TMI BlogCONSOLIDATED FDI POLICYX X X X Extracts X X X X X X X X Extracts X X X X ..... as distinguished from portfolio investment, has the connotation of establishing a 'lasting interest' in an enterprise that is resident in an economy other than that of the investor. 1.1.2 The Government has put in place a policy framework on Foreign Direct Investment, which is transparent, predictable and easily comprehensible. This framework is embodied in the Circular on Consolidated FDI Policy, which may be updated every year, to capture and keep pace with the regulatory changes, effected in the interregnum. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce Industry, Government of India makes policy pronouncements on FDI through Press Notes/Press Releases which are notified by the Reserve Bank of India as amendments to the Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 ( notification No.FEMA 20/2000-RB dated May 3, 2000 ). These notifications take effect from the date of issue of Press Notes/Press Releases, unless specified otherwise therein. In case of any conflict, the relevant FEMA Notification will prevail. The procedural instructions are issued by the Reserve Bank of India v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6 of FEMA . 2.1.7 A company is considered as "Controlled" by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company . 2.1.8 'Depository Receipt' (DR) means a negotiable security issued outside India by a Depository bank, on behalf of an Indian company, which represent the local Rupee denominated equity shares of the company held as deposit by a Custodian bank in India. DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg, etc. DRs listed and traded in the US markets are known as American Depository Receipts (ADRs) and those listed and traded anywhere/elsewhere are known as Global Depository Receipts (GDRs). 2.1.9 'Erstwhile Overseas Corporate Body' (OCB) means a company, partnership firm, society and other corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations 2.1.16 'Government route' means that investment in the capital of resident entities by non-resident entities can be made only with the prior approval of Government (FIPB, Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy Promotion, as the case may be). 2.1.17 'Holding Company' would have the same meaning as defined in Companies Act 1956 . 2.1.18 'Indian Company' means a company incorporated in India under the Companies Act, 1956 . 2.1.19 'Indian Venture Capital Undertaking' (IVCU) means an Indian company:─ ( i ) whose shares are not listed in a recognised stock exchange in India; ( ii ) which is engaged in the business of providing services, production or manufacture of articles or things, but does not include such activities or sectors which are specified in the negative list by the SEBI, with approval of Central Government, by notification in the Official Gazette in this behalf. 2.1.20 'Investing Company' means an Indian Company holding only investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n either case- ( a ) for or on taking up employment outside India, or ( b ) for carrying on outside India a business or vocation outside India, or ( c ) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) A person who has come to or stays in India, in either case, otherwise than- ( a ) for or on taking up employment in India; or ( b ) for carrying on in India a business or vocation in India, or ( c ) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; ( ii ) any person or body corporate registered or incorporated in India, ( iii ) an office, branch or agency in India owned or controlled by a person resident outside India, ( iv ) an office, branch or agency outside India owned or controlled by a person resident in India. 2.1.30 'Person resident outside India' means a person who is not a Person resident in India. 2.1.31 'Portfolio Investment Scheme' means the Portfolio Investment Scheme referred to in Schedules 2 3 of FEM (Transfer or Issue of Security by a Person Resident Outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited for foreign investment. 3.1.2 NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis, subject to the condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels. 3.1.3 OCBs have been derecognized as a class of investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under FDI Policy as incorporated non-resident entities, with the prior approval of Government of India if the investment is through Government route; and with the prior approval of RBI if the investment is through Automatic route. 3.1.4 ( i ) An FII may invest in the capital of an Indian Company under the Portfolio Investment Scheme which limits the individual holding of an FII to 10% of the capital of the company and the aggregate limit for FII investment to 24% of the capital of the company. This aggregate limit of 24% can be increased to the sectoral cap/statutory ceiling, as applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000, as amended from time to time, as well as the terms and conditions stipulated therein. 3.1.7 Qualified Foreign Investors (QFls) investment in equity shares: 3.1.7.1 QFIs are permitted to invest through SEBI registered Depository Participants (DPs) only in equity shares of listed Indian companies through recognized brokers on recognized stock exchanges in India as well as in equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations. QFIs are also permitted to acquire equity shares by way of right shares, bonus shares or equity shares on account of stock split/consolidation or equity shares on account of amalgamation, demerger or such corporate actions subject to the prescribed investment limits. QFIs are allowed to sell the equity shares so acquired subject to the relevant SEBI guidelines. 3.1.7.2 The individual and aggregate investment limits for the QFIs shall be 5% and 10% respectively of the paid up capital of an Indian company. These limits shall be over and above the FII and NRI investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in any agricultural/plantation activity or real estate business or print media. 3.2.3 FDI in Venture Capital Fund (VCF) : FVCIs are allowed to invest in Indian Venture Capital Undertakings (IVCUs)/Venture Capital Funds (VCFs)/other companies, as stated in paragraph 3.1.6 of this Circular. If a domestic VCF is set up as a trust, a person resident outside India (non-resident entity/individual including an NRI) can invest in such domestic VCF subject to approval of the FIPB. However, if a domestic VCF is set-up as an incorporated company under the Companies Act, 1956 , then a person resident outside India (non-resident entity/individual including an NRI) can invest in such domestic VCF under the automatic route of FDI Scheme, subject to the pricing guidelines, reporting requirements, mode of payment, minimum capitalization norms, etc. 3.2.4 FDI in Trusts: FDI in Trusts other than VCF is not permitted. 3.2.5 FDI in Limited Liability Partnerships (LLPs) : FDI in LLPs is permitted, subject to the following conditions: ( a ) FDI will be allowed, through the Government approval route, only in LLPs operating in sectors/activities where 100% FDI is allowed, through the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STRUMENTS. 3.3.1 Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. The price/conversion formula of convertible capital instruments should be determined upfront at the time of issue of the instruments. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with the extant FEMA regulations [the DCF method of valuation for the unlisted companies and valuation in terms of SEBI (ICDR) Regulations, for the listed companies]. 3.3.2 Other types of Preference shares/Debentures i.e. non-convertible, optionally convertible or partially convertible for issue of which funds have been received on or after May 1, 2007 are considered as debt. Accordingly all norms applicable for ECBs relating to eligible borrowers, recognized lenders, amount and maturity, end-use stipulations, etc. shall apply. Since these instruments would be denominated in rupees, the rupee interest rate will be based on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket. There is no monetary limit up to which an Indian company can raise ADRs/GDRs. ( v ) The ADR/GDR proceeds can be utilized for first stage acquisition of shares in the disinvestment process of Public Sector Undertakings/Enterprises and also in the mandatory second stage offer to the public in view of their strategic importance. ( vi ) Voting rights on shares issued under the Scheme shall be as per the provisions of Companies Act, 1956 and in a manner in which restrictions on voting rights imposed on ADR/GDR issues shall be consistent with the Company Law provisions. Voting rights in the case of banking companies will continue to be in terms of the provisions of the Banking Regulation Act, 1949 and the instructions issued by the Reserve Bank from time to time, as applicable to all shareholders exercising voting rights. ( vii ) Erstwhile OCBs who are not eligible to invest in India and entities prohibited from buying, selling or dealing in securities by SEBI will not be eligible to subscribe to ADRs/GDRs issued by Indian companies. ( viii ) The pricing of ADR/GDR issues should be made at a price determined under the provisions of the Scheme of issue of Foreign Currency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be reckoned as a contravention under FEMA and would attract penal provisions. In exceptional cases, refund of the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the RBI, on the merits of the case. 3.4.2 Issue price of shares - Price of shares issued to persons resident outside India under the FDI Policy, shall not be less than - a. the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India; b. the fair valuation of shares done by a SEBI registered Category - I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India ; and c. the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment. However, where non-residents (including NRIs) are making investments in an Indian company in compliance with the provisions of the Companies Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company. ( h ) The Form FC-TRS should be submitted to the AD Category-I Bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor/transferee, resident in India. ( ii ) The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a Know Your Customer (KYC) check by the remittance receiving AD Category-I bank at the time of receipt of funds. In case, the remittance receiving AD Category-I bank is different from the AD Category-I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category-I bank carrying out the transaction along with the Form FC-TRS. ( iii ) Escrow: AD Category-I banks have been given general permission to open Escrow account and Special account of non-resident corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications: ( a ) The proposed transferee (donee) is eligible to hold such capital instruments under Schedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May 3, 2000 , as amended from time to time. ( b ) The gift does not exceed 5 per cent of the paid-up capital of the Indian company/each series of debentures/each mutual fund scheme. ( c ) The applicable sectoral cap limit in the Indian company is not breached. ( d ) The transferor (donor) and the proposed transferee (donee) are close relatives as defined in Section 6 of the Companies Act, 1956 , as amended from time to time. The current list is reproduced in Annex-4 . ( e ) The value of capital instruments to be transferred together with any capital instruments already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 50,000 during the financial year. ( f ) Such other conditions as stipulated by Reserve Bank in public interest from time to time. ( iii ) Transfer of shares from NRI to non-resident . 3.4.5.2 In the following cases, approval of RBI is not required: A. Transfer of shares from a Non Resident to Resident un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany as well as transferor and transferee entities and such NOCs are filed along with the form FC-TRS with the AD bank; and ( b ) The FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization, pricing, etc.), reporting requirements, documentation etc., are complied with. 3.4.6 Conversion of ECB/Lumpsum Fee/Royalty etc. into Equity ( i ) Indian companies have been granted general permission for conversion of External Commercial Borrowings (ECB) (excluding those deemed as ECB) in convertible foreign currency into equity shares/fully compulsorily and mandatorily convertible preference shares, subject to the following conditions and reporting requirements. ( a ) The activity of the company is covered under the Automatic Route for FDI or the company has obtained Government approval for foreign equity in the company; ( b ) The foreign equity after conversion of ECB into equity is within the sectoral cap, if any; ( c ) Pricing of shares is as per the provision of para 3.4.2 above; ( d ) Compliance with the requirements prescribed under any other statute and regulation in force; and ( e ) The conversion faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to sectoral cap, if any. However, such issue of bonus/rights shares has to be in accordance with other laws/statutes like the Companies Act, 1956 , SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (in case of listed companies), etc. The offer on right basis to the persons resident outside India shall be: ( a ) in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company; ( b ) in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders. 3.5.2 Prior permission of RBI for Rights issue to erstwhile OCBs- OCBs have been de- recognised as a class of investors from September 16, 2003. Therefore companies desiring to issue rights share to such erstwhile OCBs will have to take specific prior permission from RBI. As such, entitlement of rights share is not automatically available to erstwhile OCBs. However bonus shares can be issued to erstwhile OCBs without the approval of RBI. 3.5.3 Additional allocation of rights share by residents to non-residents - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zens of Bangladesh with the prior approval of the FIPB. ( iii ) The issuing company is required to report (plain paper reporting) the details of granting of stock options under the scheme to non-resident employees to the Regional Office concerned of the Reserve Bank and thereafter the details of issue of shares subsequent to the exercise of such stock options within 30 days from the date of issue of shares in Form FC-GPR. 3.5.6 Share Swap : In cases of investment by way of swap of shares, irrespective of the amount, valuation of the shares will have to be made by a Category I Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country. Approval of the Government conveyed through Foreign Investment Promotion Board (FIPB) will also be a prerequisite for investment by swap of shares. 3.5.7 Pledge of Shares: (A) A person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowings, may pledge the shares of the borrowing company or that of its associate resident companies for the purpose of securing the ECB raised by the borrowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not result in any capital inflow into India; ( iv ) in case of invocation of pledge, transfer should be in accordance with the FDI policy in vogue at the time of creation of pledge; and ( v ) submission of a declaration/annual certificate from a Chartered Accountant/Certified Public Accountant of the non-resident borrower that the loan proceeds will be/have been utilized for the declared purpose. 3.6 ENTRY ROUTES FOR INVESTMENT: 3.6.1 Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route, are considered by FIPB. 3.6.2 Guidelines for establishment of Indian companies/transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S ON INVESTMENT 3.8.1 Investments by non-residents can be permitted in the capital of a resident entity in certain sectors/activity with entry conditions. Such conditions may include norms for minimum capitalization, lock-in period, etc. The entry conditions in various sectors/activities are detailed in Chapter 6 of this circular. 3.9 OTHER CONDITIONS ON INVESTMENT BESIDES ENTRY CONDITIONS 3.9.1 Besides the entry conditions on foreign investment, the investment/investors are required to comply with all relevant sectoral laws, regulations, rules, security conditions, and state/local laws/regulations. 3.10 FOREIGN INVESTMENT INTO/DOWNSTREAM INVESTMENT BY INDIAN COMPANIES 3.10.1 The Guidelines for calculation of total foreign investment, both direct and indirect in an Indian company, at every stage of investment, including downstream investment, have been detailed in Paragraph 4.1. 3.10.2 For the purpose of this chapter, ( i ) 'Downstream investment' means indirect foreign investment, by one Indian company, into another Indian company, by way of subscription or acquisition, in terms of Paragraph 4.1. Paragraph 4.1.3 provides the guidelines for calculation of indir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans, shall not count towards indirect foreign investment. However, their 'strategic downstream investment' shall count towards indirect foreign investment. For this purpose, 'strategic downstream investments' would mean investment by these banking companies in their subsidiaries, joint ventures and associates. 3.10.4.2 Downstream investments by Indian companies will be subject to the following conditions: ( i ) Such a company is to notify SIA, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme); ( ii ) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors as also a shareholders Agreement, if any; ( iii ) issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines; ( iv ) For the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the investing company into the subject Indian Company would be considered as indirect foreign investment, provided that, as an exception, the indirect foreign investment in only the 100% owned subsidiaries of operating-cum-investing/investing companies, will be limited to the foreign investment in the operating-cum-investing/investing company. This exception is made since the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. This exception, however, is strictly for those cases where the entire capital of the downstream subsidiary is owned by the holding company. Illustration To illustrate, if the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation: (A) where Company Y has foreign investment less than 50%- Company X would not be taken as having any indirect foreign investment through Company Y. (B) where Company Y has foreign investment of say 75% and: (I) invests 26% in Company X, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956 . The term 'largest Indian shareholder', used in this clause, will include any or a combination of the following: (I) In the case of an individual shareholder, ( aa ) The individual shareholder, ( bb ) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956 . ( cc ) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (II) In the case of an Indian company, ( aa ) The Indian company ( bb ) A group of Indian companies under the same management and ownership control. (B) For the purpose of this Clause, "Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/HUF , either singly or in combination holding at least 51% of the shares. (C) Provided that, in case of a combination of all or any of the entities mentioned in Sub- Clauses (I) and (II) of clause 4.1.3(v)(d)(A) above, each of the parties shall have entered into a legally binding agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to it by the FIPB/the Minister of Finance (in-charge of FIPB). 5.3 CASES WHICH DO NOT REQUIRE FRESH APPROVAL 5.3.1 Companies may not require fresh prior approval of the Government i.e. Minister in-charge of FIPB/CCEA for bringing in additional foreign investment into the same entity, in the following cases: ( i ) Entities the activities of which had earlier required prior approval of FIPB/CCFI/CCEA and which had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such activities/sectors have been placed under automatic route; ( ii ) Entities the activities of which had sectoral caps earlier and which had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such caps were removed/increased and the activities placed under the automatic route; provided that such additional investment alongwith the initial/original investment does not exceed the sectoral caps; and ( iii ) Additional foreign investment into the same entity where prior approval of FIPB/CCFI/CCEA had been obtained earlier for the initial/original foreign investment due to requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions; ( b ) Development and production of Seeds and planting material; ( c ) Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, under controlled conditions; and ( d ) services related to agro and allied sectors Note: Besides the above, FDI is not allowed in any other agricultural sector/activity 100% Automatic 6.2.1.1 Other conditions: I. For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: ( i ) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. ( ii ) Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992 . ( iii ) The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. ( iv ) Undertaking of business activities involving the use of genetically engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt concerned in case of any future land use change. 6.2.3 MINING 6.2.3.1 Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development Regulation) Act, 1957. 100% Automatic 6.2.3.2 Coal and Lignite (1) Coal Lignite mining for captive consumption by power projects, iron steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973 100% Automatic (2) Setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 100% Automatic 6.2.3.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce 'Synthetic Rutile or Titanium Slag as an intermediate value added product. (2) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled. 6.2.4 Petroleum Natural Gas 6.2.4.1 Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R D base. ( vi ) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. ( vii ) There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the Government. ( viii ) The Ministry of Defence is not in a position to give purchase guarantee for products to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of these provisions may lead to cancellation of the licence. ( xv ) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement. SERVICES SECTOR INFORMATION SERVICES 6.2.7 Broadcasting 6.2.7.1 Broadcasting Carriage Services 6.2.7.1.1 (1) Teleports (setting up of up-linking HUBs/Teleports); (2) Direct to Home (DTH); (3) Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability); (4) Mobile TV; (5) Headend-in-the Sky Broadcasting Service (HITS) 74% Automatic up to 49% Government route beyond 49% and up to 74% 6.2.7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)) 49% Automatic 6.2.7.2 Broadcasting Content Services 6.2.7.2.1 Terrestrial Broadcasting FM (FM Radio), subject to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director/Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained. It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors. ( iv ) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more that 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years. Permission vis- -vis Security Clearance ( v ) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn the permission granted is liable to be terminated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, however, will be confined only to security related aspects, including screening of objectionable content. ( xiv ) The inspection will ordinarily be carried out by the government of India, Ministry of Information Broadcasting or its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection. ( xv ) The company shall submit such information with respect to its services as may by required by the Government or its authorized representative, in the format as may be required, from time to time. ( xvi ) The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required. ( xvii ) The service providers should familiarize/train designated officials or the Government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems. National Security Conditions ( xviii ) It shall be open to the licenso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign newspapers 100% Government 6.2.8.4.1 Other Conditions: ( i ) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. ( ii ) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. ( iii ) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information Broadcasting on 31.3.2006, as amended from time to time. 6.2.9 Civil Aviation 6.2.9.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: ( i ) "Airport" means a landing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfield projects 100% Automatic ( b ) Existing projects 100% Automatic up to 74% Government route beyond 74% 6.2.9.3 Air Transport Services (1) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline 49% FDI (100% for NRIs) Automatic (2) Non-Scheduled Air Transport Service 74% FDI (100% for NRIs) Automatic up to 49% Government route beyond 49% and up to 74% (3) Helicopter services/seaplane services requiring DGCA approval 100% Automatic 6.2.9.3.1 Other conditions: ( a ) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. ( b ) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services, as per the limits and entry routes mentioned above. ( c ) Foreign airlines are also, henceforth, allowed to invest, in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) 100% Automatic 6.2.11.2 Investment will be subject to the following conditions: (1) Minimum area to be developed under each project would be as under: ( i ) In case of development of serviced housing plots, a minimum land area of 10 hectares ( ii ) In case of construction-development projects, a minimum built-up area of 50,000 sq.mts ( iii )In case of a combination project, any one of the above two conditions would suffice (2) Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company. (3) Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each installment/tranche o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity. ( ii ) "Infrastructure" refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. ( iii ) "Common Facilities" refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. ( iv ) "Allocable area" in the Industrial Park means- ( a ) in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities. ( b ) in the case of built up space- the floor area and built up space utilized for providing common facilities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. In any case, the 'Indian' shareholding will not be less than 26 percent. ( iii ) FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. ( iv ) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. ( v ) FDI shall be subject to laws of India and not the laws of the foreign country/countries. (2) Security Conditions: ( i ) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. ( ii ) Details of infrastructure/network diag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Licensor (DOT) in consultation with the Ministry of Home Affairs. ( xii ) Under no circumstances, should any RA to the Suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time. ( xiii ) The licensee company is not allowed to use remote access facility formonitoring of content. ( xiv ) Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes. ( xv ) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. ( xvi ) The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location. ( xvii ) The telecom service providers should f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public in 5 years, if these companies are listed in other parts of the world. 100% Automatic up to 49% Government route beyond 49% 6.2.16 TRADING 6.2.16.1 (i) Cash Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) 100% Automatic 6.2.16.1.1 Definition : Cash Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce. 6.2.16.1.2 Guidelines for Cash Carry Wholesale Trading/Wholesale Trading (WT): ( a ) For undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t existing restrictions on FDI in domestic trading would be applicable to e-commerce as well. 6.2.16.3 Test marketing of such items for which a company has approval for manufacture, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing. 100% Government 6.2.16.4 Single Brand product retail trading 100% Government (1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand product retail trading would be subject to the following conditions: ( a ) Products to be sold should be of a 'Single Brand' only. ( b ) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval of the Government. (4) Applications would be processed in the Department of Industrial Policy Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval. 6.2.16.5 Multi Brand Retail Trading 51% Government (1) FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions: ( i ) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded. ( ii ) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million. ( iii ) At least 50% of total FDI brought in shall be invested in 'backend infrastructure' within three years of the first tranche of FDI, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s outlets may be set up in those States/Union Territories which have agreed, or agree in future, to allow FDI in MBRT under this policy. The list of States/Union Territories which have conveyed their agreement is at (2) below. Such agreement, in future, to permit establishment of retail outlets under this policy, would be conveyed to the Government of India through the Department of Industrial Policy Promotion and additions would be made to the list at (2) below accordingly. The establishment of the retail sales outlets will be in compliance of applicable State/Union Territory laws/regulations, such as the Shops and Establishments Act etc. ( ix ) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading. ( x ) Applications would be processed in the Department of Industrial Policy Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval. (2) LIST OF STATES/UNION TERRITORIES AS MENTIONED IN PARAGRAPH 6.2.16.5(1)(viii) 1. Andhra Pradesh 2. Assam 3. Delhi 4. Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources will be allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank. (3) The stipulations as above will be applicable to all investments in existing private sector banks also. (4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs and NRIs will be as follows: ( i ) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. ( a ) Thus, the FII investment limit will continue to be within 49 per cent of the total paid-up capital. ( b ) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes consistent with para (i) (b) above. ( e ) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks. ( f ) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI ( g ) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI. ( iii ) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals. 6.2.17.3 Banking- Public Sector 6.2.17.3.1 Banking- Public Sector subject to Banking Companies (Acquisition Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks. 20% (FDI and Portfolio Investment) Government 6.2.17.4 Commodity Exchanges 6.2.17.4.1 1 Futures trading in commod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. (4) Such FII investment would be permitted subject to the conditions that: ( a ) No single entity should directly or indirectly hold more than 10% equity. ( b ) Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement; and ( c ) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. 6.2.17.6 Infrastructure Company in the Securities Market 6.2.17.6.1 Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% (FDI FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital ] Government (For FDI) 6.2.17.6.2 Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below. ( vi ) Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company. Note: The following activities would be classified as Non-Fund Based activities: ( a ) Investment Advisory Services ( b ) Financial Consultancy ( c ) Forex Broking ( d ) Money Changing Business ( e ) Credit Rating Agencies ( vii ) This will be subject to compliance with the guidelines of RBI. Note: ( i ) Credit Card business includes issuance, sales, marketing design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc. ( i i) Leasing Finance covers only financial leases and not operating leases. (2) The NBFC will have to comply with the guidelines of the relevant regulator/s, as applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Companies Act, 1956 . AD Category-I banks shall allow the remittance provided the applicant submits: a. No objection or Tax clearance certificate from Income Tax Department for the remittance. b. Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for. c. Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, 1956 . d. In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance. 7.1.2 Repatriation of Dividend: Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 , as amended from time to time. 7.1.3 Repatriation of Interest: Interest on fully, mandatorily compulsorily convertible de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above mentioned certificate can be given by a practicing company secretary. ( b ) A certificate from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India. ( c ) The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD Category-I bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated. ( d ) Annual return on Foreign Liabilities and Assets (Annex 7) should be filed on an annual basis by the Indian company, directly with the Reserve Bank. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information submitted by 31st July will pertain to all the investments made in the previous years up to March 31). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closing of the issue. The company should also furnish a quarterly return in the Form enclosed as Annex 10, to the Reserve Bank within 15 days of the close of the calendar quarter. The quarterly return has to be submitted till the entire amount raised through ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant Reserve Bank guidelines. 7.3 ADHERENCE TO GUIDELINES/ORDERS AND CONSEQUENCES OF VIOLATION FDI is a capital account transaction and thus any violation of FDI regulations are covered by the penal provisions of the FEMA. Reserve Bank of India administers the FEMA and Directorate of Enforcement under the Ministry of Finance is the authority for the enforcement of FEMA. The Directorate takes up investigation in any contravention of FEMA. 7.3.1 Penalties ( i ) If a person violates/contravenes any FDI Regulations, by way of breach/non-adherence/non-compliance/ contravention of any rule, regulation, notification, press note, press release, circular, direction or order issued in exercise of the powers under FEMA or contravenes any conditions subject to which an authorization is issued by the Government of India/FIPB/Reserve Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any provisions of the FEMA. The Compounding Authorities are authorized to compound the amount involved in the contravention to the Act made by the person. No contravention shall be compounded unless the amount involved in such contravention is quantifiable. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerns as expeditiously and not later than 180 days from the date of application made to the Compounding Authority. Compounding Authority shall issue order specifying the provisions of the Act or of the rules, directions, requisitions or orders made there under in respect of which contravention has taken place along with details of the alleged contraventions. Annex - 1 FC-GPR (To be filed by the company through its Authorised Dealer Category - I bank with the Regional Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nature of issue Date of issue Number of shares/ convertible debentures/others 01 IPO/FPO 02 Preferential allotment/private placement 03 Rights 04 Bonus 05 Conversion of ECB 06 Conversion of royalty (including lump sum payments) 07 Conversion against import of capital goods by units in SEZ 08 ESOPs 09 Share Swap 10 Others (please specify) Total ( b ) Type of security issued No. Nature of security Number Maturity Face value Premium Issue Price per share Amount of inflow* 01 Equity 02 Compulsorily Convertible Debentures 03 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 Foreign Trusts 06 Private Equity Funds 07 Pension/ Provident Funds 08 Sovereign Wealth Funds 09 Partnership/ Proprietorship Firms 10 Financial Institutions 11 NRIs/PIO 12 Others (please specify) Sub Total ( b ) Resident Total DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE INDIAN COMPANY: (Delete whichever is not applicable and authenticate) We hereby declare that: 1. We comply with the procedure for issue of shares/convertible debentures as laid down unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. R . . . R (Signature of the Applicant)* : ____________________________________ (Name in Block Letters) : _______________________________________ (Designation of the signatory) : ____________________________________ Place: Date: (* To be signed by Managing Director/Director/Secretary of the Company) CERTIFICATE TO BE FILED BY THE COMPANY SECRETARY 5 OF THE INDIAN COMPANY ACCEPTING THE INVESTMENT: (As per Para 9 (1) (B) (i) of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000 ) In respect of the abovementioned details, we certify the following : 1. All the requirements of the Companies Act, 1956 have been complied with. 2. Terms and conditions of the Government approval, if any, have been complied with. 3. The company is eligible to issue shares/convertible debentures/others under these Regulations. 4. The company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delines, as applicable, provided the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date pf purchase or sale of shares, ( b ) not listed on a recognized stock exchange in India, shall not be less than the fair value to be determined by a SEBI registered Category I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method. The price per share arrived at should be certified by a SEBI registered Category I Merchant Banker or a Chartered Accountant. 2.3 Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI, FII) to Resident Sale of shares by a non-resident to resident shall be in accordance with Regulation 10 B (2) of Notification No. FEMA 20/2000-RB dated May 3, 2000 which shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident as given at para 2.2 above. 3. Responsibilities/Obligations of the parties All the parties involved in the transaction would have the responsibility to ensure that the relevant regulations under FEMA are complied with and consequent on transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere Consent Letter has been signed by their duly appointed agent, the Power of Attorney Document executed by the seller/buyer authorizing the agent to purchase/sell shares. iii . The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India showing equity participation of residents and non-residents category-wise (i.e. NRIs/OCBs/foreign nationals/incorporated non-resident entities/FIIs) and its percentage of paid up capital obtained by the seller/buyer or their duly appointed agent from the company, where the sectoral cap/limits have been prescribed. iv. Certificate indicating fair value of shares from a Chartered Accountant. v. Copy of Broker's note if sale is made on Stock Exchange vi. Undertaking from the buyer to the effect that he is eligible to acquire shares/ convertible debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with. vii. Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as prescribed by SEBI has not been breached. 5.2. For sale of shares by a person resident outside India i. Consent L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate from the AD, the company may record the transfer in its books. 6.3 The actual inflows and outflows on account of such transfer of shares shall be reported by the AD branch in the R-returns in the normal course. 6.4 In addition the AD branch should submit two copies of the Form FC-TRS received from their constituents/customers together with the statement of inflows/outflows on account of remittances received/made in connection with transfer of shares, by way of sale, to IBD/FED/or the nodal office designated for the purpose by the bank in the enclosed proforma (which is to be prepared in MS-Excel format). The IBD/FED or the nodal office of the bank will in turn submit a consolidated monthly statement in respect of all the transactions reported by their branches together with copies of the FC-TRS Forms received from their branches to Foreign Exchange Department, Reserve Bank, Foreign Investment Division, Central Office, Mumbai in soft copy (in MS- Excel) by e-mail to fdidata@rbi.org.in 6.5 Shares purchased/sold by FIIs under private arrangement will be by debit /credit to their Special Non Resident Rupee Account. Therefore, the transaction should also be reported in Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; or ( c ) the one is related to the other in the manner indicated in Schedule IA (as under) 1. Father. 2. Mother (including step-mother). 3. Son (including stepson). 4. Son's wife. 5. Daughter (including step-daughter). 6. Father's father. 7. Father's mother. 8. Mother's mother. 9. Mother's father. 10. Son's son. 11. Son's son's wife. 12. Son's daughter. 13. Son's daughter's husband. 14. Daughter's husband. 15. Daughter's son. 16. Daughter's son's wife. 17. Daughter's daughter. 18. Daughter's daughter's husband. 19. Brother (including step-brother). 20. Brother's wife. 21. Sister (including step-sister). 22. Sister's husband. Annex - 5 Report by the Indian company receiving amount of consideration for issue of shares/Convertible debentures under the FDI Scheme (To be filed by the company through its Authorised Dealer Category-I bank, with the Regional Office of the Reserve Bank under whose jurisdiction the Registered Office of the company making the declaration is situated, not later than 30 days from the date of receipt of the amount of consideration, as specified in para 9 (I) (A) of Schedule I to Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the information furnished above is true and accurate as provided by the overseas remitting bank of the non-resident investor. (Signature of the Authorised Official of the AD bank receiving the remittance) Date : Place: Stamp : Annex - 7 RESERVE BANK OF INDIA Annual Return on Foreign Liabilities and Assets as on 31 March, 20 _ _ (Return to be filled under A.P. (DIR Series) Circular No. dated and submitted to the Department of Statistics and Information Management, RBI, Mumbai) Please read the guidelines/definitions carefully before filling-in the Return (Respondents are encouraged to submit the e-form of this return, which can be downloaded from the FEMA Forms section under the 'Forms' category on the RBI website, www.rbi.org.in) The e-form is easy-to-fill with user guidance and consistency checks. The duly filled-in e-form should be emailed. 1. Name and Address of the Indian Company: Name of the Company : ______________________________________ Address: ___________________________________________________ City: State: Pin: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Company: Item End-of Previous March End-of Latest March Number of Shares in actual Amount in Rs lakh Number of Shares in actual Amount in Rs lakh 1.0 Total Paid-up Capital (= 1.1 + 1.2) 1.1 Total Equity Participating Preference Share capital (= 1.1(a) + 1.1(b)) (a) Ordinary/Equity Share* (b) Participating Preference Share 1.2 Non-participating Preference Share# 2.0 Non-resident Holdings (at face value in Rs lakh) 2.1 Equity Participating Preference share capital (Sum of item-1 to item-12) 1 Individuals 2 Companies 3 Foreign Institutional Investors (FIIs) 4 Foreign Venture Capital Investors (FVCIs) 5 Foreign Trusts 6 Priv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Latest March 5.1 Domestic Sales 5.2 Exports 5.3 Total Sales ( = 5.1+ 5.2) 5.4 Domestic purchase 5.5 Imports 5.6 Total Purchase ( = 5.4 + 5.5) Section III (FOREIGN LIABILITIES) CARE: Information should be reported for all the reference period, i.e. Previous March and Latest March. If reporting period is different from Account Closing Period, then information should be given on internal assessment. 2. Investments made in India: ( i ) In case of listed companies, equity should be valued using share price on closing date of reference period. ( ii ) In case of unlisted companies, Own Fund of Book Value (OFBV) Method should be used. Block-2A: Investment in India under Foreign Direct Investment (FDI) scheme (10% or more Equity Participation). [Please furnish here the outstanding investments made under the FDI Scheme in India by Non-resident Direct investors, who were individually holding 10 per cent or more ordinary/equity preference shares of your company on the reporting date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 Claims on Direct Investor Note: ( i ) If the information is to be furnished for more than one country, then add separate Block with same format. ( ii ) #: Other capital, item 2.1 2.2 of Block-2B includes all other liabilities and claims at Nominal value, except equity and participating preference shares, (i.e. trade credit, loan, debentures, Non-participating share capital, other accounts receivable and payables etc.) of Indian reporting company with non-resident investors holding less than 10 per cent equity and related parties. 2C. Portfolio Investment in India Please furnish here the outstanding investments by non-resident investors, other than those made under Foreign Direct Investment Scheme in India (i.e. other than those reported in Block-2A Block-2B). Portfolio Investment Equity Participating Preference share capital holding per cent as at the end of latest year (%) Amount in Rs lakh as at the end of Previous March Latest March 1.0 Equity Securities (at Market Value) 2.0 Debt Securities ( =2.1+2.2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by your company under the ODI Scheme, in each of which your company hold 10% or more equity shares on the reference date. Name of the non-resident DIE Type of Capital Country of non-resident DIE Equity holding per cent as at the end of latest year (%) Amount in Rs lakh as at the end of Previous March Latest March 1.0 Equity Capital (=1.1-1.2) 1.1 Claims on Direct Investment Enterprise 1.2 Liabilities to Direct Investment Enterprise (Reverse investment) 2.0 Other Capital (=2.1-2.2) # 2.1 Claims on Direct Investment Enterprise 2.2 Liabilities to Direct Investment Enterprise Note: ( i ) If the information is to be furnished for more than one overseas company, then ADD separate Block 3 and Block 4A with the same format. ( ii ) #: Other capital, item 2.1 2.2 of Block-4A includes all other liabilities and claims at Nominal value, except equity shares, (i.e. trade c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consolidated information pertaining to each type of investment should be reported separately. ( ii ) If the information is to be furnish for more than one country, then use the ADD Block 5 with the same format.. Section V (Other Assets and Liabilities) Block 6: Other Investment (i.e., position with unrelated parties) This is a residual category that includes all financial outstanding liability and claims not considered as direct investment or portfolio investment. Other Investment Outstanding Liabilities with unrelated party Outstanding claims on unrelated party Amount in Rs lakh as at the end of Previous March Latest March Previous March Latest March 6.1 Trade Credit 6.2 Loans 6.3 Currency Deposits 6.4 Other receivable and payable accounts [e-Form version of this Return is available on the FEMA Forms section under the 'Forms' category on the RBI website (www.rbi.org.in). System Requirement: MS-Excel 2003 and abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Activity NIC Code No. 2 Whether FDI is allowed under Automatic route Sectoral Cap under FDI Policy 3 Nature of transaction (Strike out whichever is not applicable) Transfer from resident to non resident / Transfer from non resident to resident 4 Name of the buyer Constitution/Nature of the investing Entity Specify whether 1. Individual 2. Company 3. FII 4. FVCI 5. Foreign Trust 6. Private Equity Fund 7. Pension/ Provident Fund 8. Sovereign Wealth Fund (SWF ) 9. Partnership/Proprietorship firm 10. Financial Institution 11. NRIs/PIOs 12. others Date and Place of Incorporation Address of the buyer (including e-mail, telephone number. Fax no.) 5 Name of the seller Constitution/Nature of the disinvesting entiry Specify whether 1. Individual 2. Company 3. FII 4. FVCI 5. Foreign Trust 6. Private Equity Fund 7. Pension/ Provident Fund 8. Sovereign Wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pricing guidelines have been adhered to. Signature of the Declarant or his duly authorised agent Date: Note: In respect of the transfer of shares/compulsorily and mandatorily convertible preference shares/compulsorily and mandatorily convertible debentures/ others from resident to non resident the declaration has to be signed by the non resident buyer, and in respect of the transfer of shares/compulsorily and mandatorily convertible preference shares/compulsorily and mandatorily convertible debentures/ other from non-resident to resident the declaration has to be signed by the non-resident seller. Certificate by the AD Branch It is certified that the application is complete in all respects. The receipt/payment for the transaction are in accordance with FEMA Regulations/Reserve Bank guidelines. Signature Name and Designation of the Officer Date : Name of the AD Branch AD Branch Code SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages those assets separately from the official reserves of the monetary authorities. Know Your Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annex-9 Form DR [Refer to paragraph 4(2) of Schedule 1] Return to be filed by an Indian Company who has arranged issue of GDR/ADR Instructions : The Form should be completed and submitted to the Reserve Bank of India, Foreign Investment Division, Central Office, Mumbai. 1. Name of the Company 2. Address of Registered Office 3. Address for Correspondence 4. Existing Business (please give the NIC Code of the activity in which the company is predominantly engaged) 5. Details of the purpose for which GDRs/ADRs have been raised. If funds are deployed for overseas investment, details thereof 6. Name and address of the Depository abroad 7. Name and address of the Lead Manager/ Investment/ Merchant Banker 8. Name and address of the Sub-Managers to the issue 9. Name and address of the Indian Custodians 10. Details of FIPB approval (please quote the relevant NIC Code if the GDRs/ADRs are being issued under the Automatic Route) 11. Whether any overall sectoral cap for foreign investment is applicable. If yes, please give details 12. Details of the Equity Capital Before Issue After Issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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