TaxTMI 
TaxTMI 
Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies
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....nership will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately 'owned and controlled by resident Indian citizens' and such resident Indian citizens and entities have majority of the profit share; (b) A company owned by non-residents shall mean an Indian company that is not owned by resident Indian citizens. (ia) 'Control' shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. For the purpose of Limited Liability Partnership, 'control' shall mean right to appoint majority of the designated partners, where such designated partners, with specific exclusions to others, have control over all the policies of Limited Liability Partnership.] (ii) 'Direct foreign investment' shall mean investment received by an Indian Company from non-resident entities regardless of whether the said investments have been made under ^6[Schedule 1,2,2A,3, 6 and 8] of....
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....ndia resulting from any conversion of any debt instrument under any arrangement shall be reckoned as foreign investment.] 2. Investment in Indian companies can be made by both non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise both resident and non-resident investments. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be through multi-layered structure. Guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in an Indian company. 3.(i) Counting of Direct foreign investment: All investments made directly by non-resident entities into the Indian company would be counted towards 'Direct foreign investment'. (ii) ^12[Counting of indirect foreign investment: For the purpose of computation of indirect foreign investment, foreign investment in an Indian company shall include all types of foreign investments regardless of whether the said investments have been made under Schedul....
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....r Section 2 (72) of the Companies Act, 2013, as the case may be. 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 2 (77) of Companies Act, 2013. (cc) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (ii) In the case of an Indian company, (aa) The Indian company (bb) A group of Indian companies under the same management and ownership control. (b) For the purpose of this Clause, "Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 2 (77) of Companies Act, 2013/ HUF, either singly or in combination holding at least 51% of the shares. (c) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing t....
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....hat Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, FPIs, QFIs, 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 1, 2, 2A, 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000. (vi) Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 will be deemed to be domestic investment at par with the investment made by residents. (vii) A company, trust and partnership firm incorporated outside India and owned and controlled by nonresident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations, 2000 and such investment will also be deemed domestic investment at par with the investment made by residents.] 6. (i) Downstream investment by an Indian company, which is not owned and/ or controlled by resident entity /ies, into another Indian company, wo....
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....nvesting in the capital of other Indian company/ies, will require prior Government/FIPB approval, regardless of the amount or extent of foreign investment. Foreign investment into Non-Banking Finance Companies (NBFCs), carrying on activities approved for FDI, will be subject to the conditions specified in Annex B of Schedule I to these Regulations. B. Those companies, which are Core Investment Companies (CICs), will have to additional follow RBI's Regulatory Framework for CICs. C. For undertaking activities which are under automatic route and without FDI linked performance conditions, Indian company which does not have any operations and also does not have any downstream investments, will be permitted to have infusion of foreign investment under automatic route. However, approval of the Government will be required for such companies for infusion of foreign investment for undertaking activities which are under Government route, regardless of the amount or extent of foreign investment. Further, as and when such a company commences business(s) or makes downstream investment, it will have to comply with the relevant sectoral conditions on entry route, conditionali....
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....s if the residents Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company". 4. Omitted vide Notification No. FEMA. 285/2013-RB dated 30-08-2013 w.e.f. 22-08-2013 before it was read as, "Company 'Controlled' by non-residents means an Indian company where non-residents have the power to appoint a majority of its directors in that company". 5. Inserted vide Notification No. FEMA. 285/2013-RB dated 30-08-2013 w.e.f. 22-08-2013. 6. Substituted vide Notification No. FEMA. 297/2014-RB dated 13-03-2014,w.e.f. 13-03-2014 before it was read as, "Schedule 1, 2, 3, 6 and 8" 7. Substituted vide Notification No. FEMA. 297/2014-RB dated 13-03-2014,w.e.f. 13-03-2014 before it was read as, "FIIs, NRIs or QFIs" 8. Substituted vide Notification No. FEMA. 297/2014-RB dated 13-03-2014,w.e.f. 13-03-2014 before it was read as, "Schedule 1, 2, 3, 6 and 8" 9. Omitted vide Notification No. 319/2014-RB, dated 05-09-2014 w.e.f. 26-08-2014 before it was read as, "and Defence sectors" ....
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....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: (aa) In the case of an individual shareholder, (aai) The individual shareholder, (aaii) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956. (aaiii) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (ab) In the case of an Indian company, (abi) The Indian company (abii) A group of Indian companies under the same management and ownership control. (b) For the purpose of this Clause, "Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either sin....
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....RIs, QFIs or RFPIs] holding as on March 31 of the previous year would be taken into account. e.g. for monitoring foreign investment for the financial year 2011-12, investment as on March 31, 2011 would be taken into account. Besides, investments in the form of Foreign Direct Investment, Foreign Venture Capital investment, ADRs/GDRs, Foreign Currency Convertible Bonds (FCCB) will also be taken in account. Thus, regardless of the investments having been made ^10[under Schedules 1, 2, 3, 6, 8 and 10], the same will be taken into account. Downstream investment by an Indian company which is not owned and/or controlled by resident entity /ies." 16. Substituted vide Notification No. 362/2016-RB - dated 15-02-2016, w.e.f. 15-02-2016, before it was read as, "(ii) Downstream investments by Indian companies will be subject to the following conditions: (a) Such a company has to notify Secretariat for Industrial Assistance, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted along with the modality of investment in new/exist....