action taken or purported to have been done or taken under the rescinded Press Notes/Press Releases/Clarifications prior to March 31, 2010 shall, in so far as it is not inconsistent with those Press Notes/Press Releases/Clarifications, be deemed to have been done or taken under the corresponding provisions of this circular and shall be val....
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....es, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company. 2.1.8 An entity is considered as 'Controlled' by 'non resident entities', if non-residents have the power to appoint a majority of its directors 2.1.9 '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). 2.1.10 '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 ....
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....ction 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. 2.1.21 'Investing Company' means an Indian Company holding only investments in another Indian company, directly or indirectly, other than for trading of such holdings/securities. 2.1.22 '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. 2.1.23 'Joint Venture' (JV) means an Indian entity incorporated in accordance with the laws and regulations in India in whose capital a foreign entity makes an investment. 2.1.24 'Non resident entity' means a 'person resident outside India' as defined under FEMA 2.1.25 'Non Resident Indian' (NRI) means an individual resident outside India who is a citizen of India or is an individual of Indian origin. 2.1.26 A company is considered as 'Owned' by resident Indian citizens if more than 50% of the capital in it is beneficially owned by....
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....dent in India. 2.1.32 'Person resident outside India' means a person who is not a Person resident in India. 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 Citizenship Act, 1955. 2.1.36 'SEBI' means the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992. 2.1.37 'SEZ' means a Special Economic Zone as defined in Special Economic Zone Act, 2005. 2.1.38 'SIA' means Secretariat of Industrial Assistance in DIPP, Ministry of Commerce & Industry, Government of India. 2.1.39 'Transferable Development Rights' (TDR) means certificates issued in respect of category of land acquired for public purposes either by the Central or State Government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole. 2.1.40 'Venture Capital Fund' (VCF) means a Fund establishe....
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....monitor the overall ceiling/sectoral cap/statutory ceiling. 3.1.5 No person other than registered FII/NRI as per Schedules II and III of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations of FEMA 1999, can invest/trade in capital of Indian Companies in the Indian Stock Exchanges directly i.e. through brokers like a Person Resident in India. 3.1.6 A Foreign Venture Capital Investor (FVCI) may contribute upto 100% of the capital of a Venture Capital Fund/Indian Venture Capital Undertaking and may also set up a domestic asset management company to manage the fund. All such investments are allowed under the automatic route subject to SEBI & RBI regulations and FDI Policy. However FVCIs are also allowed to invest as non-resident entities in other companies subject to FDI Policy. 3.2 TYPES OF INSTRUMENTS. 3.2.1 Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. The pricing of the capital instruments should be decided/deter....
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....e of Deposits or other instruments offered by banks rated by Standard and Poor, Fitch, IBCA ,Moody's, etc. with rating not below the rating stipulated by Reserve Bank from time to time for the purpose; (b) Deposits with branch/es of Indian Authorized Dealers outside India; and (c) Treasury bills and other monetary instruments with a maturity or unexpired maturity of one year or less. (iv) There are no end-use restrictions except for a ban on deployment / investment of such funds in real estate or the stock market. There is no monetary limit up to which an Indian company can raise ADRs / GDRs. (v) The ADR / GDR proceeds can be utilized for first stage acquisition of shares in the disinvestment process of Public Sector Undertakings / Enterprises and also in the mandatory second stage offer to the public in view of their strategic importance. (vi) Voting rights on shares issued under the Scheme shall be as per the provisions of Companies Act, 1956 and in a manner in which restrictions on voting rights imposed on ADR/GDR issues shall be consistent with the Company Law provisions. Voting rights in the case of banking companies will continue to be in terms of the provisions of th....
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....Proprietary Concern: (i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided; (a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers / Authorized banks. (b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector. (c) Amount invested shall not be eligible for repatriation outside India. (ii) Investments with repatriation benefits: NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation benefits. The application will be decided in consultation with the Government of India. (iii) Investment by non-residents other than NRIs/PIO: A person resident outside India other than NRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment by way of contribution to the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided....
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.... 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. In both the above cases, the 'Existing Venture/tie-up condition' as defined in para 4.2.2 would apply. (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 an Indian company on a recognized Stock Exchange in India through a stock broker registered with stock exchange or a merchant banker registered with SEBI. (e) A person resident in India can transfer by way of sale, shares/convertible debentures (including transfer of subscriber's shares), of an Indian company in sectors other than financial services sectors (i.e. Banks, NBFC, Insurance, ARCs, CICs, infrastructure companies in the securities market viz. Stock Exchanges, Clearing Corporations, and Depositorie....
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....e. 3.4.5 Prior permission of RBI in certain cases for transfer of capital instruments - (i) The following instances of transfer of capital instruments from resident to non-residents by way of sale require prior approval of RBI: (a) Transfer of capital instruments of an Indian company engaged in financial services sector (i.e. Banks, NBFCs, Asset Reconstruction Companies, CICs, Insurance companies, infrastructure companies in the securities market such as Stock Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges, etc.). (b) Transactions which attract the provisions of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997. (c) The activity of the Indian company whose capital instruments are being transferred falls outside the automatic route and the approval of the FIPB has been obtained for the said transfer. (d) The transfer is to take place at a price which falls outside the pricing guidelines specified by the Reserve Bank from time to time. (e) Transfer of capital instruments where the non-resident acquirer proposes deferment of payment of the amount of consideration, prior approval of the Reserve Bank would be required, as hithe....
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....under the Automatic Route for FDI or the company has obtained Government approval for foreign equity in the company; (b) The foreign equity after conversion of ECB into equity is within the sectoral cap, if any; (c) Pricing of shares is as per SEBI regulations or erstwhile CCI guidelines in the case of listed or unlisted companies respectively; (d) Compliance with the requirements prescribed under any other statute and regulation in force; and (e) The conversion facility is available for ECBs availed under the Automatic or Government Route and is applicable to ECBs, due for payment or not, as well as secured/unsecured loans availed from non-resident collaborators. (ii) General permission is also available for issue of shares/preference shares against lump sum technical know-how fee, royalty, under automatic route or SIA/FIPB route, subject to pricing guidelines of SEBI/CCI and compliance with applicable tax laws. 3.5 ISSUE OF INSTRUMENTS. 3.5.1 Issue of Rights/Bonus Shares - FEMA provisions allow Indian companies to freely issue Rights/Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, if any. However, such issue of b....
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....ares under the Employees Stock Option Scheme (ESOPs), to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, other than to the citizens of Pakistan. ESOPs can be issued to citizens of Bangladesh with the prior approval of FIPB. Shares under ESOPs can be issued directly or through a Trust subject to the condition that: (a) The scheme has been drawn in terms of relevant regulations issued by the SEBI, and (b) The face value of the shares to be allotted under the scheme to the non-resident employees does not exceed 5 per cent of the paid-up capital of the issuing company. (ii) Unlisted companies have to follow the provisions of the Companies Act, 1956. The Indian company can issue ESOPs to employees who are resident outside India, other than to the citizens of Pakistan. ESOPs can be issued to the citizens of Bangladesh with the prior approval of the FIPB. (iii)The issuing company is required to report the details of such issues to the Regional Office concerned of the Reserve Bank, within 30 days from the date of issue of shares. CHAPTER 4: CALCULATION, ENTRY ROUTE, CAPS, ENTRY CONDITIONS, ETC. OF INVESTMENT 4.1 C....
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..... This exception is 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 strictly for those cases where the entire capital of the downstream subsidy is owned by the holding company. Illustration To illustrate, if the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation: (A) where Company Y has foreign investment less than 50%- Company X would not be taken as having any indirect foreign investment through Company Y. (B) where Company Y has foreign investment of say 75% and: (I) invests 26% in Company X, the entire 26% investment by Company Y would be treated as indirect foreign investment in Company X; (II) Invests 80% in Company X, the indirect foreign investment in Company X would be taken as 80% (III) where Company X is a wholly owned subsidiary of Company Y (i.e. Company Y owns 100% shares of Company X), then only....
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....older, (bb) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956. (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 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 (i) and (ii) of clause 4.1.3(v)(d)(1) 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 counte....
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....ansfer/technology collaboration/trademark agreement in a new joint venture for technology transfer/ technology collaboration/trademark agreement would have to be under the Government approval route through FIPB/ Project Approval Board. The onus to provide requisite justification that the new tie-up would not jeopardize the existing joint venture or technology transfer/ trademark partner, would lie equally on the foreign investor/ technology supplier and the Indian partner. 4.2.2.3 The following investments, however, will be exempt from the requirement of Government approval even though the foreign investor may be having a joint venture or technology transfer/ trademark agreement in the same filed: (a) Investments to be made by Venture Capital Fund registered with the Securities and Exchange Board of India (SEBI); or (b) Investments by Multinational Financial Institutions like Asian Development Bank(ADB), International Finance Corporation(IFC), Commonwealth Finance Corporation (CDC), Deutsche Entwicklungs Gescelschaft (DEG) etc.; or (c) where in the existing joint venture, investment by either of the parties is less than 3 per cent; or (d) where the existing joint venture ....
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....Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/debentures, regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. 4.3 CAPS ON INVESTMENTS 4.3.1 Investments can be made by non-residents in the capital of a resident entity only to the extent of the percentage of the total capital as provided/permitted in the FDI policy. Thus while investment are prohibited in some sectors/activities, there are restrictions/conditions/caps on the investment in certain other sector/activities. The caps in various sector(s)/activity are detailed out in Chapter 5 of this circular. 4.4 ENTRY CONDITIONS ON INVESTMENT 4.4.1 Investments can be permitted to be made by non-residents in the capital of a resident entity in certain sectors/activity with entry conditions. These entry conditions would be applicable for investment only by non-resident entities. Such conditions may include norms for minimum capitalization, lock-in period, etc. The entry conditions in various sectors/activities are detailed in Chapter 5 of this circ....
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.... investment in such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. (iii) Operating-cum-investing companies: Foreign investment into such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. Further, the subject Indian companies into which downstream investments are made by such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. (iv) Investing companies: Foreign Investment in Investing Companies will require the prior Government/FIPB approval, regardless of the amount or extent of foreign investment. The Indian companies into which downstream investments are made by such investing companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. 4.6.5 For infusi....
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.... and making recommendations, FIPB should keep in mind the sectoral requirements and the sectoral policies vis-a-vis the proposal (s). 4.7.6 FIPB would consider each proposal in its totality 4.7.7 The Board should examine the following while considering proposals submitted to it for consideration. (i) whether the items of activity involve industrial licence or not and if so the considerations for grant of industrial licence must be gone into; (ii) whether the proposal involves any export projection and if so the items of export and the projected destinations. (iii)Whether the proposal has any strategic or defence related considerations. 4.7.8 While considering proposals the following may be prioritised. (i) Items falling in infrastructure sector. (ii) Items which have an export potential. (iii) Items which have large scale employment potential and especially for rural people. (iv) Items which have a direct or backward linkage with agro business/farm sector. (v) Items which have greater social relevance such as hospitals, human resource development, life saving drugs and equipment. (vi) Proposals which result in induction of technology or infusion of cap....
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....stry 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 Relations, Ministry of External Affairs (v) Secretary to Government, Ministry of Overseas Indian Affairs. 4.8.2 The Board would be able to co-opt other Secretaries to the Central Government and top officials of financial institutions, banks and professional experts of Industry and Commerce, as and when necessary. 4.9 APPROVAL LEVELS FOR CASES UNDER GOVERNMENT ROUTE 4.9.1 The following approval levels shall operate for proposals involving FDI under the Government route i.e. requiring prior Government approval: (i) The Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs.1200 crore. (ii) The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 1200 crore would be placed for consideration of CCEA. The FIPB Secretariat in DEA will process the recommendations of FIPB to obtain the app....
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....l Husbandry 5.2.1 100% FDI is allowed under automatic route in Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors. Note: Besides the above, FDI is not allowed in any other agricultural sector/activity. 5.2.2 For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: (i) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. (ii) Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. (iii) The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. (iv) Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of a....
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....or. 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). (iii) 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 "prescribed substances". (iv) FDI up to 100% is allowed under Government route in mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation Act 1957). (v) FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions viz.: (A) value addition facilities are set up w....
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....ion in consultation with Ministry of Defence. (iii) The applicant should be an Indian company / partnership firm. (iv) The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company / partnership firm being resident Indians. (v) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. (vi) The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R & D base. (vii) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the foreign investor taking into acco....
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....o any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. (xvi) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement. 5.10 Drugs & Pharmaceuticals including those involving use of recombinant technology -100% FDI is allowed under the automatic route 5.11 Hazardous chemicals viz. hydrocyanic acid and its derivatives; phosgene and its derivatives; and isocyanates and di-isocyanates of hydrocarbon - 100% FDI is allowed under the automatic route and subject to the obtaining of Industrial licence under the Industries (Development & Regulation) Act 1951. 5.12 Industrial Explosi....
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....sts 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 Chartered and Cargo airlines. (ix)"Chartered" and "Cargo" airlines would mean such airlines which meet the conditions as given in the Civil Aviation Requirements ....
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....g institutes; and technical training institutions - FDI up to 100% allowed on the automatic route. 5.15.4 The policy for FDI in the Civil Aviation Sector would be subject to the Aircraft Rules, 1934 as amended from time to time, Civil Aviation Requirements, and Aeronautical Information Circulars as notified by the Ministry of Civil Aviation. 5.16. Asset Reconstruction Companies: 5.16.1 'Asset Reconstruction Company' (ARC) means a company registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 5.16.2 Persons resident outside India, other than Foreign Institutional Investors (FIIs), can invest in the equity capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the Government Route. Automatic Route is not available for such investment. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs and FDI is restricted to 49 per cent of the paid-up capital of the ARC. 5.16.3 However, FIIs registered with SEBI can invest in the Security Receip....
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.... repatriation and non-repatriation basis provided the banking company passes a special resolution to that effect in the General Body. (c) Applications for foreign direct investment (FDI route) in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for the insurance sector is not being breached. (d) Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and FIPB as per para 4.2(iii) above. (e) The policies and procedures prescribed from time to time 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 foreign investors as well. (ii) Setting up of a subsidiary by foreign banks (a) Foreign banks ....
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....istry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations. 5.19.2 Cable Network: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Cable Networks under Government route subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting. 5.19.3 Direct-to-Home: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Direct to Home under Government route. Within the limit of 49%, FDI will not exceed 20%. This will be subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 5.19.4 Headend-In-The-Sky (HITS) Broadcasting Service: (i) 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 a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encry....
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....ment in Commodity Exchanges. 5.21.2 For the purposes of this chapter, (i) "Commodity Exchange" is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) "recognized association" means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952 (iii) "Association" means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase 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 t....
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....5.23.1, 5.23.2 and 5.23.3 would not apply. 5.23 Development of Townships, Housing, Built-up infrastructure and Construction-development projects. 5.23.1 FDI up to 100% under the automatic route in townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) is allowed subject to the following guidelines: Minimum area to be developed under each project would be as under: (i) In case of development of serviced housing plots, a minimum land area of 10 hectares (ii) In case of construction-development projects, a minimum built-up area of 50,000 sq.mts (iii)In case of a combination project, any one of the above two conditions would suffice. 5.23.2 The investment would further be subject to the following conditions: (j) Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company....
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.... Estate Business. 5.24 Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898. 5.24.1 100% FDI is allowed under the Government route. 5.24.2 This will be subject to existing Law i.e Indian Post Office Act 1898 and exclusion of activity relating to the distribution of letters. 5.25. Credit Information Companies (CIC) 5.25.1 Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. 5.25.2 Foreign investment consisting of FDI and FII upto 49% is permitted under the Government route, subject to regulatory clearance from RBI. 5.25.3 Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. 5.25.4 Such FII investment would be permitted subject to the conditions that: (a) No single entity should directly or indirectly hold more than 10% equity. (b) Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement; and (c) FIIs investing in CICs sha....
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....cable area" in the Industrial Park means- (a) in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities. (b) in the case of built up space- the floor area and built up space utilized for providing common facilities. (c) in the case of a combination of developed land and built-up space- the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities. (v) "Industrial Activity" means manufacturing, electricity, gas and water supply, post and telecommunications, software publishing, consultancy and supply, data processing, database activities and distribution of electronic content, other computer related activities, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities. 5.28.4 FDI up to 100% under the automatic route is allowed both in setting up new and in established industrial parks and would not be subject to the conditionalities applicable for construction development ....
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....down subsidiaries for specific NBFC activities, without any restriction on number of operating subsidiaries and without bringing in additional capital. (v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below. (vi) Non- Fund based activities : US $0.5 million for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company. Note: The following activities would be classified as Non-Fund Based activities: (a) Investment Advisory Services (b) Financial Consultancy (c) Forex Broking (d) Money Changing Business (e) Credit Rating Agencies (vii) This will be subject to compliance with the guidelines of RBI. 5.31.3 Credit Card business includes issuance, sales, marketing & design of various payment products such....
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....bsp; (i) Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26%, is permitted under the Government route. (ii) 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. (iii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008. 5.33.3 Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals: 100% FDI is permitted under the Government route. (i) This will also be subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 5.33.4 Publication of facsimile edition of foreign newspapers: (i) FDI up to 100% is permitted under Government route in publication of facsimile edition of foreign newspapers provided the FDI is by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought o....
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....rvices. (ii) Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include 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 entity. In any case, the `Indian' shareholding will not be less than 26 percent. (iii) FDI up to 49 percent is on the automatic route and beyond that on the Government route. FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. (iv) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. (v) FDI shall be subject to laws of India and not the laws of the foreign country/countries. ....
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....ion) at a given point of time. (xi) The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Security Agencies (IB). (xii) Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time. (xiii) The licensee company is not allowed to use remote access facility for monitoring of content. (xiv) Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes. (xv) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. (xvi) The telecom service providers should ensure tha....
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.... requirements notified by the Department of Telecommunications. 5.38.6 (i) FDI upto 100% is allowed for the following activities (a) Infrastructure provider providing dark fibre, right of way, duct space, tower (IP Category I) (b) Electronic Mail (c) Voice Mail (ii) The investment upto 49% is under the automatic route and beyond 49% under the Government route. (iii) This will be subject to the condition that such companies will divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. (iv) This will be subject to licensing and security requirements notified by the Department of Telecommunications. 5.39 Trading: 5.39.1 100% FDI is permitted under the automatic route for trading companies for the following activities: 5.39.1.1 Cash & Carry trading Wholesale Trading/ Wholesale Trading. 5.39.1.1 (i) Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales....
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....companies should be for their internal use only. (e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. (f) A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly. 5.39.1.2 Trading for exports. 5.39.1.3 E-commerce activities: E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well. 5.39.2 100% FDI is permitted under the Government route for trading companies for the following activities: (i) Trading of items sourced from small scale sector. (ii) Test marketing of such items for which a company has approval for manufacture, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing. 5.39.3 Single Brand product trading: FDI up to 51%, under the Government route is allowed in retail t....
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....o 100% on the automatic route subject to applicable laws/sectoral rules/regulations. CHAPTER 6: REMITTANCE, REPORTING AND VIOLATION 6.1 REMITTANCE AND REPATRIATION 6.1.1 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 pro....
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.... the FIRC/s evidencing the receipt of the remittance along with the KYC report (enclosed as Annex-6) on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported. 6.2.2 Reporting of issue of shares (i) After issue of shares (including bonus and shares issued on rights basis and shares issued 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) Part A of 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 Part A: (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 Gov....
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....e to its link office. The link office would consolidate the Form FC-TRS and submit a monthly report to the Reserve Bank. 6.2.4 Reporting of Non-Cash Details of issue of shares against conversion of ECB has to be reported to the Regional Office concerned of the RBI, as indicated below: (i) In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR to the Regional Office concerned of the Reserve Bank 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 subsequ....
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....ntinuing one, further penalty which may extend to five thousand Rupees for every day after the first day during which the contraventions continues. (ii) Where a person committing a contravention of any provisions of this Act or of any rule, direction or order made there under is a company (company means any body corporate and includes a firm or other association of individuals as defined in the Companies Act), every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. (iii) Any Adjudicating Authority adjudging any contraventions under 6.3.1(i), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government. 6.3.2 Adjudication and Appeals (i) For the purpose of adjudication of any contravention of FEMA, the Ministry of Finance as pe....
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....NSOLIDATED FDI POLICY. The "Consolidated FDI Policy" is attached. 2. This circular will take effect from April 1, 2010. (Gopal Krishna) Joint Secretary to the Government of India D/o IPP F. No. 5(14)/2009-FC Dated 31.03.2010 Copy forwarded to: Press Information Officer, Press Information Bureau- for giving wide publicity to the above circular. 1. 2. 3. 4. Reserve Bank of India, Mumbai BE Section for uploading the circular on DIPP's website. Department of Economic Affairs, Ministry of Finance, New Delhi 1 INDEX PAGE NUMBER DESCRIPTION CHAPTER-1 INTENT AND OBJECTIVE 1.1 Intent And Objective CHAPTER-2 DEFINITIONS 2.1 Definitions CHAPTER-3 ORIGIN, TYPE, ELIGIBILITY, CONDITIONS AND ISSUE/TRANSFER OF INVESTMENT 3.1 Origin of Investment in India 3.2. Types of Instruments 3.3 Eligibility of FDI in Resident Entities 3.4 Conditions on Issue/Transfer of Shares 3.5 Issue of Instruments 18 22 16762 14 15 CHAPTER-4 CALCULATION, ENTRY ROUTE, CAPS, ENTRY CONDITIONS ETC. OF INVESTMENT 24 24 4.1 Calculation of Total Foreign Investment i.e. Direct and Indirect Foreign Investment in Indian Companies 4.2 Entry Routes for Investment 4.3 Caps on Investments 4....
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....52 53 54 54 56 56 57 57 3 5.37 Storage and Warehouse Services 5.38 Telecommunication 5.39 Trading 5.40 Transport and Transport Support Services CHAPTER-6 REMITTANCE, REPORTING AND VIOLATION 6.1 Remittance and Repatriation 6.2 Reporting of FDI 6.3 Adherence to Guidelines/Orders and Consequences of Violation Penalties Adjudication and Appeals Compounding Proceedings 58 58 62 64 65 65 668829 ANNEXURES Annex-1 Form FC-GPR 71 Annex-2 Terms and conditions for transfer of capital instruments from resident to non-resident and vice-versa 84 Annex-3 Documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift 90 Annex-4 Definition of "relative" as given in Section 6 of Companies Act, 1956 Annex-5 Report by the Indian company receiving amount of consideration for issue of shares / convertible debentures under the FDI scheme Annex-6 Know Your Customer (KYC) Form in respect of the non-resident investor Annex-7 Form FC-TRS Annex-8 Form DR Annex-9 Form DR - Quarterly 91 92 94 24 95 99 101 4 CHAPTER 1: INTENT AND OBJECTIVE 1.1 1.1.1 INTENT AND OBJECTIVE 'Investment' is usual....
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....otified by the Reserve Bank of India as amendment to notification No.FEMA 20/2000-RB dated May 3, 2000. These notifications take effect from the date of issue of Press Notes/ Press Releases. 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. 1.1.5 This circular consolidates into one document all the prior policies/regulations on FDI which are contained in FEMA, 1999, RBI Regulations under FEMA, 1999 and Press Notes/Press Releases/Clarifications issued by DIPP and reflects the current ‘policy framework' on FDI. It is clarified that this is a consolidation/compilation and comprehensive listing of most matters on FDI and is not intended to make changes in the extant regulations. This Consolidation deals comprehensively with all aspects of FDI Policy which are covered under the various Press Notes/Press Releases/ Clarifications issued by DIPP. 1.1.6 It has been decided that from now onwards a consolidated circular would be issued every six months to update the FDI policy. This consolida....
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....time being authorized under Sub-section (a) of Section 10 of FEMA to deal in foreign exchange or foreign securities. 'Capital' means equity shares; fully, compulsorily & mandatorily convertible preference shares; fully, compulsorily & mandatorily convertible debentures. Note Any other type of instruments like warrants, partly paid shares etc. are not considered as capital and cannot be issued to person resident outside India. ‘Capital account transaction' means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6 of FEMA. A company is considered as “Controlled†by resident Indian citizens if the resident 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 . 2.1.8 An entity is considered as 'Controlled' by 'non resident entities', if non-residents have the power to appoint a majority of its directors 2.1.9 'Depository Rec....
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.....24 2.1.25 FII in accordance with the SEBI (FII) Regulations 1995. 'Foreign Venture Capital Investor' (FVCI) means an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations "Government route' means that investment in the capital of resident entities by non- resident entities can be made only with the prior approval from FIPB, Ministry of Finance or SIA, DIPP as the case may be. 'Holding Company' would have the same meaning as defined in Companies Act 1956. 'Indian Company' means a company incorporated in India under the Companies Act, 1956. '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 th....
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.... (A) A person who has gone out of India or who stays outside India, in either case- (a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) A person who has come to or stays in India, in either case, otherwise than- (a) for or on taking up employment in India; or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an 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. 'Person resident outside India' means a person who is not a Person resident in India. 'RBI' means the Reserve Bank of India established under the Reserve Bank of India Act, 1934. 'Resident Entity' means 'Person resident in India' excluding an individual. 'R....
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.... RBI if the investment is through Automatic route. 3.1.4 (i) An FII may invest in the capital of an Indian company either under the FDI Scheme/Policy or the Portfolio Investment Scheme. 10% individual limit and 24% aggregate limit for FII investment would still be applicable even when FIIs invest under the FDI scheme/policy. (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) (Post-issue pattern of shareholding) so that the details could be suitably reconciled for statistical/monitoring purposes. (iii)A daily statement in respect of all transactions (except derivative trade) have to be submitted by the custodian bank in floppy / soft copy in the prescribed format directly to RBI to monitor the overall ceiling/sectoral cap/statutory ceiling. 3.1.5 No person other than registered FII/NRI as per Schedules II and III of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations of FEMA 1999, can invest/trade in capital of Indian Companies in the India....
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....urities and Exchange Board of India (SEBI) will not be eligible to issue ADRs/GDRs. (iii) Unlisted companies, which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued ADRs/GDRs in the international market, have to list in the domestic market on 15 making profit or within three years of such issue of ADRs/GDRs, whichever is earlier. ADRs / GDRs are issued on the basis of the ratio worked out by the Indian company in consultation with the Lead Manager to the issue. The proceeds so raised have to be kept abroad till actually required in India. Pending repatriation or utilization of the proceeds, the Indian company can invest the funds in:- (a) Deposits, Certificate of Deposits or other instruments offered by banks rated by Standard and Poor, Fitch, IBCA,Moody's, etc. with rating not below the rating stipulated by Reserve Bank from time to time for the purpose; (b) Deposits with branch/es of Indian Authorized Dealers outside India; and (c) Treasury bills and other monetar....
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....rlying shares and sold in the Indian market. (ii) Sponsored ADR/GDR issue: An Indian company can also sponsor an issue of ADR / GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs/GDRs can be issued abroad. The proceeds of the ADR / GDR issue are remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion. These proceeds can be kept in Resident Foreign Currency (Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into ADRs/GDRs. 3.3 ELIGIBILITY OF FDI IN RESIDENT ENTITIES 3.3.1 FDI in an Indian Company (i) Indian companies including those which are micro and small enterprises can issue capital against FDI. 3.3.2_FDI in Partnership Firm / Proprietary Concern: (i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided; (a) Amount is invested by inward remittance or out of NRE/FCNR....
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....res – Issue price of shares to persons resident outside India under the FDI Policy, shall be on the basis of SEBI guidelines in case of listed companies. In case of unlisted companies, valuation of shares has to be done by a Chartered Accountant in accordance with the guidelines issued by the erstwhile Controller of Capital Issues (CCI). 3.4.3 Foreign Currency Account – Indian companies which are eligible to issue shares 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. 18 3.4.4 Transfer of shares and convertible debentures (i) Subject to FDI sectoral policy, foreign 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 ....
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....e consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a Know Your Customer (KYC) check by the remittance receiving AD Category - I bank at the time of receipt of funds. In case, the remittance receiving AD Category – I bank is different from the AD Category - I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category – I bank carrying out the transaction along with the Form FC- TRS. (iii) Escrow: AD Category I banks have been given general permission to open Escrow account and Special account of non-resident corporate for open offers / exit offers and delisting of shares. The relevant SEBI (SAST) Regulations or any other applicable SEBI Regulations/ provisions of the Companies Act, 1956 will be applicable. 3.4.5 Prior permission of RBI in certain cases for transfer of capital instruments - (i) The following instances of transfer of capital instruments from resident to non-residents by way of sale require prior approval of R....
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.... limit in the Indian company is not breached. (d) The transferor (donor) and the proposed transferee (donee) are close relatives as defined in Section 6 of the Companies Act, 1956, as amended from time to time. The current list is reproduced in Annex-4. (e) The value of capital instruments to be transferred together with any capital instruments already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 25,000 during the calendar year. (f) Such other conditions as stipulated by Reserve Bank in public interest from time to time. 21 3.4.6 Conversion of ECB/Lumpsum Fee/Royalty into Equity. (i) Indian companies have been granted general permission for conversion of External Commercial Borrowings (ECB) (excluding those deemed as ECB) in convertible foreign currency into shares/preference shares, subject to the following conditions and reporting requirements. (a) The activity of the company is covered under the Automatic Route for FDI or the company has obtained Government approval for foreign equity in the company; (b) The foreign equity after conversion of ECB into equity is within the sectoral cap, if....
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....oes 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 policy. 3.5.5 Issue of shares under Employees Stock Option Scheme (ESOPs) – (i) Listed Indian companies are allowed to issue shares under the Employees Stock Option Scheme (ESOPs), to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, ot....
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....gn Investment: All investment directly by a non-resident entity into the Indian company would be counted towards foreign investment. (ii) Counting of indirect foreign Investment: (a) The foreign investment through the investing Indian company would not be considered for calculation of the indirect foreign investment in case of Indian companies which are ‘owned and controlled' by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens . (b) For cases where condition (a) above is not satisfied or if the investing company is owned or controlled by ‘non resident entities', the entire investment by the investing company into the subject Indian Company would be considered as indirect foreign investment, Provided that, as an exception, the indirect foreign investment in only 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 is made since 24 the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstr....
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..... (c) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral foreign investment cap, would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens. (d) In the I& B and Defence sectors where the sectoral cap is less than 49%, the company would need to be 'owned and controlled' by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens. (A) For this purpose, the equity held by the largest Indian shareholder would have to be at least 51% of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956. The term 'largest Indian shareholder', used in this clause, will include any or a combination of the following: (I) In the case of an individual shareholder, (aa) The individual shareholder, (bb) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956. (cc) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and c....
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....r Government route as laid down in the FDI policy from time to time, are considered by the Foreign Investment Promotion Board (FIPB) in Department of Economic Affairs (DEA), Ministry of Finance. 4.2.2 Investment would be subject to the ‘Existing Venture/ tie-up condition' as defined below: 4.2.2.1 With effect from January 12, 2005 the joint venture agreements are expected to include a 'conflict of interest' clause to determine/ safeguard the interests of joint venture partners in the event of one of the partners desiring to set up another joint venture or a wholly owned subsidiary in the same field of economic activity. The policy is, however, expected to protect the interest of the joint venture partner where the agreement had been entered prior to January 12, 2005. 27 4.2.2.2 Where a foreign investor has an existing joint venture/technology transfer/ trademark agreement in the same field, prior to January 12, 2005, the proposal for fresh investment/technology transfer/technology collaboration/trademark agreement in a new joint venture for technology transfer/ technology collaboration/trademark agreement would have to be under the Government approval route th....
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....d 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 that these guidelines will not apply for sectors/activities where there are no foreign investment caps, that is, 100% foreign investment is permitted under the automatic route. (vi) It is also clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIS, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/debentures, regardless of whether the said investments have been made under Schedule ....
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....m investment, have been detailed in Para 4.1 which enables determination of total foreign investment in any/all Indian Companies. 4.6.3 For the purpose of this chapter, (i) ‘Operating Company' is an Indian company which is undertaking operations in various economic activities and sectors. (ii) 'Downstream investment' means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of Para 4.1. Para 4.1.3 provides the guidelines for calculation of indirect foreign investment with conditions specified in para 4.1.3 (v) (iv) 'Foreign Investment' would have the same meaning as in Para 4.1 30 4.6.4 Guidelines for downstream investment by Investing Indian Companies 'owned or controlled by non resident entities' as per Para 4.1: (i) The Policy on downstream investment comprises policy for (a) only operating companies (b) operating-cum-investing companies (c) only investing companies as below: (ii) Only operating companies: Foreign investment in such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such co....
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....requisite funds from abroad and not leverage funds from domestic market for such investments. This would, however, not preclude downstream operating companies to raise debt in the domestic market. GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB: 4.7.1 The following guidelines are laid down to enable the FIPB to consider the proposals for FDI and formulate its recommendations. 4.7.2 All applications should be put up before the FIPB by its Secretariat within 15 days and it should be ensured that comments of the administrative ministries are placed before the Board either prior to/or in the meeting of the Board. 4.7.3 Proposals should be considered by the Board keeping in view the time frame of thirty (30) days for communicating Government decision. 4.7.4 In cases in which either the proposal is not cleared or further information is required in order to obviate delays presentation by applicant in the meeting of the FIPB should be resorted to. 4.7.5 While considering cases and making recommendations, FIPB should keep in mind the sectoral requirements and the sectoral policies vis-Ã -vis the proposal (s). 4.7.6 FIPB would consider each proposal in its totality 4.....
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.... of shares will be as per SEBI/RBI guidelines. (vii) Whether the activity is an industrial or a service activity or a combination of both. (viii) Whether the items of activity involves any restriction by way of reservation for the Micro & Small Enterprises sector. (ix) Whether there are any sectoral restrictions on the activity (x) Whether the proposal involves import of items which are either hazardous, banned or detrimental to environment (e.g. import of plastic scrap or recycled plastics). 4.7.10 No condition specific to the letter of approval issued to a foreign investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and, regulations applicable to the industrial sector. 33 4.8 4.8.1 India: CONSTITUTION OF FIPB : FIPB comprises of the following Core Group of Secretaries to the Government of (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 Com....
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.... Government under the FDI policy is not required for any other reason/purpose. 35 55 CHAPTER 5: POLICY ON ROUTE, CAPS AND ENTRY CONDITIONS: 5.1 PROHIBITION ON INVESTMENT IN INDIA. FDI is prohibited in the following activities/sectors: (a) Retail Trading (except single brand product retailing) (b) Atomic Energy (c) Lottery Business including Government /private lottery, online lotteries, etc. (d) Gambling and Betting including casinos etc. (e) Business of chit fund (f) Nidhi company (g) Trading in Transferable Development Rights (TDRs) (h) Real Estate Business or Construction of Farm Houses (i) Activities / sectors not opened to private sector investment. Besides foreign investment in any form, foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities. 5.2 AGRICULTURE Agriculture & Animal Husbandry 5.2.1 100% FDI is allowed under automatic route in Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled condition....
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....coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 5.4.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities. (i) India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Ilmenite, 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. 37 (ii) 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 i....
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....icro, Small and Medium Enterprises Development Act 2006. 5.6 Alcohol - Distillation & Brewing: 100% FDI is allowed under the automatic route. 5.7 Cigars & Cigarettes Manufacture: 100% FDI is allowed under Government route and subject to the obtaining of Industrial licence under the Industries (Development & Regulation) Act 1951. 5.8 Coffee & Rubber processing and warehousing: 100% FDI is allowed under the automatic route. 5.9 Defence Industry 5.9.1 FDI is permissible up to 26%, under Government route subject to Industrial license under the Industries (Development & Regulation) Act 1951 and the following conditions: (i) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence. (ii) Cases involving FDI will be considered by the FIPB and licences given by the Department of Industrial Policy & Promotion in consultation with Ministry of Defence. (iii)The applicant should be an Indian company / partnership firm. (iv)The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well ....
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....nfidentiality 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. (xiv) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. (xv) Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities ot....
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....ger airlines, Helicopter services / Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. 5.15.2 For the purposes of the Civil Aviation sector: (i) "Airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934; (ii) "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto; (iii)"Air transport service" means a service for the transport by air of persons, mails or any other thing, 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 w....
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....heduled Passenger Airline - FDI up to 49% and investment by Non-resident Indians (NRI) up to 100% allowed on the automatic route. (b) Non-Scheduled Air Transport Service/ Non-Scheduled airlines, Chartered airlines, and Cargo airlines- FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% allowed. FDI in on the automatic route upto 49% and on the Government route beyond 49% and upto 74%. (c) Helicopter services/seaplane services requiring DGCA approval- FDI up to 100% allowed on the automatic route. (iv) FDI ceilings in other services under Civil Aviation sector (a) Ground Handling Services- FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% allowed. FDI under the automatic route upto 49% and through the 43 Government route beyond 49% and upto 74%. This will be subject to sectoral regulations and security clearance. (b) Maintenance and Repair organizations; flying training institutes; and technical training institutions - FDI up to 100% allowed on the automatic route. 5.15.4 The policy for FDI in the Civil Aviation Sector would be subject to the Aircraft Rules, 1934 as amended from time to time, Civil Aviation Requirements, and A....
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....FIIS and NRIs will be as follows: (i) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. (a) Thus, the FII investment limit will continue to be within 49 per cent of the total paid-up capital. (b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the banking company passes a special resolution to that effect in the General Body. (c) Applications for foreign direct investment (FDI route) in private banks having joint venture/subsidiary in insurance sector m....
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....ii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals. Banking- Public Sector 5.18.1 FDI and Portfolio Investment in nationalized Banks are subject to overall statutory limit of 20% under Government route as per section 3(2D) of the Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. The same ceiling is also applicable to the State Bank of India and its associate Banks. 5.19 Broadcasting 5.19.1 Terrestrial Broadcasting FM (FM Radio): Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 20% equity for FM Radio's Broadcasting Services with prior approval of the Government subject to such terms and conditions 46 46 as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations. 5.19.2 Cable Network: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Cable....
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....fy the continued compliance of this requirement through the Company Secretary at the end of each financial year. (iii) FDI for Up-linking TV Channels will be subject to compliance with the Up-linking Policy notified by the Ministry of Information & Broadcasting from time to time. 5.20 Business Services- 100% FDI under the automatic route is allowed in Data processing, software development and computer consultancy services; Software supply services; Business and management consultancy services, Market Research Services, Technical testing& Analysis services. Commodity Exchanges 5.21 5.21.1 Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 5.21.2 For the purposes of this chapter, (i) “Commodity Exchange" is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exch....
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....Water Supply Projects, Package Water Treatment Plants, Rain and Rain Water Harvesting Structures, Waste-Water Recycling And Re-Use Techniques And Facilities, Rain-Water Re- Charging And Re-Use Techniques Of Ground Water. 5.22.4 Ports and Harbours: 100% FDI is allowed under the automatic route for: (i) Leasing of existing assets of ports (ii) Construction/creation and maintenance of assets such as-container terminals bulk/break bulk/multipurpose and specialized cargo berths, warehousing, container freight stations, storage facilities and tank farms, cranage/ handling equipment, setting up of captive power plants, dry docking and ship repair facilities. (iii) Leasing of equipment for port handling and leasing of floating crafts 49 49 (iv) Captive facilities for port based industries. 5.22.5 FDI upto 100% is permitted on the automatic route for Mass Rapid Transport Systems in all Metropolitan Cities including associated commercial development of real estate. The conditions at para 5.23.1, 5.23.2 and 5.23.3 would not apply. 5.23 Development of Townships, Housing, Built-up infrastructure and Construction- development projects. 5.23.1 FDI up to 100% under the automatic ....
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....pheral 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. 5.23.6 The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer. 5.23.7 The conditions as at paras 5.23.1, 5.23.2 and 5.23.3 would not apply to Hotels & Tourism, Hospitals and SEZ's. 5.23.8 For investment by NRIs, the conditions at paras 5.23.1, 5.23.2 and 5.23.3 would not apply. 5.23.9 100% FDI is allowed under the automatic route in development of Special Economic Zones (SEZ) without the conditionalities at paras 5.23.1, 5.23.2 and 5.23.3 above. This will be subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce. 5.23.10 FDI is not allowed in Real Estate Business. 5.24 Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898. 5.24.1 100% FDI is allowed under....
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.... common facilities, is developed and made available to all the allottee units for the purposes of industrial activity. (ii) "Infrastructure†refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. (iii) "Common Facilities†refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel 52 52 desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. (iv)"Allocable area†in the Industrial Park means- (a) in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common....
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....investment in NBFC is allowed under the automatic route in the following activities: (i) Merchant Banking (ii) Under Writing (iii) Portfolio Management Services (iv) Investment Advisory Services (v) Financial Consultancy (vi) Stock Broking (vii) Asset Management (viii) Venture Capital (ix) Custodian Services (x) Factoring (xi) Credit Rating Agencies (xii) Leasing & Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit 54 5.31.2 Investment would be subject to the following minimum capitalisation norms: (i) US $0.5 million for foreign capital upto 51% to be brought upfront (ii) US $ 5 million for foreign capital more than 51% and upto 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 upfront and the balance in 24 months. (iv) 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on number of operating subsidiaries and without bringing in additional capital. (v) Joint Venture operating....
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....refining in the private sector. This will be subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. 5.32.2 FDI up to 49% is permitted under the Government route in petroleum refining by the Public Sector Undertakings (PSU). This should not involve any divestment or dilution of domestic equity in the existing PSUs. 5.33. Print Media 5.33.1 Publishing of Newspaper and periodicals dealing with news and current affairs: Foreign investment, including FDI and investment by NRIS/PIOS/FII, up to 26%, is permitted under the Government route. 5.33.2 Publication of Indian editions of foreign magazines dealing with news and current affairs: (i) Foreign investment, including FDI and investment by NRIS/PIOs/FII, up to 26%, is permitted under the Government route. (ii) 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. (iii) Foreign investment would also be subject to the Guidelines for Pu....
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.... 49% under the Government route. Satellites Establishment and operation: 5.36.1 FDI upto 74% is allowed under Government route. 5.36.2 This will be subject to the sectoral guidelines of Department of Space/ISRO. 57 5.37 Storage and Warehouse Services: 100% FDI is allowed under the automatic route in Storage and Warehousing including warehousing of agricultural products with refrigeration (cold storage). 5.38 Telecommunication 5.38.1 Telecom services: Foreign Direct Investment limit in telecom services is 74 percent subject to the following conditions: (i) This is applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services. (ii) Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include 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....
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.... 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 to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement. (x) On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location) at a given point of time. 59 (xi) The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Security Agencies (IB). (xii) Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful ....
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....applicable to the companies operating telecom service(s) with the FDI cap of 49%. 5.38.4 All the telecom service providers shall submit a compliance report on the aforesaid conditions to the licensor on 1st day of July and January on six monthly basis. 5.38.5 (i) FDI upto 74% is allowed in following activities (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 licenses with FDI upto 74%. (c) Radio paging (d) End-to-End bandwidth (ii) FDI upto 49% would be allowed under the automatic route and above that under the Government route. (iii) This will be subject to licensing and security requirements notified by the Department of Telecommunications. 5.38.6 (i) FDI upto 100% is allowed for the following activities (a) Infrastructure provider providing dark fibre, right of way, duct space, tower (IP Category I) (b)Electronic Mail (c) Voice Mail (ii) The investment upto 49% is under the automatic route and beyond 49% under the Government route. (iii) This will be subject to the condition that such companies....
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....i 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. 62 12 (c) (d) (e) (f) 5.39.1.2 5.39.1.3 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. 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 and the wholesale made to the group companies should be for their internal use only. WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly. Trading for exports. E-commerce activities: E-commerce activities refer to the activity of buying and selling by a company through the....
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....ed for: 5.40.1 Pipeline transport, ocean and water transport, inland water transport. 5.40.2 Transport Support Services: (i) Support services to land transport like operation of highway bridges, toll roads, and vehicular tunnels. (ii)Support services to water transport like operation and maintenance of piers, loading and discharging of vessels. (iii) Services incidental to transport like cargo handling incidental to land, water and air transport (iv) Rental and leasing of - motor vehicles without operator for passenger transport and freight transport, refrigerated/cold transport. (v) Renting of -transport equipment without operator, of other transport equipment. 5.41. In sectors/Activities not listed above, FDI is permitted upto 100% on the automatic route subject to applicable laws/sectoral rules/regulations. 64 CHAPTER 6: REMITTANCE, REPORTING AND VIOLATION 6.1 REMITTANCE AND REPATRIATION 6.1.1 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. ....
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...., should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank not later than 30 days from the date of receipt in the Advance Reporting Form enclosed as Annex-5. (ii) Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category – I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (enclosed as Annex-6) on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported. 6.2.2 Reporting of issue of shares (i) After issue of shares (including bonus and shares issued on rights basis and shares issued 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) Part A of Form FC-GPR has to be duly filled u....
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....porting of transfer of shares between residents and non-residents and vice versa is to be done in Form FC-TRS (Annex-7). The Form FC-TRS should be submitted to the AD Category - I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The AD Category - I bank, would forward the same to its link office. The link office would consolidate the Form FC-TRS and submit a monthly report to the Reserve Bank. 6.2.4 Reporting of Non-Cash Details of issue of shares against conversion of ECB has to be reported to the Regional Office concerned of the RBI, as indicated below: 67 62 (i) In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR to the Regional Office concerned of the Reserve Bank 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 indica....
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....tion of any provisions of this Act or of any rule, direction or order made there under is a company (company means any body corporate and includes a firm or other association of individuals as defined in the Companies Act), every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. (iii) Any Adjudicating Authority adjudging any contraventions under 6.3.1(i), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government. 6.3.2 Adjudication and Appeals (i) For the purpose 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 f....
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....s / convertible debentures No. 1. Name Particulars Address of the Registered Office (In Block Letters) State Registration No. given by Registrar of Companies Whether existing company or new company (strike off whichever is not applicable) If existing company, give registration number allotted by RBI for FDI, if any Telephone Fax Existing company / New company e-mail 71 2. Description of the main business activity 3 NIC Code Location of the project and NIC code for the district where the project is located 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) Details of the foreign investor / collaborator* Automatic Route / Approval Route 72 4 (a) 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 *If there is more than one foreign....
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....ce Value) Rs. % No. of shares 75 (Face Value) Amount RS. % 11 10 Financial Institutions NRIS/PIO 12 Others (please specify) Sub Total b) Resident Total 76 DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE INDIAN COMPANY: (Delete whichever is not applicable and authenticate) We hereby declare that: 1. We comply with the procedure for issue of shares / convertible debentures as laid down under the FDI scheme as indicated in Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time. 2. The investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of RBI and we fulfill all the conditions laid down for investments under the Automatic Route namely (strike off whichever is not applicable). a) Foreign entity/entities―(other than individuals), to whom we have issued shares have existing joint venture or technology transfer or trade mark agreement in India in the same field and Conditions stipulated in para 4.2.2 of this circular have been complied with. OR Foreign entity/entities―(other than individuals), to whom we have issued shares do not have any existing joint vent....
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....with. Companies Act, 1956 have been complied with. Government approval, if any, have been complied 3. The company is eligible to issue shares / convertible debentures under these Regulations. 4. The company has all original certificates issued by AD Category - I banks 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. ak If the company doesn't have a full time Company Secretary, a certificate from a practising Company Secretary may be submitted. (Name & Signature of the Company Secretary) (Seal) FOR USE OF THE RESERVE BANK ONLY: Registration Number for the FC- GPR: Unique Identification Number allotted to the Company at the time of reporting receipt of remittance 79 PART-B [Part-B of Annex I to A. P. (DIR Series) Circular No. 44 dated May 30, 2008] (i) This part of Form FC-GPR is to be submitted to the Director, Balance of Payment Statistical Division, Department of Statistics and Information Management, Reserve Bank of India, C-8, 3rd Floor, Bandra- Kurla Complex, Bandra (E), Mumbai 400051; Tel: 2657 1265, 2657 2513, Fax: 26570848; email: [email protected]....
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....nt direct investor and investee / reporting company, relating to i) Short Term Borrowing from overseas investors, ii) Long Term Borrowing from overseas investors, iii) Trade Credit, iv) Suppliers Credit, v) Financial Leasing, vi) Control Premium, vii) Non-Competition Fee in case of transactions not involving issue of shares, viii) Non-cash acquisition of shares against technical transfer, plant and machinery, goodwill, business development and similar considerations and ix) investment in immovable property made during the year. 81 + Under foreign liabilities, for retained earnings (undistributed profit), please furnish the proportionate amount as per the share holding of non-resident investors (Direct investors). Similarly under foreign assets outside India, the retained earnings of your company would be proportionate to your shareholding of ordinary shares in the non- resident enterprise. 7. Portfolio and Other Investment [Please furnish here the outstanding investments other than those mentioned under FDI above] Foreign Liabilities In India Outstanding Amount in Lakhs of Foreign Assets Outside Outstanding | Outstanding Outstanding at end- at end- at end- M....
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....entures of an Indian company, other than a company engaged in financial service sector, transferred by way of sale, the parties involved in the transaction shall comply with the guidelines set out below. 1.2 Parties involved in the transaction are (a) seller (resident/non-resident), (b) buyer (resident/non-resident), (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. ii. Transfer of shares, by way of sale under private arrangement by a person resident in India to a person resident outside India. 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 shall not be less than (a) the ruling market price, in case the shares are listed on stock exchang....
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....s as may be laid down by the Reserve Bank so that the entire shareholding is sold in not less than five trading days through screen based trading system or C) where the shares are not listed on any stock exchange, at a price which is lower of the two independent valuations of share, one by statutory auditors of the company and the other by a Chartered Accountant or by a Merchant Banker in Category 1 registered with Securities and Exchange Board of India. 85 Explanation: i) A share is considered as thinly traded if the annualized trading turnover in that share, on main stock exchanges in India, during the six calendar months preceding the month in which application is made, is less than 2 percent (by number of shares) of the listed stock. ii) For the purpose of arriving at Net Asset Value per share, the miscellaneous expenses carried forward, accumulated losses, total outside liabilities, revaluation reserves and capital reserves (except subsidy received in cash) shall be reduced from value of the total assets and the net figure so arrived at shall be divided by the number of equity shares issued and paid up. Alternatively, intangible assets shall be reduced from t....
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....taxes. 4.3 The sale proceeds of shares (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. ii. iii. iv. V. vi. 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. 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....
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....uld be on the transferor / transferee, resident in India. The 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 88 books. 6.3 The actual inflows and outflows on account of such transfer of shares shall be reported by the AD....
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....uidelines issued by the Securities& Exchange Board of India or the erstwhile CCI for listed companies and unlisted companies, respectively. vii. Certificate from the concerned Indian company certifying that the proposed transfer of shares/convertible 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. 22 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 25,000 during a calendar year. 06 90 Annex-4 (Para 3.4.5(iii) (d)) 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....
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....idual) 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: Stamp: Place: 94 24 Annex-7 (Para 6.2.3) FORM FC-TRS Declaration regarding transfer of shares / compulsorily and mandatorily convertible preference shares (CMCPS) / debentures by way of sale from resident to non resident / non-resident to resident (to be submitted to the designated AD branch in quadruplicate within 60 days from the date of receipt The following documents are enclosed For sale of shares/compulsorily and mandatorily convertible preference shares / debentures by a person resident in India i. ii. iii. iv. V. vi. vii. viii. Consent Letter duly signed by the seller and buyer or their duly appointed agent a....
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....lsorily and mandatorily convertible preference shares (CMCPS)/debentures to be transferred Date of the transaction Amount of considerati Number of shares CMCPS/ debenture Face value in Rs. Negotiated Price for the transfer**in on in Rs. Rs. 8 Foreign Investments in the company Before the transfer After the transfer 9 Where the shares/CMCPS / debentures are listed on Stock Exchange Name of the Stock exchange No. of shares Percentage Price Quoted on the Stock exchange Where the shares/CMCPS / debentures are Unlisted Price as per Valuation guidelines* Price as per Chartered Accountants */** Valuation report (CA Certificate to be attached) *SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages those assets separately from the official reserves of the monetary authorities. Declaration by the transferor/transferee I/We hereby declare that : i. The particulars given above are true and correct to the best of my/our knowledge 97 and belief. ii. iii. iv. Date: Note: I/ We, was/were holding the shares compulsorily and mandatorily convertible preference shares / debentures as per FDI Policy ....
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....overall sectoral cap for foreign investment is applicable. If yes, please give details 12. Details of the Equity Capital (a) Authorised Capital (b) Issued and Paid-up Capital (i) Held by persons Resident in India Before Issue After Issue 99 66 13 14 15 56 (c) (ii) Held by foreign investors other than FIIS/NRIS/PIOs/ OCBs (a list of foreign investors holding more than 10 percent of the paid-up capital and number of shares held by each of them should be furnished) (iii) Held by NRIS/PIOS/OCBs (iv) Held by FIIS Total Equity held by non-residents Percentage of equity held by non-residents to total paid-up capital Whether issue was on private placement basis. If yes, please give details of the investors and GDRs/ADRs issued to each of them Number of GDRs/ADRs issued Ratio of GDRs/ADRs to underlying shares 16 Issue Related Expenses (a) Fee paid/payable to Bankers/Lead Manager Merchant (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 ....