In a move to further rationalize and liberalise the overseas investment central Government and Reserve Bank of India notified Foreign Exchange Management (Overseas Investment) Rules, 2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022 respectively on 22 Aug 2022. The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics. Immense clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment related transactions that were earlier under approval route are now under automatic route, significantly enhancing "Ease of Doing Business".

1. New Overseas Investment Regime
Notified by
By Central Government along with Reserve Bank of India
On 22nd Aug 2022
Institute of Chartered Accountants of India
18th Oct 2022
CA. Sudha G. Bhushan
091 9769033172 || Sudha@taxpertpro.com

2. The regulatorsneedto
keeppace to enable
the continuedmarch
Indian businesses
going global due to
openingof the
Outbound Investment
Regime – IT / Pharma /
G&J / BFSI / Other Mfg
Sector
India has recently
overtakenU.K.as the
5th
largest economy
and is expectedto
overtake Germanyand
Japan by 2030
The growth rate over
the past 10 years has
beenon an average
5.76% p.a. and the
projectedgrowth rate
for the next5 yearsis
at 6.72%
Over the past 2
decades,India’s
economyhas grown to
US$ 11.75 trillion
(PPP) and US$ 3.53
trillion (Nominal)
India – An Emerging Global Economic Powerhouse

3. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
(Aug)
Total ODI ($Mn)
(Equity + Loan + Guarantee Invoked)
Guarantee Issued ($Mn)
India ODI Outlook – Recent Trends

4. Financial, Insurance &
Business Services
39%
Manufacturing, G&J,Pharma,
Others
27%
Wholsale,Retail Trade,
Restaurants & Hotels
17%
Agriculture & Mining
6%
Construction
4%
Community, Social &
Personal Services
4%
Transport, Storage &
Communication Services
2%
Electricity, Gas & Water
1%
Miscellaneous
0%
SECTORS ATTRACTING HIGHEST ODI OUTFLOWS (April 20 - Aug 22)

5. 0
5
10
15
20
25
30
Singapore USA UK Netherlands Mauritius UAE Russia BVI Others
ODI in Million
Singapore USA UK Netherlands Mauritius UAE Russia BVI Others
Countries Attracting ODI
1100
Million
USD
in
July
2022.

6. BACKGROUND

7. GOVERNING REGULATIONS
(ERSTWHILE)
Foreign Exchange Management (Transfer or Issue of any
Foreign Security) Regulations, 2004
Master Direction – Direct Investmentby Residents in
Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad

8. Erstwhile Regulations
Foreign Exchange Management
(Transfer or Issue of anyForeign
Security) Regulations,2004
Master Direction – Direct
Investment byResidents in
Joint Venture (JV) / WhollyOwned
Subsidiary(WOS)Abroad
22
August
2022
New Investment Regime
Foreign Exchange
Management (Overseas
Investment)Rules,2022
• Central Government
Foreign Exchange Management
(Overseas Investment)
Regulations,2022
• RBI
Foreign Exchange
Management (Overseas
Investment)Directions,2022
• RBI
THE
CHANGE
Foreign Exchange Management
(Acquisition and Transfer of
Immovable Property Outside India)
Regulations, 2015

9. GOVERNING REGULATIONS IN NEW FRAMEWORK
• Notified by Reserve Bank of India
ForeignExchange Management(Overseas
Investment)Regulations,2022
• Notified by Central Government
ForeignExchange Management(Overseas
Investment)Rules, 2022
• By Reserve Bank of India
ForeignExchange Management(Overseas
Investment)Directions,2022
Consequent amendment in the
Master Directions on Reporting
under FEMA.
New forms have been
introduced.

10. SIGNIFICANT
CHANGES
Definition of Overseas portfolio investment introduced
enhanced clarity with respect to various definitions
Introduction of the concept of “strategic sector”
Deferred consideration allowed
Only NOC needed for investment for entities under investigation
Major liberalization in ODI – FDI Structure
Done away of RBI approval in cases of write-off on account of disinvestment;
introduction of “Late Submission Fee (LSF)” for reporting delays.
Arms Length price introduced
Overall simplifies the procedures and rationalizes the Regulatory framework
New forms for reporting notified
G. Bhushan
Rationalizes
Liberalizes
Brings clarity

11. Save as otherwise provided in these rules or the Foreign Exchange
Management (Overseas Investment) Regulations, 2022, any
investment made outside India by a person resident in India shall be
made in a foreign entity engaged in a bona fide business activity,
directly or through step down subsidiary or the special-purpose
vehicle, subject to the limits and the conditions laid down in these
rules and the said regulations:
Provided that the structure of such subsidiary or step down
subsidiary of the foreign entity shall comply with the structural
requirements of a foreign entity: any investment made outside India
by a person resident………..
Relevant Extracts from Rule
limits and the
conditions

12. NewFramework
Applicable to the followingclass of
persons who intends to make
Overseas Investment(ODI + OPI)
Resident
Individual
IndianEntity
Company PartnershipFirm
(including LLP)
Body corporate
incorporatedby
any law for the
time being in
force
Others
Not Applicable to
Investment made outside India
by a financial institutioninan
IFSC
Acquisition/transferof any
investment outside India
made
out of
Resident
Foreign
Currency
Account
out of foreigncurrency resources held
outside India by a personemployedin
India fora specific duration
irrespective of lengththereof orfora
specific joborassignment,durationof
whichdoes not exceed3 years
In
accordance
with section
6(4) of
FEMA, 1999
Note 1 : A registered Trust or a registered Society engaged in the educational sector or which has set up
hospitals in India may make ODI in a foreign entity with the prior approval of the Reserve Bank, subjectto
certain conditions. Note 2 : Overseas Investments by Sole proprietorship or unregistered partnershipfirms may
be made by the proprietor concerned or the individual partners concerned within their limit available under the
LRS in accordancewith New Framework

13. Restrictions & Prohibitionson OI by Indian Entity
Foreign entity engaged in
Real Estate
Activity
Gambling Financial
products linked
with Indian
Rupee
Until delay in Reporting is
regularized
Foreign entity that has invested directly /
indirectly in India resulting in more than two
layers of subsidiaries
Exceptions
Banking
Company
NBFC
Insurance
Company
Government
Company

14. Investments made under Erstwhile
Regime
G. Bhushan

15. Facts
o Investment in UK Entity made in 2015
o Investment amount was 100 Pound
o PQR shown as subsidiary in India
o No reporting of what so ever nature is done
till date
Scenario
OverseasInvestment
Outside India
InIndia
PRQLimited
XYZLimited

16. Facts
o Investment in UK Entity made in 2015
o Investment amount was 100 Pound
o PQR shown as subsidiary in India
o No reporting of what so ever nature is done
till date [ Form ODI + APR + FLA]
Scenario
OverseasInvestment
Outside India
InIndia
PRQLimited
XYZLimited
Make good the
compliance
File for
Compounding

17. Facts
o Investment in UK Entity made in 2015
o Investment amount was 100 Pound
o PQR shown as subsidiary in India
o No reporting of what so ever nature is done
till date [ Form ODI + APR + FLA]
Scenario
OverseasInvestment
Outside India
InIndia
PRQLimited
XYZLimited
Make good
the
compliance
File for
Compounding Late Submission Fees

18. The
option
of
LSF
shall
be
available
up to three years
from the due dateof
reporting/submission underOI
Regulations.
The optionof LSF shall also be
availablefordelayed
reporting/submissions
under the NotificationNo.
FEMA 120/2004-RB and earlier
correspondingregulations,
up to three years from the
date of notification ofOI
Regulations.
Opportunityto get
past transactions
Regularised

19. Foreign Exchange
Management
(Overseas
Investment) Rules,
2022
Rule
No.
TOPIC
1. Short title and commencement
2. Definitions
3. Administration ofthese rules
4. Non-applicabilityofrules and regulations relatingthereto in certain cases
5. Debt instruments and non-debt instruments
6. Continuity ofcertain investments
7. Rights issue and bonus shares
8. Prohibitionon investment outside India
9. Overseas Investment
10. No Objection Certificate
11. Manner of making Overseas Direct Investment by Indian entity
12. Manner of making Overseas Portfolio Investment byan Indian entity
13. Manner of making Overseas Investment by resident individual
14. Overseas Investment by person resident in India other than Indian entity and resident
Individual
15. Overseas Investment in IFSC by person resident in India
16. Pricing guidelines
17. Transfer or liquidation
18. Restructuring
19. Restrictions and prohibitions
20. Requirements to be specified by Reserve Bank
21. Restriction on acquisitionor transfer of immovable property outside India
+ 5 Schedules

20. Foreign Exchange
Management
(Overseas
Investment)
Regulations, 2022
Rule No. TOPIC
1. Shorttitle and commencement
2. Definitions
3. Financial commitment by Indian entity by modes other than equity capital
4. Financial commitment by Indian entity by way of debt
5. Financial commitment by way of guarantee.
6. Financial commitment by way of pledge or charge
7. Acquisition or transfer by way of deferred payment
8. Mode of payment
9. Obligations of person resident in India
10. Reporting requirements for Overseas Investment
11. Delay in reporting
12. Restriction on further financial commitment or transfer

21. • New definitions introduced
G. Bhushan

22. CONTROL
The right to appoint majority of the directors or to control
management or policy decisions exercisable by a person or
persons acting individually or in concert, directly or indirectly,
including by virtue of their shareholding or management
rights or shareholders’ agreements or voting agreements that
entitle them to ten per cent. or more of voting rights or in any
other mannerin the entity.
DISINVESTMENT
Partial or full extinguishmentof right, title or possession of
equity capital acquired under theserules.
EQUITY CAPITAL
Equity shares or perpetual capital or instruments that are
irredeemable or contribution to non-debt capital of a foreign
entity in the nature of fully and compulsorily convertible
instruments.
FINANCIAL SERVICE REGULATOR
A financial service regulator established under any law in force
in India and include the Reserve Bank, the Securities and
Exchange Board of India, the Insurance Regulatory and
DevelopmentAuthority and the Pension Fund Regulatoryand
DevelopmentAuthority.
NEW DEFINITIONS
INTRODUCED

23. FOREIGN ENTITY
An entity formed or registered or incorporated outside India,
including International Financial Services Centre that has limited
liability. Provided that the restriction of limited liabilityshall not
apply to an entity with core activity in a strategic sector.
IFSC
“International Financial Services Centre” shall have the same
meaning as assigned to it in clause (g) of section 3 of the
International Financial Services Centres Authority Act, 2019 ( 50
of 2019).
LAST AUDITED BALANCE SHEET
Audited balance sheet as on date not exceeding eighteen months
preceding the date of the transaction.
LISTED FOREIGN ENTITY
A foreign entity whose equity shares or any other fully and
compulsorily convertible instrument is listed on a recognized stock
exchange outside India.
SUBSIDIARY or STEP DOWN SUBSIDIARY
An entity in which the foreign entity has control.
NEW DEFINITIONS
INTRODUCED

24. LISTED INDIAN COMPANY
An Indian company that has equity shares or any of its fully and
compulsorily convertible instruments listed on a recognized stock
exchange in India and the expression “unlisted Indian company”
shall be construed accordingly.
OVERSEAS DIRECT INVESTMENT
Investment by way of acquisition of unlisted equity capital of a
foreign entity, or subscription as a part of the memorandum of
association of a foreign entity, or investment in ten per cent, or
more of the paid-up equity capital of a listed foreign entity or
investment with control where investment is less than ten per
cent. of the paid-up equity capital of a listed foreign entity.
OVERSEAS INVESTMENT
Financial commitment and Overseas Portfolio Investment by a
person resident in India.
RESIDENT INDIVIDUAL
A person resident in India who is a natural person.
OVERSEAS PORTFOLIO INVESTMENT
Investment, other than ODI, in foreign securities, but not in any
unlisted debt instruments or any security issued by a person
resident in India who is not in an IFSC: Provided that OPI by a
person resident in India in the equity capital of a listed entity,
even after its delisting shall continue to be treated as OPI until
any further investment is made in the entity.
NEW DEFINITIONS
INTRODUCED

25. RESIDENT FOREIGN CURRENCY ACCOUNT
Shall have the same meaning as assigned to it in the Foreign
Exchange Management (Foreign Currency Accounts by a Person
Resident in India) Regulations, 2015.
SEBI
The Securities and Exchange Board of India established under
section 3 of the Securities and Exchange Board of India Act,
1992 (15 of 1992).
STRATEGIC SECTOR
Include energy and natural resources sectors such as oil, gas,
coal, mineral ores, submarine cable system and start-ups and any
other sector or sub-sector as deemed necessary by the Central
Government.
SWEAT EQUITY SHARES
Such equity shares as are issued by an overseas entity to its
directors or employees at a discount or for consideration other
than cash, for providing their know-how or making available
rights like intellectual property rights or value additions, by
whatever name called.
NEW DEFINITIONS
INTRODUCED

26. Important Definitions
G. Bhushan

27. FOREIGN
ENTITY
An entity formed
or registeredor
incorporated
outside India,
International
Financial Services
Centre That
has
limited
liability
Meaning
‘Limited liability’ would mean a
structure such as a limited liability
company, limited liability partnership,
etc.
where the liability of the person
resident in India is clear and limited.
In case of a foreign entity being an
investment fund or vehicle,
duly regulated by the regulator for the
financial sector in the host jurisdiction
and set up as a trust outside India,
the liability of the person resident in
India shall be clear and limited not
exceeding the interest or contribution in
the fund in any manner.
the trustee of such fund shall be a
person resident outside India.
The restriction of limited liability
structure of foreign entity shall not be
mandatory for entities with core activity
in any strategic sector.
Definition 01

28. STRATEGIC
SECTOR Include energy andnatural resources sectors
such as oil,gas, coal,mineral ores,submarine cable
system
and start-ups andany
other sectororsub-sector as deemednecessary by
the Central Government.
The restrictionof limitedliability structure of foreign
entity shall not be mandatory forentities withcore
activity inany strategic sector.
Accordingly,Overseas Direct Investment (ODI)canbe
made in such sectors inunincorporatedentities as
well.
An Indian entity is permittedto participate ina
consortiumwithother international operators
to construct andmaintain
submarine cable systems on
co-ownershipbasis.
AD banks may allow remittances forODI instrategic
sector after ensuringthat
Indianentity has obtainednecessary permissionfrom
the competent authority,wherever applicable.
Definition 02

29. “control”
means
the
right to appoint majority of the
directors or
to control the management orpolicy
decisions exercisable by a personor
persons actingindividually orin
concert,directly orindirectly,
including by virtue of their
shareholdingormanagement rights
or shareholders’agreements
or voting agreements that entitle
them to tenpercent ormore of
votingrights
orin any other manner in the entity.
Definition 03

30. Control
9% Shareholding+No right to
appoint directors/No Mgt
Control/No Voting Right/No
SCENARIO 5
B CO
INDIAN
COMPANY
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
B Co B CO B CO B CO
INDIAN
COMPANY
INDIAN
COMPANY
INDIAN
COMPANY
INDIAN
COMPANY
9% Shareholding + Management
Control
11% Shareholding + NO
Management Control
11% Shareholding +
Management Control
0% Shareholding + Management
Control

31. NO CONTROL
9% Shareholding+No right to
appoint directors/No Mgt
Control/No Voting Right/No
SCENARIO 5
B CO
INDIAN
COMPANY
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
B Co
CONTROL CONTROL CONTROL CONTROL
B CO B CO B CO
INDIAN
COMPANY
INDIAN
COMPANY
INDIAN
COMPANY
INDIAN
COMPANY
9% Shareholding + Management
Control
11% Shareholding + NO
Management Control
11% Shareholding +
Management Control
0% Shareholding + Management
Control
Control

32. “subsidiary”/
“step
down
subsidiary
(SDS)”
of
a
foreign
entity
means
an entity in which the foreign
entity has control and
the structure of suchsubsidiary/SDS shall
comply withthe structural requirements of a
foreignentity,i.e.,suchsubsidiary/SDS shall
also have limitedliability
where the foreignentity’s core activity is not
in strategic sector.
The investee entities of the foreignentity
where such foreignentity does not have
control shall not be treatedas SDSs and
therefore neednot be reportedhenceforth.
Definition 04

33. Foreign Entity
Indian Entity
Foreign Entity
Indian Entity
XYZ Co ANC Co.
Foreign Entity
Indian Entity
01
02 03
Holds Control No Control
XYZ
to
be
considered
as
Sub
so
of
FE
ANC
will
not
be
considered
as
Sub
so
of
FE

34. 9% without
control
8%
7%
Subsidiary
Facts
❑ Indian company making direct investment in
subsidiaries will need to follow the Direct investment
outside India. YES
❑ Form ODI to be filed - Yes
❑ When Foreign JV / Sub co. makes investment outside
India - does it need to be reported in Form ODI – Yes
Type of investment can be wholly owned step down
subsidiary (WO SDS) or Step Down Joint Venture (JV SDS).
ErstwhileScenario

35. 9% without
control
8%
7%
Subsidiary
Facts of the case
❑ Indian company making direct investment in
subsidiaries will need to follow the Direct investment
outside India. Yes
❑ Form FC to be filed – Yes
❑ When Foreign Entity makes investment outside India
- does it need to be reported in Form FC – No
The investee entities of the foreign entity where such
foreign entity does not have control shall not be treated
as SDSs and therefore need not be reported henceforth.
Present

36. “Equity
capital”
means
equityshares or
perpetual capitalor
instruments thatare irredeemable or
contribution to non-debt capitalofa
foreign entity,which is in the nature
of fully and compulsorilyconvertible
instruments.
Any instrument which is
redeemable or non-
convertible or optionally
convertible shall be treated as
debt
Nature of instrument
Definition 05

37. Significant Changes - 01
• Overseas Investment Framework
G. Bhushan

38. Overseas Investment
Financial
Commitment
Overseas Portfolio
investment
Overseas
Investment

39. Overseas Investment
Financial
Commitment
Overseas
Portfolio
investment
Overseas
Investment
Financial
Commitmen
t
Overseas Direct
Investment
Debt
Non Fund
Facilities
Other than
Overseas
Portfolio
Investment

40. Overseas Direct Investment
ODI
means
investment
by way of acquisition of
unlisted equity capital of a
foreign entity,
or subscription as a part of the
memorandumof association of a
foreign entity,
or investmentin ten per cent, or
more of the paid-up equity
capital
of a listed foreign entity
or investmentwith controlwhere
investmentis less than ten per
cent. of the paid-up equity capital
of a listed foreign entity;
All investment in unlisted
entity shall be considered as
ODI

41. Overseas Direct Investment
ODI
means
investment
by way of acquisition of
unlisted equity capital of a
foreign entity,
or subscription as a part of the
memorandumof association of a
foreign entity,
or investmentin ten per cent, or
more of the paid-up equity
capital
of a listed foreign entity
or investmentwith controlwhere
investmentis less than ten per
cent. of the paid-up equity capital
of a listed foreign entity;
LISTED FOREIGN
ENTITY
A foreign entity whose equity
shares or any other fully and
compulsorily convertible
instrument is listed on a
recognized stockexchange
outside India.

42. Overseas Direct Investment
ODI
means
investment
by way of acquisition of
unlisted equity capital of a
foreign entity,
or subscription as a part of the
memorandum of association of a
foreign entity,
or investment in ten per cent, or
more of the paid-up equity
capital
of a listed foreign entity
or investment with control where
investment is less than ten per
cent. of the paid-up equity capital
of a listed foreign entity;
Control
the right to appoint majority of
directors or
to controlmanagementorpolicy
decisions exercisable by a person or
persons acting individually or in
concert, directly or indirectly,
including by virtue of their
shareholding or managementrights or
shareholding agreements or Voting
agreements that entitle them to ten per
cent. or more of voting rights or in any
othermannerin the entity;

43. Once ODI always ODI
ODI
means
investment
by way of acquisition of unlisted equity capitalof a foreign
entity,
or subscription as a part of the
memorandum of association of a
foreign entity,
or investmentin ten per cent, or
more of the paid-up equity capital of a listed foreign entity
or investmentwith controlwhere
investmentis less than ten per cent.
of the paid-up equity capital
of a listed foreign entity;
where an investment by a
person resident in India in the
equity capital of a foreign entity
is classified as ODI, such
investment shall continue to
be treated as ODI even if the
investment falls to a level
below ten per cent. of the
paid-up equity capital or such
person loses control in the
foreign entity
❑ Form FC?

44. Overseas portfolio investment means investment
Overseas Portfolio Investment
other than ODI
• Means less than 10%
• Not allowed in unlisted
entities
in foreign securities
but not in any unlisted
debt instruments or any
security issued by a
person resident in India
who is not in an IFSC

45. Overseas portfolio investment means investment
Overseas Portfolio Investment
other than ODI
• Means less than 10%
• Not allowed in unlisted
entities
in foreign securities
• Defined in the Section
2(o) of FEMA, 1999
but not in any unlisted
debt instruments or or any
security issued by a
person resident in India
who is not in an IFSC
Debt Instruments
defined in Rule 5 +
instrument which is
redeemableor non-
convertibleor optionally
convertible

46. Overseas portfolio investment means investment
Overseas Portfolio Investment
OPI by a person
resident in India in the
equity capital of a
listed entity, even after
its delisting shall
continue to be treated
as OPI until any
further investment is
made in the entity.
OPI shall not be
made in:
i. any unlisted debt
instruments; or
ii. any security which
is issued by a person
resident in India who
is not in an IFSC; or
iii. any derivatives
unless otherwise
permitted by Reserve
Bank; or
iv. any commodities
including Bullion
Depository Receipts
(BDRs).

47. ODI/OPI
Investment
outside India
Listed entity
Less than 10%
without control -
OPI
Less than 10%
with Control -
ODI
More than 10% -
ODI
Unlisted entity
ODI

48. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is an unlisted entity
incorporated in the US.
3. A Ltd. invests in Z sub. Co.
4. What shall the investment be
considered as ODI/OPI?
CASE 01

49. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is an entity registered in
US.
3. A Ltd. subscribes to MoA of Z
Sub.co
4. What shall the investment be
considered as ODI/OPI? ?
CASE 02

50. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is a listed entity
incorporated in the US.
3. A Ltd. acquires 10% paid-up
equity capital of Z sub. Co.
4. What shall the investment be
considered as ODI/OPI??
CASE 03

51. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is a listed entity
incorporated in the US.
3. A Ltd. have 9% paid-up equity
capital of Z sub. Co. A Ltd. have
rights to appoint 2 out of 3
directors on Board of Z Sub.co.
4. What shall the investment be
considered as ODI/OPI??
CASE 04

52. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is a listed entity
incorporated in the US.
3. A Ltd. acquired 12% paid-up
equity capital of Z sub. Co
without control.
4. What shall the investment be
considered as ODI/OPI? ?
CASE 05

53. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is a listed entity
incorporated in the US.
3. A Ltd. acquired 7% paid-up
equity capital of Z sub. Co
without control.
4. What shall the investment be
considered as ODI/OPI? ?
CASE 06

54. Z Sub Co.
A Limited
US
India
1. A hold co. is an Indian entity.
2. Z sub. Co. is an unlisted
entity.
3. A Ltd. acquired 7% paid-up
equity capital of Z sub. Co
without control.
4. What shall the investment be
considered as ODI/OPI??
CASE 07

55. Company ODI OPI Exceptions, if any
Unlisted foreign entity Inall cases ODI OPI not possible in case of unlisted
foreignentity.
Where the investment, whether listed
or unlisted, by way of sweat equity
shares, minimum qualification shares
and shares/interest under Employee
Stock Ownership Plan (ESOP)/Employee
Benefits Scheme does not exceed 10 %
of the paid-up capital/stock of the
foreign entity and does not lead to
control, such Investment shall be
categorisedas OPI
Acquisition of 10% or more of the paid-up equity
capital of a listed foreign entity with control
ODI Not anOPI
Acquisition of 10% or more of the paid-up equity
capital of a listed foreign entity without control
ODI Not anOPI
Acquisition of less than 10% of the paid-up equity
capital of a listed foreign entity without control
Not anODI OPI
Acquisition of less than 10% of the paid-up equity
capital of a listed foreign entity without control
ODI Not anOPI

56. Financial Commitment
Financial
Commitment
Overseas
Portfolio
investment
Overseas
Investment
Financial
Commitmen
t
Overseas Direct
Investment
Debt
Non Fund
Facilities

57. FinancialCommitment
Overseas Direct Investment
•UnlistedEquity Capital
•Subscriptionto MoA
• ListedForeignEntity:
• ≥10% paid up equity capital
• <10% of paidup equity capital withcontrol
Debt otherthan OPI
• Loans
• OCPS/ RPS
• Redeemable/ Optionally
convertible debentures
• Debt instruments
Non-fund-basedfacilities
• 100% corporate guarantee
• 100% personal guarantee
• 100% bank guarantee
• 50% performance guarantee
• Pledge or charge onassets
• Deferredpart of consideration
Holding/ Subsidiary co. canprovide guarantee to be utilized
against its ownlimits
consideration

58. Financial Commitment is defined to means
the aggregate amount of investment made by
a person resident in India
• by way of Overseas Direct Investment,
• debt other than Overseas Portfolio
Investment in a foreign entity or entities in
which the Overseas Direct Investment is
made and
• shall include the non fund - based facilities
extended by such person to or on behalf of
such foreign entity or entities
Financial Commitment
Financial
Commitment
ODI
Governed by Rules
by CG
Debt
Governed by
Regulationsby RBI
Non fund - based
facilities
Governed by
Regulationsby RBI

59. Financial Commitment is defined to means
the aggregate amount of investment made
by a person resident in India
• by way of Overseas Direct Investment
• debt other than Overseas Portfolio
Investment in a foreign entity or entities
in which the Overseas Direct Investment
is made and
• shall include the non fund - based
facilities extended by such person to or
on behalf of such foreign entity or
entities
Financial Commitment
Regulation
3
Financial
commitment by
Indian entity by
modes other than
equity capital
Regulation
4
Financial
commitment by
Indian entity by way
of debt
Regulation
5
Financial
commitment by way
of guarantee
Regulation
6
Financial
commitment by way
of pledgeor charge

60. Financial Commitmentis defined to means
the aggregate amount of investment made by a
person resident in India
• by way of Overseas Direct Investment,
• debt other than Overseas Portfolio Investment in a
foreign entity or entities in which the Overseas Direct
Investment is made and
• shall include the non fund - based facilities extended
by such person to or on behalf of such foreign entity
or entities;
Financial Commitment – Equity Capital
Y Co India
Outside India
In India
X Co. India
What is investment is
by way of preference
share capital or
debentures

61. Financial Commitmentis defined to means
the aggregate amount of investment made by a
person resident in India
• by way of Overseas Direct Investment,
• debt other than Overseas Portfolio Investment in a
foreign entity or entities in which the Overseas Direct
Investment is made and
• shall include the non fund - based facilities extended
by such person to or on behalf of such foreign entity
or entities;
Financial Commitment – Equity Capital
Y Co India
Outside India
In India
X Co. India
EQUITY CAPITAL to
include
❖ Equity shares or
❖ perpetual capital
❖ instruments that are
irredeemable or
❖ contribution to non-debt
capital of a foreign entity
in the nature of fully and
compulsorily convertible
instruments.

62. Financial Commitmentis defined to means
the aggregate amount of investment made by a person resident in India
• by way of Overseas Direct Investment,
• debt other than Overseas Portfolio Investment in a foreign entity or entities in which the Overseas Direct
Investment is made and
• shall include the non fund - based facilities extended by such person to or on behalf of such foreign entity or entities;
Financial Commitment

63. Financial Commitment is defined to means
the aggregate amount of investment made by a
person resident in India
• by way of Overseas Direct Investment,
• debt other than Overseas Portfolio
Investment in a foreign entity or entities in
which the Overseas Direct Investment is
made and
• shall include the non fund - based facilities
extended by such person to or on behalf of
such foreign entity or entities;
Financial Commitment - Debt
Conditions
for
non
Equity
FC
a) the Indian entity is eligible to
make ODI;
b) the Indian entity has made ODI in
the foreign entity;
c) the Indian entity has acquired
control in the foreign entity on or
before the date of making such
financial commitment.
Control
is
the
prerequisite

64. Omhariom is an Indian company.
As on 31st March 2020 its balance sheet had following figures
❑Paid up capital – INR 400 Cr.
❑Reserve and surplus – 100 Cr.
It Invested INR 1000 crore in PQR,B.V, Netherlands in the following manner
❑ Gave loan of 500 Cr.
❑ Gave corporate Guarantee for 500 Cr.
Scenario 01

65. Omhariom is an Indian company.
As on 31st March 2020 its balance sheet had following figures
❑Paid up capital – INR 400 Cr.
❑Reserve and surplus – 100 Cr.
It Invested INR 3010 Cr. in PQR,B.V, Netherlands in the following manner
❑ Invested in Equity shares of PQR – 10 Cr.
❑ Gave loan of 1500 Cr.
❑ Gave corporate Guarantee for 1500 Cr.
Scenario 02

66. Financial Commitment is defined to means
the aggregate amount of investment made by a
person resident in India
• by way of Overseas Direct Investment,
• debt other than Overseas Portfolio
Investment in a foreign entity or entities in
which the Overseas Direct Investment is made
and
• shall include the non fund - based facilities
extended by such person to or on behalf of
such foreign entity or entities;
Financial Commitment - Debt
Conditions
for
making
debt
loans to be duly backed by a loan
agreement
the rate of interest shall be charged on
an Arms Lengthbasis.
“Arms Length” means a transaction
betweentwo related partiesthat is
conducted as if they were unrelated,
so that there is no conflict of interest.

67. Subsidiary
Indian Entity
Step Down
Subsidiary
Direct loan
to SDS
Loan to
Subsidiary

68. Financial Commitment is defined to
means
the aggregate amount of investment
made by a person resident in India
• by way of Overseas Direct Investment
• debt other than Overseas Portfolio
Investment in a foreign entity or
entities in which the Overseas Direct
Investment is made and
• shall include the non fund - based
facilities extended by such person to
or on behalf of such foreign entity or
entities
Financial Commitment
Regulation 5
• Financial
commitmentby
way of guarantee
Regulation 6
• Financial
commitmentby
way of pledge or
charge

69. Limit of Financial Commitment
The total FC made by an Indian entity in all the foreign entities taken together at the time
of undertaking such commitment shall not exceed 400 percent of its net worth as on the
date of the last audited balance sheet.
In all Foreign Entities 400% - Kept same Net worth now defined
Last Auditedbalance sheet
defined

70. Limit of Financial Commitment
The total FC made by an Indian entity in all the foreign
entities taken together at the time of undertaking such
commitment shall not exceed 400 percent of its net
worth as on the date of the last audited balance sheet.
In all Foreign
Entities 400% - Kept same
Net worth now
defined
Last Auditedbalance
sheet defined
last audited balancesheet
means audited balance sheet as on
date not exceeding eighteen
months preceding the date of the
transaction
Net worth
Shall have the same meaning
assigned to it in clause (57) of
section 2 of the companies act,
2013
FOREIGN ENTITY
An entity formed or registered or
incorporated outside India, including
International Financial Services
Centre that has limited liability.
Provided that the restriction of
limited liability shall not apply to an
entity with core activity in a strategic
sector.

71. Limit of Financial Commitment
The total FC made by an Indian entity in all the foreign
entities taken together at the time of undertaking such
commitment shall not exceed 400 percent of its net
worth as on the date of the last audited balance sheet.
In all Foreign
Entities 400% - Kept same
Net worth now
defined
Last Auditedbalance
sheet defined
last audited balancesheet
means audited balance sheet as on
date not exceeding eighteen
months preceding the date of the
transaction
Net worth
Shall have the same meaning
assigned to it in clause (57) of
section 2 of the companies act,
2013
FOREIGN ENTITY
An entity formed or registered or
incorporated outside India, including
International Financial Services
Centre that has limited liability.
Provided that the restriction of
limited liability shall not apply to an
entity with core activity in a strategic
sector.
Will Limited Review work?

72. Calculation of Net Worth
Particulars As on 31 March 22
A. Share Capital
B. Reserves & Surplus
Securities Premium Not a Free Reserve
Share Options OutstandingAccount Not a Free Reserve
General Reserves Free Reserves
Surplus Free Reserves
Total [A+B]
Calculation of net worth
As on 31
March 2023
Particulars
A Paid Up Share Capital:
B
Reserves Out of Profit (including
securities premium)
C Accumulated Losses
D Deferred Expenditure
E Miscellaneous Expense not written off
Total [A+B-C-D-E]
but does not include reserves createdout of revaluation
of assets,write-back of depreciation and
amalgamation;
Erstwhile Present

73. Exclusions from the FC
Capitalisation of retained earnings
Calculation of Limits of Financial Commitment
Inclusions for calculation of Limit of FC
• Balances held in EEFC account
• Utilization of the amount raised by the issue of
American Depository Receipts or Global Depositary
Receipts and stock-swap of such receipts; and
• Utilization of the proceeds from External Commercial
Borrowings to the extent the corresponding pledge or
creation of charge on assets to raise such borrowings
has not already been reckoned towards the above
limit:
Only 50% of performance guarantee to be taken
Limit of 400%
1. The concept of utilising the net worth of the
subsidiary/holding company by the Indian entity
has been discontinued henceforth.
2. Further, for computing the financial commitment
limit of the group company, any fund-based
exposure of such group company to the Indian
entity or of the Indian entity to such group
company, as the case may be, shall be deducted
from the net worth of such group company.

74. 400%of the
Net worth
Balancesheld
in EEFC
account
foreign
currency funds
raised through
ADR / GDR
Limits of
overseas
investment
400%of the
Net worth
Balances held in
EEFC account
foreign currency
funds raised
through ADR /
GDR
Utilizationof the
proceeds from
External
Commercial
Borrowings
Erstwhile
Regulations
New OI
Regime

77. 100% subsidiary
Singapore
Direct Funding
India
Guarantee
Indian PSUfloated
a global tender
WOS
Indian listed co. in
infrastructure
Singapore subsidiary
entity got a contract to
execute an order in
India.
In case where an Indian company in the infrastructure
sector opened a subsidiary in Singapore, under a global
tender floated from Indian PSU, the Singapore subsidiary
entity got a contract to execute an order in India.
The precondition of which was that 10% of the award
amount was required to be given as corporate guarantee
by the Singapore entity. Singapore entity approached
the Indian PSU with a request to allow it to provide the
guarantee through its Indian holding company.
The PSU agreed to receive guarantee on behalf of the
Singapore entity from its Indian holding company. The
guarantee was issued from Indian Company to PSU on
behalf of Singapore entity.
Scenario

78. Limits of OPI Investments
OPI
Investment
shall not exceed fifty percent
of its net worth as on the date
of its last audited balance sheet
A listed Indian company
In any manner
reinvestment
An unlisted Indian entity
rights issue/ Bonus share
capitalisation,
the swap of securities;
merger, demerger, amalgamation
or any scheme of arrangement

79. Limits of OPI Investments
OPI
Investment
shall not exceed fifty
percent of its net worth
as on the date of its last
audited balance sheet
A listed Indian company
In any manner
reinvestment
An unlisted Indian entity
rights issue/ Bonus share
capitalisation,
the swap of securities;
merger, demerger,
amalgamation or any
scheme of arrangement
Reinvestment means that the
OPI proceeds are exempted
from repatriation provisions as
long as such proceeds are
reinvested within the time
specified for realisation and
repatriation as per Notification
No. FEMA 9(R)/2015-RB
namely, Foreign Exchange
Management (Realisation,
repatriation and surrender of
foreign exchange) Regulations,
2015.
As defined in Directions

80. Limits of OPI Investments
OPI
Investment
shall not exceed fifty
percent of its net worth
as on the date of its last
audited balance sheet
A listed Indian company
In any manner
reinvestment
An unlisted Indian entity
rights issue/ Bonus share
capitalisation,
the swap of securities;
merger, demerger,
amalgamation or any
scheme of arrangement

81. Outside India IFSC, GIFTCity, SEZ
India
Listed Indian Entity Resident Individual Indian Unlisted
entity
Investment Fund
Investment
to be
considered
as OPI
Investment in units of Investment fund

82. Unlisted FE Listed FE Listed FE
IE/RI IE/RI IE/RI
ODI Structures
Outside India
India
•1% holding
• Control/ no
control
•>10% holding
•Control/ no
control
•<10% holding
•Control
Scenario

83. Listed FE Listed/Unlisted FE
Outside India
India
IE/RI IE/RI
OPI Structures
•<10% holding
•No control
•<10% holding
•No Control
ESOP, qualification
shares, sweat equity
Scenario

84. Permissions
for
making
OI
CG Approval
FE formed, incorporatedor registered
in Pakistanor other specified
jurisdictions.
FC above the limits prescribed by
persons engagedin strategicsectors.
RBI approval
In case FC exceeds 400%of Net worth
in case of ODI and 50% in case of OPI
No Objection certificaterequired to
be obtained
Has an accountappearing as NPA
classified as wilful defaulter.
Is under investigationby a regulatory
agencies
NOC to be additionallyobtained
from :-
• Lender Bank
• RegulatoryBody
• InvestigativeAgencies
Deemed NoC:
Where the said Bank/authority
fails to furnish the certificate
within 60 days from the date of
receipt of such application,it
may be presumed that there
was no objection to the
proposed transaction

85. Significant Change 02
ODI FDI Structure
G. Bhushan

86. Significant Change - 02
• ODI – FDI Structure Permitted
G. Bhushan

87. ODI – FDI Structure (erstwhile)

88. The New Rule says
No person resident in India shall make financial
commitment in a foreign entity
➢ that has invested or invests into India,
➢ at the time of making such financial commitment or at
any time thereafter, either directly or indirectly,
resulting
➢ in a structure with more than two layers of subsidiaries

89. 10%
2nd Layer
51%
10%
1st layer
layer after 2nd Layer
Outside India
In India
AB Plc.
X India Ltd
X Plc.
XYZ India Limtied
Option 01
This Entity?

90. 10%
51%
10% with Control
1st layer 2nd Layer
Outside India
In India
layer after 2nd Layer
X Plc.
X India Ltd XYZ India Limtied
POU India Limtied
AB Plc.
Option 02
This Entity?

91. 10%
51%
10% with Control
1st layer 2nd Layer
Outside India
In India
layer after 2nd Layer
X Plc.
X India Ltd XYZ India Limtied
POU India Limtied
AB Plc.
Option 02
As per ODI Directions
Note: It may be noted that
subsidiary shall have the
meaning as provided in the OI
Rules i.e. an entity in which the
foreign entity has control (which
includes a stake of 10% or more
in an entityas per the OI Rules).

92. AB Plc.
USA 10%+ Control
1st Layer
51%
Singapore 10%+ Control
India
2nd Layer
X India Ltd
X Co, Singapore
XYZ India Limtied
Option 03

93. AB Plc.
USA 10%+ Control
1st Layer
51%
Singapore 10%+ Control
India
2nd Layer
X India Ltd
X Co, Singapore
XYZ India Limtied
Option 03

94. AB Plc.
USA 10%+ Control
1st Layer
51%
Singapore 10%+ Control
India
2nd Layer
X India Ltd
X Co, Singapore
XYZ India Limtied
Option 04

95. Significant Change 03
• Deferred Consideration Allowed
G. Bhushan

96. Deferred Consideration
Deferred consideration
• To be treated as non-
fund based financial
commitment
• shall be reported
accordingly.
Subsequent payments
towards deferred
consideration
• shall be reported in
Form FC as conversion
of non-fund based
financial commitment
to equity.
The valuation
• in accordance with
pricing guidelines,
wherever applicable
• shall be done upfront.

97. Significant Change 04
Disinvestment without approval of
RBI
G. Bhushan

98. Erstwhile Disinvestment provisions
where the amount repatriated after disinvestment is less than the original amount invested
• without prior approval of the RBI:
➢ in all other cases prior approval of RBI shall be required before writing off the amount of
investment.
where the JV/WOS
• is listed in the
overseas stock
exchange;
where the Indian party
• is listed on a stock
exchange in India
• and has a net worth
of not less than Rs
100crore;
Indian party is an
unlisted company
• The investmentin the
overseas venture
does not exceed USD
10 million; and
Indian party is a listed
company
• with net worth of less
than Rs 100crore
• but investmentin an
overseas JV/WOS
does not exceed USD
10 million.
CA. Sudha G. Bhushan

99. Disinvestment
The requirement of taking RBI approval for
disinvestment with write off have been
dispensed with. It is very big relief. The
provisions in old regulations were very stringent
and made genuine cases of write off difficult
too.
OI rules provides that where the transferor is
required to repatriate all the dues before
disinvestment, such requirement shall not apply
to the dues that do not arise on account of
investment in equity or debt like export
receivables, etc.
A person resident in India holding equity capital in accordance with
these rules may transfer such investment in the manner provided in
these rules and the OI regulations
A person resident in India may transfer equity capital by way of
sale to a person resident in India, who is eligible to make such
investment under these rules, or to a person resident outside India.
If the transfer is on account of merger, amalgamation or
demerger or on account of buyback of foreign securities, it shall
have the approval of the competent authority.
Where the disinvestment by a person resident in India pertains to ODI

100. Significant Change 05
Pre incorporation expenses
G. Bhushan

101. Pre
incorporation
expenses
Max. USD
100,000
Capitalise
OI Rules/
Regulation
applicable
Recognised
such expenses
as receivables
Debt
OI Rules/
regulations
applicable
Expense
Not
Applicable
AD to confirm the
reasonableness !!

102. OBLIGATION OF PERSON RESIDENT IN INDIA

103. OBLIGATION OF PERSON RESIDENT IN INDIA
Submit
Share
Certificate
Submit
Form FC
Obtain
UIN
Routed
through
same UIN
All dues
receivable
or
disinvestment
EMD or
Bond
Guarantee
to the
AD bank
Within 6 months
of remittance
to the
AD bank
From the
AD bank
before remittance
or acquisition of
share capital
in FE
If more than
one person makes
FC in the same
FE,
all transactions
to be routed
through same
UIN
Should be received
in India within
90 days from
the due date
or
date of
disinvestment
To be provided
before Bidding
or
Tender procedure
for acquisition
of a FE
Failing which amount
to be repatriated back.
AD Bank to satisfy the
bonafides
w.e.f June 1, 2022UIN
through auto generated
mail from RBI to AD Banks

104. Requirements Form / Return Due Date
ReportingFC FORM-FC
[Replaced FORM- ODIpart I]
At the time of making investment
Reportingof Overseas Portfolio Investment
by Indianentities
Form OPI Within 60 days fromthe end of the half-year in
whichinvestment ortransfer is made
Repatriationof proceeds oftransfer/
Disinvestment
- Within 90 days of it fallingdue
Reportingrestructuring / disinvestment FormFC
[Replaced FORM- ODIpart III]
Within 30 days
Submission of evidence of ODI Share Certificate Within 6 months fromthe date of remittance
Annual filing of ForeignAsset and Liability Annual Returnon ForeignLiabilities and
Assets
Indianentity need to submit by July 15 every year
Annual Performance Report FormAPR
(Replaced Form ODI part II)
FE/ RI to report onor before December 31 of
every year
Person excluded from APR Compliance:-
• Resident holding<10% equitycapital in FE without control and No FC other than equitycapital
• FE under liquidation
In case of more than one Indian entities / RI, reportingof APR to be done by person holdinghighest stake in FE

105. REPORTING REQUIREMENTS – Overseas Portfolio Investment
FORM
OPI
A person resident in India other than a
resident individual making any Overseas
PortfolioInvestment
To be submitted by a resident person in India
other than a residentindividual
within 60 days from the end of the half
year in which such OPI or transfer by way
of sale is made as of September or March-
end:
in case of OPI by way of acquisition of
shares or interest under Employee Stock
Ownership Plan or Employee Benefits
Scheme
the reporting shall be done by the office in India or
branch of an overseas entity or a subsidiary in
India of an overseas entity or the Indian entity in
which the overseas entity has direct or indirect
equity holding where the resident individual is an
employee ordirector
within 60 days from the end of the half
year in which such OPI or transfer by way
of sale is made as of September or March-
end:

106. Thanks
Your Queries
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