Presentation on FEMA by CA. Sudha G. BhushanForeign Investment in India90th SMTP7th June 2009ICSI        by CA. Sudha G. B...
Contents Press note 1-Regulatory 2 Press note             framework of Foreign Investment in  India Press note 3-Press ...
Foreign Investment in India   Foreign Exchange Management Act   Reserve bank of India   Department of Industrial Policy...
Regulatory Framework  Presentation on FEMA by CA. Sudha G. Bhushan
Foreign Exchange            Reserve Bank of India            Department ofManagement Act,1999         • Foreign Exchange  ...
Ways             • Foreign Direct InvestmentSchedule 1           • Foreign institutional investor under PortfolioSchedule ...
Continued…           • NRI on non repatriation basis under the schemeSchedule 4             other than through PIS        ...
Limits                             •Approval route [Latest press note 7/2008]   Foreign Direct            •Prohibited Sect...
NRI on non repatriationbasis under the scheme        •No Limitsother than through PISNRI/FIIs can purchase securities othe...
Press Note 1  Presentation on FEMA by CA. Sudha G. Bhushan
Policy for Foreign Direct                       Investment Publication of Indian                              Publication ...
Publication of facsimile edition offoreign newspapers   100% FDI permitted   Prior approval of the Government   Conditi...
Publication of Indian editions of foreignmagazines dealing with news and currentaffairs     Foreign investment up to 26% ...
Press note 2   Guidelines for calculation of Foreign investment i.e.    Direct and indirect foreign investment in Indian ...
Direct Foreign Investment                  Non resident entity  Outside India     In India                  Indian Company...
Indirect Foreign Investment                  Non Resident Entity Outside India                       Direct Foreign Invest...
Definitions  Presentation on FEMA by CA. Sudha G. Bhushan
   Foreign Investment in Indian company shall include all types of    foreign investments i.e. FDI, investment by FIIs(ho...
Owned and controlled  Presentation on FEMA by CA. Sudha G. Bhushan
By RICs and Indian companies, which areowned and controlled by RICsowned                                      Controlled ...
By Non Resident Entitiesowned                                      Controlled   More than 50% of the                    ...
Counting of foreign InvestmentDirectIndirectTotal  Presentation on FEMA by CA. Sudha G. Bhushan
Counting the Direct Foreign Investment   All investment directly by a non resident entity into the    Indian company woul...
Counting the Direct Foreign Investment                   Non resident entity   Outside India                              ...
Counting of Indirect Foreign Investment   Not counted as Indirect Foreign Investment   Counted as Indirect Foreign Inves...
NREsICs                   Investing Indian                      Company RICs                   Indian Company        Prese...
Not counted            Investing Indian Company                                Indirect Foreign Investment                ...
Counted            Investing Indian Company                                Indirect Foreign Investment                 Ind...
Total Investment  Presentation on FEMA by CA. Sudha G. Bhushan
NREs                  74%                   Investing Indian                      Company                          30%    ...
Examples  Presentation on FEMA by CA. Sudha G. Bhushan
1. Ownership and control with Indian entity                    Non resident entity    Outside India                       ...
2. Ownership with Non resident entity                    Non resident entity   Outside India                              ...
3. Control with Non resident entity                      Non resident entity   Outside India                              ...
4.                       Non resident entity     Outside India                                        Foreign Investment 7...
Exception                    Non resident entity  Outside India                                        Foreign Investment ...
Addition Conditions  Presentation on FEMA by CA. Sudha G. Bhushan
   The full details about the foreign investment to be furnished to the    government of India at the time of seeking app...
Press Note 4Clarificatory Guidelines on downstreaminvestment by Indian Companies   Presentation on FEMA by CA. Sudha G. Bh...
Policy comprises     Only operating companies     Operating cum investing companies     Only investing companies     N...
Definitions  Presentation on FEMA by CA. Sudha G. Bhushan
   “Indian Company” same as press note 2 of 2009 series   “Operating Company” is an Indian company which is undertaking ...
Only operating company   Foreign investment - to comply with the relevant sectoral    conditions:      on entry route   ...
Operating-cum-investing companies   Foreign investment to comply with the relevant sectoral    conditions with regard to ...
Policy                Non resident entity                                 Relevant sectoral conditions w.r.t. the sector  ...
Investing companies   Foreign Investment in Investing Companies - prior    Government/FIPB approval, regardless of the am...
Policy                Non resident entity                                         Prior Government/FIPB Approval          ...
Non operative Non investment   Government/FIPB approval be required   As and when such company commences    business(s) ...
Policy                Non resident entity                                           Prior Government/FIPB Approval  Non op...
Additional Conditions  Presentation on FEMA by CA. Sudha G. Bhushan
   SIA, DIPP and FIPB to be notified within 30 days of    investment   Resolution of Board of Directors   Issue/transfe...
Press Note 3Guidelines for transfer of ownership or controlof Indian companies in sectors with caps fromresident Indian ci...
Guidelines    In Sector with caps, government approval/FIPB approval    would be required in all cases where:   An Indian...
    sudhag999@gmail.com      Presentation on FEMA by CA. Sudha G. Bhushan
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Presentation on press note 2,3,4 [2009] fema by ca. sudha g. bhushan

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Presentation on press note 2,3,4 [2009] fema by ca. sudha g. bhushan

  1. 1. Presentation on FEMA by CA. Sudha G. BhushanForeign Investment in India90th SMTP7th June 2009ICSI by CA. Sudha G. Bhushan
  2. 2. Contents Press note 1-Regulatory 2 Press note framework of Foreign Investment in India Press note 3-Press notes4 Press note issued by DIPP – 2009 series  Press note 1 dated 14th January 2009  Press note 2 dated 13th February 2009  Press note 3 dated 13th February 2009  Press note 4 dated 25th February 2009 Presentation on FEMA by CA. Sudha G. Bhushan
  3. 3. Foreign Investment in India Foreign Exchange Management Act Reserve bank of India Department of Industrial Policy and Promotion Presentation on FEMA by CA. Sudha G. Bhushan
  4. 4. Regulatory Framework Presentation on FEMA by CA. Sudha G. Bhushan
  5. 5. Foreign Exchange Reserve Bank of India Department ofManagement Act,1999 • Foreign Exchange Industrial policy and• Section 6(3)(b) Management (Transfer Promotion• Section 47 or issue of security by • Press Notes a Person resident outside India)Regulaitons,2000 • Master Circular – Foreign Investment in India dated 1 July 2008 Presentation on FEMA by CA. Sudha G. Bhushan
  6. 6. Ways • Foreign Direct InvestmentSchedule 1 • Foreign institutional investor under PortfolioSchedule 2 investment Scheme • Non resident Indian under Portfolio investmentSchedule 3 Scheme Presentation on FEMA by CA. Sudha G. Bhushan
  7. 7. Continued… • NRI on non repatriation basis under the schemeSchedule 4 other than through PIS • NRI/FIIs can purchase securities other than theSchedule 5 shares and debentures • Foreign venture capital investor registered with SEBI may make investment in a venture capitalSchedule 6 fund or an Indian Venture capital undertaking Presentation on FEMA by CA. Sudha G. Bhushan
  8. 8. Limits •Approval route [Latest press note 7/2008] Foreign Direct •Prohibited Sector •Automatic Route [also those sectors not investment specifically mentioned under approval route or not specifically prohibited –Automatic Route]Foreign Institutional Investors under •FII- 24% of the paid up capital of the company.portfolio investment SchemeNon resident Indian under Portfolio •NRI- 10% of the paid up capital of the companyinvestment Scheme Presentation on FEMA by CA. Sudha G. Bhushan
  9. 9. NRI on non repatriationbasis under the scheme •No Limitsother than through PISNRI/FIIs can purchase securities other than •Securities other than shares and debentures the shares and debentures Foreign venture capital •Investments to be in accordance with SEBIinvestor registered with regulations dealing with VCF / FVCI SEBI Presentation on FEMA by CA. Sudha G. Bhushan
  10. 10. Press Note 1 Presentation on FEMA by CA. Sudha G. Bhushan
  11. 11. Policy for Foreign Direct Investment Publication of Indian Publication of facsimile editions of foreign edition of foreignmagazines dealing with newspapersnews and current affairs Presentation on FEMA by CA. Sudha G. Bhushan
  12. 12. Publication of facsimile edition offoreign newspapers 100% FDI permitted Prior approval of the Government Conditions:  FDI is by the owner of the original foreign newspaper  Publication by an entity incorporated or registered in India under the provisions of the Companies Act, 1956.  Subject to guidelines issued by Ministry of Information & Broadcasting Presentation on FEMA by CA. Sudha G. Bhushan
  13. 13. Publication of Indian editions of foreignmagazines dealing with news and currentaffairs  Foreign investment up to 26%  Prior approval of the Government  Guidelines issued by the Ministry of Information & Broadcasting Presentation on FEMA by CA. Sudha G. Bhushan
  14. 14. Press note 2 Guidelines for calculation of Foreign investment i.e. Direct and indirect foreign investment in Indian Companies Presentation on FEMA by CA. Sudha G. Bhushan
  15. 15. Direct Foreign Investment Non resident entity Outside India In India Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  16. 16. Indirect Foreign Investment Non Resident Entity Outside India Direct Foreign Investment In India Indian Company Indirect Foreign Investment Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  17. 17. Definitions Presentation on FEMA by CA. Sudha G. Bhushan
  18. 18.  Foreign Investment in Indian company shall include all types of foreign investments i.e. FDI, investment by FIIs(holding as on March 31), NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and convertible preference shares, convertible Currency 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[For the purpose of computation of indirect Foreign investment]. „Resident Indian Citizen‟ (RICs) 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. “Non resident entity” (NREs) means a „person resident outside India‟ as defined under FEMA 1999. „Indian Company‟ means a company registered or incorporated in India as per the Indian Companies Act, 1956. “Investing Company” means an Indian Company making equity/preference/CCD investment into another Indian Company. “Holding Company” would have the same meaning as defined in Indian Companies Act 1956. by CA. Sudha G. Bhushan Presentation on FEMA
  19. 19. Owned and controlled Presentation on FEMA by CA. Sudha G. Bhushan
  20. 20. By RICs and Indian companies, which areowned and controlled by RICsowned Controlled More than 50% of the  The RICs and Indian equity interest in it is companies, which are beneficially owned by owned and controlled by RICs and Indian RICs, have the power to companies, which are appoint a majority of its owned and controlled directors ultimately by RICs Presentation on FEMA by CA. Sudha G. Bhushan
  21. 21. By Non Resident Entitiesowned Controlled More than 50% of the  Non-residents have the equity interest in it is power to appoint a beneficially owned by majority of its directors non-residents Presentation on FEMA by CA. Sudha G. Bhushan
  22. 22. Counting of foreign InvestmentDirectIndirectTotal Presentation on FEMA by CA. Sudha G. Bhushan
  23. 23. Counting the Direct Foreign Investment All investment directly by a non resident entity into the Indian company would be counted towards foreign investment Presentation on FEMA by CA. Sudha G. Bhushan
  24. 24. Counting the Direct Foreign Investment Non resident entity Outside India Foreign Investment In India Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  25. 25. Counting of Indirect Foreign Investment Not counted as Indirect Foreign Investment Counted as Indirect Foreign Investment Presentation on FEMA by CA. Sudha G. Bhushan
  26. 26. NREsICs Investing Indian Company RICs Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  27. 27. Not counted Investing Indian Company Indirect Foreign Investment Indian Company if the investing Indian company is “owned and controlled” by RICs and/or by Indian companies which are owned and controlled by RICs Presentation on FEMA by CA. Sudha G. Bhushan
  28. 28. Counted Investing Indian Company Indirect Foreign Investment Indian Company if the above conditions are not satisfied or if the investing Company is owned or controlled by NREs Presentation on FEMA by CA. Sudha G. Bhushan
  29. 29. Total Investment Presentation on FEMA by CA. Sudha G. Bhushan
  30. 30. NREs 74% Investing Indian Company 30% 51% Indian CompanyTotal Foreign Investment in subject Indian Company Direct (51%) + Indirect (30%)=81% Presentation on FEMA by CA. Sudha G. Bhushan
  31. 31. Examples Presentation on FEMA by CA. Sudha G. Bhushan
  32. 32. 1. Ownership and control with Indian entity Non resident entity Outside India Foreign Investment 49% In India Investing Indian Company Indirect Foreign Investment Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  33. 33. 2. Ownership with Non resident entity Non resident entity Outside India Foreign Investment 75% In India Investing Indian Company Indirect Foreign Investment Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  34. 34. 3. Control with Non resident entity Non resident entity Outside India Foreign Investment 25% In India Investing Indian Company Indirect Foreign Investment Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  35. 35. 4. Non resident entity Outside India Foreign Investment 75% In India Investing Indian Company 26% Indirect Foreign Investment 26% Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  36. 36. Exception Non resident entity Outside India Foreign Investment 75% In India Operating Cum Investing/Investing Indian Company 100% Indirect Foreign Investment 75% Indian Company (100% subsidiary) Presentation on FEMA by CA. Sudha G. Bhushan
  37. 37. Addition Conditions Presentation on FEMA by CA. Sudha G. Bhushan
  38. 38.  The full details about the foreign investment to be furnished to the government of India at the time of seeking approval Agreements  which have an effect on the appointment of the Board of Directors or  on the exercise of voting rights or  of creating voting rights disproportionate to shareholding or  any incidental matter thereof, such agreements will have to be informed to the approving authority in case of sectors where government is required for Foreign Investment The balance equity in case of sectoral caps would specifically be beneficially owned by RICs and Indian companies, owned and controlled by RICs Investment by RICs is counted as foreign investment ,If a declaration under section 187C of the Indian Companies Act is made regarding the same Presentation on FEMA by CA. Sudha G. Bhushan
  39. 39. Press Note 4Clarificatory Guidelines on downstreaminvestment by Indian Companies Presentation on FEMA by CA. Sudha G. Bhushan
  40. 40. Policy comprises  Only operating companies  Operating cum investing companies  Only investing companies  Non operative non investment Companies Presentation on FEMA by CA. Sudha G. Bhushan
  41. 41. Definitions Presentation on FEMA by CA. Sudha G. Bhushan
  42. 42.  “Indian Company” same as press note 2 of 2009 series “Operating Company” is an Indian company which is undertaking operations in various economic activities and sectors. “Downstream Investment” means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of press note 2 of 2009. “Investing Company” means an Indian company holding only investments into another Indian company, directly or indirectly, other than for trading of such holding/securities. “Foreign Investment” same as press note 2 of 2009 series „Downstream investment‟ means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of Press Note 2 of 2009. Presentation on FEMA by CA. Sudha G. Bhushan
  43. 43. Only operating company Foreign investment - to comply with the relevant sectoral conditions:  on entry route  conditions  caps with regard to their relevant sectors Presentation on FEMA by CA. Sudha G. Bhushan
  44. 44. Operating-cum-investing companies Foreign investment to comply with the relevant sectoral conditions with regard to the sectors in which such companies are operating 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, conditions and caps in regard of the sector in which the subject Indian companies are operating Presentation on FEMA by CA. Sudha G. Bhushan
  45. 45. Policy Non resident entity Relevant sectoral conditions w.r.t. the sector in which the company is operating Operating cum Investing Indian Company Relevant sectoral conditions w.r.t. the sector in which subject company is operating Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  46. 46. Investing companies Foreign Investment in Investing Companies - 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, conditions and caps in regard of the sector in which the subject Indian companies are operating Presentation on FEMA by CA. Sudha G. Bhushan
  47. 47. Policy Non resident entity Prior Government/FIPB Approval Investing Indian Company Relevant sectoral conditions w.r.t. the sector in which subject company is operating Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  48. 48. Non operative Non investment Government/FIPB approval be required As and when such company commences business(s) or makes downstream investment it will have to comply with the relevant sectoral conditions on entry route, conditions and caps Presentation on FEMA by CA. Sudha G. Bhushan
  49. 49. Policy Non resident entity Prior Government/FIPB Approval Non operative and non Investing Indian Company Relevant sectoral conditions w.r.t. the sector in which subject company is operating Indian Company Presentation on FEMA by CA. Sudha G. Bhushan
  50. 50. Additional Conditions Presentation on FEMA by CA. Sudha G. Bhushan
  51. 51.  SIA, DIPP and FIPB to be notified within 30 days of investment Resolution of Board of Directors Issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines Investing companies to bring in requisite funds from abroad Presentation on FEMA by CA. Sudha G. Bhushan
  52. 52. Press Note 3Guidelines for transfer of ownership or controlof Indian companies in sectors with caps fromresident Indian citizens to non-resident entities Presentation on FEMA by CA. Sudha G. Bhushan
  53. 53. Guidelines In Sector with caps, government approval/FIPB approval would be required in all cases where: An Indian company is being established with foreign investment and is owned or controlled by a non-resident entity or The ownership or control is transferred/passed on to a non-resident entity as a consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc. Presentation on FEMA by CA. Sudha G. Bhushan
  54. 54.  sudhag999@gmail.com Presentation on FEMA by CA. Sudha G. Bhushan

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