The document summarizes key changes made by the Reserve Bank of India to foreign exchange regulations relating to overseas direct investments by Indian parties. The changes liberalize rules around the creation of charges on shares and assets of joint ventures, wholly owned subsidiaries, and step-down subsidiaries. Specifically, the changes allow for the automatic routing of creating charges in favor of domestic or overseas lenders on shares and assets at any level of subsidiaries, extend this to group companies, and allow charges on domestic assets in favor of overseas lenders and overseas assets in favor of domestic lenders. The changes aim to provide more flexibility to Indian parties in availing foreign funding.
Key Takeaways:
Analysing the provisions of Sec 6
Recent budget amendments of Finance Act, 2020
Residency provisions under DTAA
Illustrations and Judicial Precedents
Impact due to change in residential status - FEMA perspectiveDVSResearchFoundatio
Key Takeaways:
Various bank accounts
ODI and FDI investments
Property held in India and Outside India
Loan transactions
Demat, Insurance policies and PPF accounts
Key Takeaways:
Analysing the provisions of Sec 6
Recent budget amendments of Finance Act, 2020
Residency provisions under DTAA
Illustrations and Judicial Precedents
Impact due to change in residential status - FEMA perspectiveDVSResearchFoundatio
Key Takeaways:
Various bank accounts
ODI and FDI investments
Property held in India and Outside India
Loan transactions
Demat, Insurance policies and PPF accounts
FEMA Regulations for Incorporation of WOS/JV/ Step-down Subsidiary outside IndiaDVSResearchFoundatio
Key Takeaways:
Acquisition of JV/WOS by Indian parties
Approvals required for investment in JV/WOS by Indian parties
Understanding step-down subsidiary
Setting up step-down subsidiary outside India and reporting procedures involved
Foreign Currency and Foreign Currency Accounts for Residents under FEMADVSResearchFoundatio
Objectives & Agenda :
The Regulations under Foreign Exchange Management Act, 1999 regulate Foreign Currency that can held by an individual in India. In this Webinar we shall understand the Definition of the term 'Foreign Currency' and the regulation which governs the possession of foreign currency in India and the various types of Foreign Current Accounts that can opened by an Indian resident and the related conditions.
Objectives & Agenda :
The Regulations under Foreign Exchange Management Act, 1999 regulate Foreign Currency Accounts that can held by an non-resident in India. In this Webinar we shall understand the Definition of the term 'Foreign Currency' and the various types of Foreign Currency Accounts that can opened by a Non-resident in India and the related conditions.
Objectives & Agenda :
Foreign Exchange Management Act, 1999 has the authority to govern the Capital Account Transactions and Provision of Services between Non-Residents and Realisation and Repatriation of Foreign Exchange. FEMA empowers the RBI to prescribe Regulations in order to govern such transactions. In this Webinar, we shall understand the FEMA regulations governing International Financial Services Centre (IFSC) and Offshore Banking Unit (OBU).
Objectives & Agenda :
To understand the regulations under Foreign Exchange Management Act, 1999, relating to Transfer of Capital Instruments of an Indian Company by or to a Person resident outside India. In this webinar, we shall look at the various circumstances of such transfers and the conditions to be adhered to. We shall also look at the Pricing Guidelines, Mode of Payment and provisions for Opening of Escrow account and Deferred payment of consideration in transfers between Residents and Non-residents.
Objectives & Agenda :
The Regulations under FEMA regulate the Import transactions of Goods, Services and Currencies. In this Webinar we shall understand the Definition of the term 'Import', 'Services' and 'Currencies'. We will also look at various procedures and compliances involved while Importing goods or services or currencies.
Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. The Reserve Bank is empowered to compound contraventions under Foreign Exchange Management Act, 1999. In this webinar, we shall understand the provisions of FEMA Act and its regulations relating to Compounding of Offences
Key Takeaways:
Recent amendment in FDI policy for foreign investment
Ambiguities relating to the amendment
Probable impact of the changes in the policy
Overview of other countries' rule for strategic takeovers
WTO principles and inference
To gain knowledge on various reports and forms prescribed by RBI for transactions undertaken under the ambit of FEMA. In this Webinar we shall look into various reports and forms which are to be submitted by or through Authorised persons/ dealers in specific cases like Foreign investment, Overseas Direct Investment, External Commercial Borrowings.
Key Takeaways:
FEMA regulations relating to IFSC
Scheme for setting up of IFSC Banking Units (IBUs)
Permissible activities of IBUs
Rupee Derivatives at IFSCs
Objectives & Agenda :
The Regulations under FEMA regulate a transaction based on whether the transaction is a 'Capital Account Transaction' or a 'Current Account Transaction'. In this Webinar we shall understand the Definition of the terms 'Capital Account Transactions' and 'Current Account Transactions'. We will also look at various transactions covered and the limits applicable to such transactions.
How to make outbound investment from india financing & complianceRamanuj Mukherjee
Detailed procedure for making outbound investment from India. Includes financing options for the same and foreign foreign exchange, securities and company law compliances (RBI, FEMA, SEBI, and Companies Act).
FEMA Regulations for Incorporation of WOS/JV/ Step-down Subsidiary outside IndiaDVSResearchFoundatio
Key Takeaways:
Acquisition of JV/WOS by Indian parties
Approvals required for investment in JV/WOS by Indian parties
Understanding step-down subsidiary
Setting up step-down subsidiary outside India and reporting procedures involved
Foreign Currency and Foreign Currency Accounts for Residents under FEMADVSResearchFoundatio
Objectives & Agenda :
The Regulations under Foreign Exchange Management Act, 1999 regulate Foreign Currency that can held by an individual in India. In this Webinar we shall understand the Definition of the term 'Foreign Currency' and the regulation which governs the possession of foreign currency in India and the various types of Foreign Current Accounts that can opened by an Indian resident and the related conditions.
Objectives & Agenda :
The Regulations under Foreign Exchange Management Act, 1999 regulate Foreign Currency Accounts that can held by an non-resident in India. In this Webinar we shall understand the Definition of the term 'Foreign Currency' and the various types of Foreign Currency Accounts that can opened by a Non-resident in India and the related conditions.
Objectives & Agenda :
Foreign Exchange Management Act, 1999 has the authority to govern the Capital Account Transactions and Provision of Services between Non-Residents and Realisation and Repatriation of Foreign Exchange. FEMA empowers the RBI to prescribe Regulations in order to govern such transactions. In this Webinar, we shall understand the FEMA regulations governing International Financial Services Centre (IFSC) and Offshore Banking Unit (OBU).
Objectives & Agenda :
To understand the regulations under Foreign Exchange Management Act, 1999, relating to Transfer of Capital Instruments of an Indian Company by or to a Person resident outside India. In this webinar, we shall look at the various circumstances of such transfers and the conditions to be adhered to. We shall also look at the Pricing Guidelines, Mode of Payment and provisions for Opening of Escrow account and Deferred payment of consideration in transfers between Residents and Non-residents.
Objectives & Agenda :
The Regulations under FEMA regulate the Import transactions of Goods, Services and Currencies. In this Webinar we shall understand the Definition of the term 'Import', 'Services' and 'Currencies'. We will also look at various procedures and compliances involved while Importing goods or services or currencies.
Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. The Reserve Bank is empowered to compound contraventions under Foreign Exchange Management Act, 1999. In this webinar, we shall understand the provisions of FEMA Act and its regulations relating to Compounding of Offences
Key Takeaways:
Recent amendment in FDI policy for foreign investment
Ambiguities relating to the amendment
Probable impact of the changes in the policy
Overview of other countries' rule for strategic takeovers
WTO principles and inference
To gain knowledge on various reports and forms prescribed by RBI for transactions undertaken under the ambit of FEMA. In this Webinar we shall look into various reports and forms which are to be submitted by or through Authorised persons/ dealers in specific cases like Foreign investment, Overseas Direct Investment, External Commercial Borrowings.
Key Takeaways:
FEMA regulations relating to IFSC
Scheme for setting up of IFSC Banking Units (IBUs)
Permissible activities of IBUs
Rupee Derivatives at IFSCs
Objectives & Agenda :
The Regulations under FEMA regulate a transaction based on whether the transaction is a 'Capital Account Transaction' or a 'Current Account Transaction'. In this Webinar we shall understand the Definition of the terms 'Capital Account Transactions' and 'Current Account Transactions'. We will also look at various transactions covered and the limits applicable to such transactions.
How to make outbound investment from india financing & complianceRamanuj Mukherjee
Detailed procedure for making outbound investment from India. Includes financing options for the same and foreign foreign exchange, securities and company law compliances (RBI, FEMA, SEBI, and Companies Act).
Key Takeaways:
Methods of funding for investmenr in overseas JV/WOS
Capitalization of export proceeds
Investment in equity of companies registered overseas/rated debt instruments
Acquisition of foreign company through bidding or tender procedure
History of Outbound Investment & Rationale
Liberalization and the rationalization
Automatic Route of Overseas Investment
Approval Route
Eligible Entities for Investment
Other modes of Investment
Post Approval Compliance
Disinvestment / Pledge etc.
Factors Affecting Overseas Investment
Long Term Visa (LTV) is granted to the following categories of persons of Bangladesh, Afghanistan and Pakistan coming to India on valid travel documents i.e. valid passport and valid visa, and seeking permanent settlement in India with a view to acquire Indian citizenship:-
i. Members of minority communities in Bangladesh/ Afghanistan/ Pakistan, namely Hindus, Sikhs, Buddhists, Jains, Parsis and Christians.
ii. Bangladesh/ Pakistan women married to Indian nationals and staying in India; or Afghanistan nationals married to Indian nationals in India and staying in India.
iii. Indian origin women holding Bangladesh/ Afghanistan/ Pakistan nationality married to Bangladesh/ Afghanistan/ Pakistan nationals and returning to India due to widowhood/ divorce and having no male members to support them in Bangladesh/ Afghanistan/ Pakistan.
iv. Cases involving extreme compassion.
Non-resident Indians are a section of people whose roots belong to India and who have migrated from India. The Indian Government is aware of the importance of Indian Diaspora in the form of NRIs/PIOs which is spread all across the world and which despite being away from India is making significant contribution to the Indian economy on a global platform and to the economic, financial and social benefits which have been brought to India; therefore, it attempts to provide benefits to them to attract their investments. They are also called for taking part in the economy. The Indian government gives lot of benefits to NRI not only with respect to ease of making investment in India but also in Taxation. The investment from NRIs is easy money available and provides the much needed leverage to the economy. The Indian Diaspora today constitutes an important, and inimitable, part of the Indian economy. The PPT discusses about he various account that can be opened by NRIs in India
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".
As per section 92 of the Income Tax Act,1961 “Any
income arising from an international transaction shall
be computed having regard to the arm's length
price” Where in an international transaction two or
more associated enterprises enter into a mutual
agreement or arrangement for the allocation or
apportionment of, or any contribution to, any cost or
expense incurred or to be incurred in connection with
a benefit, service or facility provided or to be
provided to any one or more of such enterprises, the
cost or expense allocated or apportioned to, or, as
the case may be, contributed by, any such enterprise
shall be determined having regard to the arm's
length price of such benefit, service or facility, as the
case may be.
The 2008 Financial Crisis changed the world of Banking. Many malpractices by the Banks and various financial institutions came into light and the regulators started scrutinizing and penalizing them. The world’s most important number “LIBOR” came under the sword of the Regulators. In this article we will explore the origins and the fall of the once revered LIBOR rate.
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One of the important aspect of Start up is raising of funds. Fundraising is a necessary, and most important task in the life of Start ups. IN THIS ARTICLE GIVES PRELIMINARY INSIGHTS INTO FUND RAISING BY STARTUPS
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What makes Rafah so significant that it captures global attention? The phrase ‘All eyes are on Rafah’ resonates not just with those in the region but with people worldwide who recognize its strategic, humanitarian, and political importance. In this guide, we will delve into the factors that make Rafah a focal point for international interest, examining its historical context, humanitarian challenges, and political dimensions.
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Key changes in Foreign Exchange laws in India
Investor Focus
l
2. 2
Overseas Direct Investments by Indian
Party – Rationalization / Liberalization
In order to grant more flexibility to the Indian party Vide A.P. (DIR Series)
Circular No.54 RBI/2014-15/371 dated December 29, 2014 the
regulations relating to overseas direct investment by Indian party have
been liberalized. The Overseas Direct Investments by Indian Party is
governed by Notification No. FEMA.120/RB-2004 dated July 7,
2004[Foreign Exchange Management (Transfer or Issue of any Foreign
Security) (Amendment) Regulations, 2004] (the Notification).
The liberalization have been brought in regulations relating to creation of
charge,Regulation 18 and 18A of Notification No. FEMA.120/RB-2004
dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of
any Foreign Security) (Amendment) Regulations, 2004] (the
Notification).
Following are the key changes
(i) Creation of charge on shares of JV / WOS / step
down subsidiary (SDS) in favour of domestic /
overseas lender
Extant Position : In terms of the extant FEMA provisions, creation of
charge (pledge) on the shares of an JV / WOS of an Indian party in
favour of domestic / overseas lender for the purpose of availing
facilities (funded or non-funded) by the Indian party and / or the
concerned JV / WOS is under the automatic route.
Changed Position : It has been decided that the designated AD bank
may permit creation of charge / pledge on the shares of the JV / WOS
/ SDS (irrespective of the level) of an Indian party in favour of a
domestic or overseas lender for securing the funded and / or non-
funded facility to be availed of by the Indian party or by its group
companies / sister concerns / associate concerns or by any of its JV /
WOS / SDS (irrespective of the level) under the automatic route
subject to the following conditions:
Creation of charge
on shares of JV / WOS /
step down subsidiary
(SDS)
in favour of domestic /
overseas lender
Presently automatic
route but not allowed to
be used by Group
companies etc
presently Automatic
route but not allowed on
the shares of SDS
to be changed to include
the shares of SDS and
use to be extended to
group companies etc
on the domestic assets
in favour of overseas
lenders to the JV / WOS /
step down subsidiary
Presently requires prior
approval of RBI
to be changed to
Automatic route subject
to conditions
on overseas assets
in favour of domestic
lender
Presently requires prior
approval of RBI
Automatic route subject
to conditions
3. 3
The Indian party is complying with the provisions under
Regulation 6 (and Regulation 7, if applicable) of the
Notification No. FEMA.120/RB-2004 dated July 7,
2004 [Foreign Exchange Management (Transfer or Issue of
any Foreign Security) (Amendment) Regulations, 2004] for
undertaking financial commitment;
Compliance to the provisions under Regulation 18 of the
Notification ibid;
The period of charge, if not specified upfront, may be co-
terminus with the period of end use (like loan or other facility)
for which charge has been created;
The loan / facility availed by the JV / WOS / SDS from the
domestic / overseas lender shall be utilized only for its core
business activities overseas and not for investing back in India
in any manner whatsoever;
A certificate from the Statutory Auditors’ of the Indian party, to
the effect that the loan / facility availed by the JV / WOS / SDS
has not been utilized for direct or indirect investments in India,
is to be obtained and kept by the designated AD;
The invocation of charge resulting into the domestic lender
acquiring the shares of the overseas JV / WOS / step down
subsidiary shall be governed by the extant FEMA provisions /
regulations issued by the Reserve Bank from time to time;
The facilities (funded or non-funded) extended by the
domestic lender to the Indian party or to its group / sister /
associate concern or to any of its overseas JV / WOS / SDS
shall also be governed by the prudential norms and other
guidelines issued by the Department of Banking Regulation
(DBR, the erstwhile DBOD), Reserve Bank of India from time
to time; and
(ii) Creation of charge on the domestic assets in
favour of overseas lenders to the JV / WOS / step
down subsidiary
Extant Position : As per the extant FEMA provisions, creation of charge
on the domestic assets (movable / immovable / financial / other) of an
Indian party (or its group / sister / associate concern including the
individual promoter / director) in favour of an overseas lender to the
JV / WOS / step down subsidiary (SDS) requires prior approval of the
Reserve Bank.
Changed Position : It has been decided that the designated AD bank
may permit creation of charge (by way of pledge, hypothecation,
mortgage, or otherwise) on the domestic assets of an Indian party (or
its group companies / sister concerns / associate concerns including
the individual promoters / directors) in favour of an overseas lender for
securing the funded and / or non-funded facility to be availed of by the
JV / WOS / SDS (irrespective of the level) of the Indian party under
the automatic route subject to the following:
The Indian party is complying with the provisions under
Regulation 6 (and Regulation 7, if applicable) of the
Notification No. FEMA.120/RB-2004 dated July 7, 2004
[Foreign Exchange Management (Transfer or Issue of any
Foreign Security) (Amendment) Regulations, 2004] for
undertaking the financial commitment;
Compliance to the provisions under Regulation 18A(1) of the
Notification ibid;
The domestic assets, on which charge is being created, are
not securitized;
The period of charge, if not specified upfront, may be co-
terminus with the period of end use (like loan or other facility)
for which charge has been created;
The loan / funds raised overseas by the JV / WOS / SDS shall
be utilized only for its core business activities overseas and
not for investing back in India in any manner whatsoever;
A certificate from the Statutory Auditors’ of the Indian
party, to the effect that the loan / funds raised overseas
The matter relating to the setting up / acquiring the
multi-layered structure of overseas entities by the
Indian party, wherever applicable, is under the
examination of the Reserve Bank
4. 4
by the JV / WOS / SDS has not been utilized for direct or
indirect investments in India, is to be obtained and kept
by the designated AD;
The overseas lender undertakes that, in the event of
enforcement of charge, they shall transfer the domestic
assets by way of sale to a resident only;
In case of invocation of charge, the resultant remittance
of the proceeds exceeding the prescribed limit of the
financial commitment of the Indian party (prevailed at the
time of creation of charge) shall require prior approval of
the Reserve Bank;
Wherever creation of charge involves pledge of shares of an
Indian company, the pledge shall also be governed by the
extant FEMA provisions / regulations issued by the Reserve
Bank and the consolidated Foreign Direct Investment (FDI)
policy issued by the Government of India from time to time;
and
(iii) Creation of charge on overseas assets in
favour of domestic lender
Extant Position: Creation of charge on the overseas assets of JV /
WOS / SDS of an Indian party in favour of a domestic lender to the
Indian party or to its group / sister / associate concern or to any of its
overseas JV / WOS / SDS requires prior approval of the Reserve
Bank.
Changed Position : It has been decided that the designated AD bank
may permit creation of charge (by way of hypothecation, mortgage, or
otherwise) on the overseas assets (excluding the shares) of the JV /
WOS / SDS (irrespective of the level) of an Indian party in favour of a
domestic lender for securing the funded and / or non-funded facility to
be availed of by the Indian party or by its group companies / sister
concerns / associate concerns or by any of its overseas JV / WOS /
SDS (irrespective of the level) under the automatic route subject to the
following:
a. The Indian party is complying with the provisions under
Regulation 6 (and Regulation 7, if applicable) of the
Notification ibid for undertaking financial commitment;
b. Compliance to the provisions under Regulation 18A(2) of the
Notification ibid;
c. The overseas assets, on which charge is being created, are
not securitized;
d. The period of charge, if not specified upfront, may be co-
terminus with the period of end use (like loan or other facility)
for which charge has been created;
e. The loan / facility availed by the JV / WOS / SDS from the
domestic lender shall be utilized only for its core business
activities overseas and not for investing back in India in any
manner whatsoever;
f. A certificate from the Statutory Auditors’ of the Indian party, to
the effect that the loan / facility availed by the JV / WOS / SDS
has not been utilized for direct or indirect investments in India,
is to be obtained and kept by the designated AD;
g. The invocation of charge resulting into the domestic
lender acquiring the overseas assets shall require prior
approval of the Reserve Bank;
Contributed by CA. Sudha G. Bhushan
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