TMI BlogForeign Investments in IndiaX X X X Extracts X X X X X X X X Extracts X X X X ..... lations pertaining to issue of shares by Indian companies to foreign collaborators/investors? Automatic Route FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require prior approval of the Government: i) where provisions of Press Note 1 (2005 Series) issued by the Government of India are attracted. ii) where more than 24% foreign equity is proposed to be inducted for manufacture of items reserved for the Small Scale sector. iii) FDI in sectors/activities to the extent permitted under Automatic Route does not require any prior approval either by the Government or the Reserve Bank of India. iv) The investors are only required to notify the Regional Office concerned of the Reserve Bank of India within 30 days of receipt of inward remittances and file the required documents along with form FC-GPR with that Office within 30 days of issue of shares to the non-resident investors. Government Route FDI in activities not covered under the automatic route requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB), Ministry of Finance. Application can be made in Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the Company Secretary of the company accepting investment from persons resident outside India certifying that; The company has complied with the procedure for issue of shares as laid down under the FDI scheme as indicated in the Notification No. FEMA 20/2000-RB dated 3rd May 2000 as amended from time to time The proposal is within the sectoral policy / cap permissible under the automatic route of RBI and it fulfills all the conditions laid down for investments under the Automatic approval route namely a) Non-resident entity/ies (other than individuals) to whom it has issued shares does / do not have any existing joint venture or technology transfer or trade mark agreement in India in the same field. b) The company is not investing in an SSI unit the investment limit of 24 % has been observed/ requisite approvals have been obtained. c) Shares have been issued on rights basis and the shares are issued to non-residents at a price that is not lower than that at which shares are/were issued to residents. OR d) Shares issued are bonus shares. OR e) Shares have been issued under a scheme of merger and amalgamation of two or more Indian companies or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any person resident outside India may transfer share/convertible debenture to a person resident in India by way of gift. Transfer from Resident to Non-Resident: A: Transfer by way of sale - General Permission under Regulation 10 of Notification No. FEMA 20/2000-RB dated May 3, 2000. A person resident in India may transfer to a person resident outside India any share/convertible debenture of an Indian Company whose activities fall under the Automatic Route for FDI subject to the Sectoral Limits, by way of sale subject to complying with pricing guidelines, documentation and reporting requirements for such transfers, as may be specified by the Reserve Bank of India, from time to time. This general permission is not available where: Indian Company whose shares or convertible debentures are proposed to be transferred is in financial service sector (financial services sector means service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance companies regulated by Insurance Regulatory and Development Authority (IRDA) and other companies regulated by any other financial regulator, as the case may be). The transfer falls within the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... listed shares, the price worked out is not less than the higher of average weekly high and low quotations for 6 months and average of daily high and low quotation or two weeks preceding 30 days prior to the date of making application to FIPB. 7. Are the investments and profits earned in India repatriable? All foreign investments are freely repatriable except for the cases where NRIs choose to invest specifically under non-repatriable schemes. Dividends declared on foreign investments can be remitted freely through an Authorised Dealer. 8. What are the guidelines on issue and valuation of shares in case of existing companies? Allotment of shares on preferential basis shall be as per the requirements of the Companies Act, 1956, which will require special resolution in case of a public limited company. In case of listed companies, valuation shall be as per the Reserve Bank of India /SEBI guidelines as follows: The issue price shall be either at: i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date or ii) The average of the weekly high and low of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by non-resident investors. So long ADRs/GDRs are quoted at discounts to the value of shares in domestic market, an investor will gain by converting the ADRs/GDRs into underlying shares and selling them in the domestic market. In case of ADRs/GDRs being quoted at premium, there will be demand for reverse fungibility, i.e. purchase of shares in domestic market for re-conversion into ADRs/GDRs. The scheme is operationalised through the Custodians of securities and stockbrokers under SEBI. 11. Can Indian companies issue Foreign Currency Convertible Bonds (FCCBs)? FCCBs can be issued by Indian companies in the overseas market in accordance with Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993. The FCCB issue needs to conform to External Commercial Borrowing guidelines, issued by RBI vide Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time. 12. Can I invest through Preference Shares? What are the regulations applicable in case of such investments? Foreign investment through preference shares is treated as foreign direct investment. Foreign investment in preference sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c route subject to the following limits: Lump sum payments not exceeding US$ 2 million. Royalty payable being limited to 5 per cent for domestic sales and 8 per cent for exports, without any restriction on the duration of the royalty payments. The royalty limits are net of taxes and are calculated according to standard conditions. The royalty will be calculated on the basis of the net ex-factory sale price of the product, exclusive of excise duties, minus the cost of the standard bought-out components and the landed cost of imported components, irrespective of the source of procurement, including ocean freight, insurance, custom duties, etc. RBI has delegated the powers to ADs to make payment of royalty under such agreements. The requirement of registration of the agreement with the Regional Office of Reserve Bank of India has been done away with. 2. What should be done, if Automatic Route of Reserve Bank of India for technology transfer is not available? Proposals, which do not satisfy the parameters prescribed for automatic route of RBI, require clearance from Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n invest in Government Securities/Treasury bills and Corporate debt? Under the FEMA Regulations only NRIs andSEBI registered FIIs are permitted to purchase Government Securities/Treasury bills and Corporate debt. The details are as under; A. A Non-resident Indian can purchase, (1) i) Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds; ii) bonds issued by a public sector undertaking(PSU) in India; iii) shares in Public Sector Enterprises being disinvested by the Government of India. (2) They can also invest, on non-repatriation basis, in dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates on non-repatriation basis. The guidelines for these schemes are framed by the concerned Government agencies. B. A SEBI registered Foreign Institutional Investor may purchase, on repatriation basis, dated Government securities/treasury bills, non-convertible debentures/bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers. The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. This form is available at www.rbi.org.in Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by the Regional Office in whose jurisdiction the office is set up. Liaison/Representative offices have to file an Activity Certificate on annual basis from a Chartered Accountant to the concerned Regional Office of the Reserve Bank of India , stating that the Liaison Office has undertaken only those activities permitted by Reserve Bank of India . 3. What is the procedure for setting up Project Office? Foreign companies are granted projects in India by Indian entities. General Permission has been granted by Reserve Bank of India vide Notification No. FEM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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