Regulation 2 - Definitions - Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017

2. Definitions In these Regulations, unless the context requires otherwise,- (i) Act means the Foreign Exchange Management Act, 1999 (42 of 1999); (ii) Asset Reconstruction Company (ARC) means a company registered with the Reserve Bank under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act); (iii) Authorised bank will have the same meaning as assigned to it in Foreign Exchange Management (Deposit) Regulations, 2016; (iv) Authorised dealer includes a person authorised under sub-section (1) of section 10 of the Act; (v) Capital Instruments means equity shares, debentures, preference shares and share warrants issued by an Indian company; Explanation: (a) Equity shares issued in accordance with the provisions of the Companies Act, 2013 shall include equity shares that have been partly paid. The expression Debentures means fully, compulsorily and mandatorily convertible debentures. Preference shares means fully, compulsorily and mandatorily convertible preference shares. Share Warrants are those issued by an Indian Company in accordance with the Regulations issued by the Securities and Exchange Board of India. Capital instruments can contain an optionality clause subject to a minimum lock-in period of one year or as prescribed for the specific sector, whichever is higher, but without any option or right to exit at an assured price. (b) Partly paid shares that have been issued to a person resident outside India shall be fully called-up within twelve months of such issue. Twenty five percent of the total consideration amount (including share premium, if any), shall be received upfront. (c) In case of share warrants at least twenty five percent of the consideration shall be received upfront and the balance amount within eighteen months of issuance of share warrants. (d) Capital instruments shall include non-convertible/ optionally convertible/ partially convertible preference shares issued as on and up to April 30, 2007 and optionally convertible/ partially convertible debentures issued up to June 7, 2007 till their original maturity. Non-convertible/ optionally convertible/ partially convertible preference shares issued after April 30, 2007 shall be treated as debt and shall conform to External Commercial Borrowings guidelines regulated under Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000. (vi) Convertible Note means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument; (vii) Domestic Custodian means a custodian of securities, an Indian Depository, a Depository Participant, or a bank and having permission from Securities and Exchange Board of India to provide services as custodian; (viii) Domestic Depository means a custodian of securities registered with the Securities and Exchange Board of India and authorised by the issuing entity to issue Indian Depository Receipts; (ix) Depository Receipt means a foreign currency denominated instrument, whether listed on an international exchange or not, issued by a foreign depository in a permissible jurisdiction on the back of eligible securities issued or transferred to that foreign depository and deposited with a domestic custodian and includes global depository receipt as defined in the Companies Act, 2013; (x) Employees stock option (ESOP) means an ESOP as defined under the Companies Act, 2013 and issued under the regulations issued by the Securities and Exchange Board of India; (xi) Escrow account means an Escrow account maintained in accordance with Foreign Exchange Management (Deposit) Regulations, 2016; (xii) FDI linked performance conditions means the sector specific conditions stipulated in regulation 16 of these Regulations for companies receiving foreign investment; (xiii) Foreign Venture Capital Investor (FVCI) means an investor incorporated and established outside India and registered with Securities and Exchange Board of India under Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000; (xiv) Foreign Central Bank means an institution/ organisation/ body corporate established in a Country outside India and entrusted with the responsibility of carrying out central bank functions under the law for the time being in force in that country; (xv) FCNR (B) account means a Foreign Currency Non-Resident (Bank) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; (xvi) Foreign Currency Convertible Bond (FCCB) means a bond issued under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993; (xvii) Foreign Direct Investment (FDI) means investment through capital instruments by a person resident outside India in an unlisted Indian company; or in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company; Note: In case an existing investment by a person resident outside India in capital instruments of a listed Indian company falls to a level below 10 percent of the post issue paid-up equity capital on a fully diluted basis, the investment shall continue to be treated as FDI. Explanation: Fully diluted basis means the total number of shares that would be outstanding if all possible sources of conversion are exercised (xviii) Foreign Investment means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP; Explanation: If a declaration is made by persons as per the provisions of the Companies Act, 2013 about a beneficial interest being held by a person resident outside India, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment. Note: A person resident outside India may hold foreign investment either as Foreign Direct Investment or as Foreign Portfolio Investment in any particular Indian company. (xix) Foreign Portfolio Investment means any investment made by a person resident outside India through capital instruments where such investment is less than 10 percent of the post issue paid-up share capital on a fully diluted basis of a listed Indian company or less than 10 percent of the paid up value of each series of capital instruments of a listed Indian company; Explanation: The 10 percent limit for foreign portfolio investors shall be applicable to each foreign portfolio investor or an investor group as referred in Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 (xx) Foreign Portfolio Investor (FPI) means a person registered in accordance with the provisions of Securities Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014. Explanation: Any Foreign Institutional Investor (FII) or a sub account registered under the Securities Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 and holding a valid certificate of registration from Securities and Exchange Board of India shall be deemed to be a FPI till the expiry of the block of three years from the enactment of the Securities Exchange Board of India (FPI) Regulations, 2014. (xxi) Government approval means approval from the erstwhile Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Government of India and/ or the erstwhile Foreign Investment Promotion Board (FIPB) and/ or any of the ministry/ department of the Government of India as the case may be; (xxii) Group company means two or more enterprises which, directly or indirectly, are in a position to (a) exercise 26 percent, or more of voting rights in other enterprise; or (b) appoint more than 50 percent, of members of board of directors in the other enterprise; (xxiii) Indian company means a company incorporated in India and registered under the Companies Act, 2013; (xxiv) Indian Depository Receipts (IDRs) means any instrument in the form of a depository receipt created by a Domestic Depository in India and authorised by a company incorporated outside India making an issue of such depository receipts; (xxv) Indian entity shall mean an Indian company or an LLP; (xxvi) Investing company means an Indian company holding only investments in other Indian company/ies directly or indirectly, other than for trading of such holdings/ securities; (xxvii) Investment means to subscribe, acquire, hold or transfer any security or unit issued by a person resident in India; Explanation: (a) This will include to acquire, hold or transfer depository receipts issued outside India, the underlying of which is a security issued by a person resident in India. (b) For the purpose of LLP, investment shall mean capital contribution or acquisition/ transfer of profit shares. (xxviii) Investment on repatriation basis means an investment, the sale/ maturity proceeds of which are, net of taxes, eligible to be repatriated out of India, and the expression Investment on nonrepatriation basis , shall be construed accordingly; (xxix) Investment Vehicle means an entity registered and regulated under relevant regulations framed by Securities and Exchange Board of India or any other authority designated for the purpose and shall include Real Estate Investment Trusts (REITs) governed by the Securities and Exchange Board of India (REITs) Regulations, 2014, Infrastructure Investment Trusts (InvIts) governed by the Securities and Exchange Board of India (InvIts) Regulations, 2014 and Alternative Investment Funds (AIFs) governed by the Securities and Exchange Board of India (AIFs) Regulations, 2012; (xxx) Limited Liability Partnership (LLP) means a partnership formed and registered under the Limited Liability Partnership Act, 2008; (xxxi) Listed Indian Company means an Indian company which has any of its capital instruments listed on a recognized stock exchange in India and the expression Unlisted Indian Company shall be construed accordingly; (xxxii) Manufacture , with its grammatical variations, means a change in a non-living physical object or article or thing, (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. (xxxiii) NRE account means a Non-Resident External account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; (xxxiv) NRO account means a Non-Resident Ordinary account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; (xxxv) Non-Resident Indian (NRI) means an individual resident outside India who is citizen of India; (xxxvi) Overseas Citizen of India (OCI) means an individual resident outside India who is registered as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955; (xxxvii) Resident Indian citizen means an individual who is a person resident in India and is citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; (xxxviii) 'Secretariat for Industrial Assistance' means Secretariat for Industrial Assistance in the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India; (xxxix) Sectoral cap means the maximum investment including both foreign investment on a repatriation basis by persons resident outside India in capital instruments of a company or the capital of an LLP, as the case may be, and indirect foreign investment, unless provided otherwise. This shall be the composite limit for the Indian investee entity; Explanation: (a) FCCBs and DRs having underlying of instruments being in the nature of debt shall not be included in the sectoral cap. (b) Any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned under the sectoral cap. (xl) 'SNRR account' means a Special Non-Resident Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; (xli) Startup means an entity which complies with the conditions laid down in Notification No. G.S.R 180(E) dated February 17, 2016 issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India; (xlii) Startup company means a private company incorporated under the Companies Act, 2013 and recognised as such in accordance with notification number G.S.R. 180(E) dated February 17, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India and complies with the conditions laid down by it; (xliii) Sweat equity shares means sweat equity shares as defined under the Companies Act, 2013; (xliv) Transferable Development Rights (TDR)' shall have the same meaning as assigned to it in the Regulations made under sub-section (2) of section 6 of the Act; (xlv) Unit means beneficial interest of an investor in an investment vehicle. (xlvi) 'Venture Capital Fund' means a fund established in the form of a trust, a company including a body corporate and registered under the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996; 1 [ (xlvii) Municipal Bonds mean debt instruments issued by municipalities constituted under Article 243Q of the Constitution of India. ] 2 [ (xlviii) ] The words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act. ********* Notes 1. Inserted vide NOTIFICATION No. FEMA 20 (R) (4) /2019-RB dated 18-04-2019 2. Re-numbered vide NOTIFICATION No. FEMA 20 (R) (4) /2019-RB dated 18-04-2019 before it was read as (xlvii)