TMI BlogReview of FDI Policy for permitting foreign investment in Life Insurance Corporation of India (LIC) and other modifications for further clarity of the existing FDI Policy.X X X X Extracts X X X X X X X X Extracts X X X X ..... mpulsorily and mandatorily convertible debentures and warrants; Note : The equity shares issued by an Indian Company in accordance with the provisions of the Companies Act, 2013 or any other applicable law, shall include equity shares that have been partly paid. Preference shares and convertible debentures shall be required to be fully paid, and to be mandatorily and fully convertible. Further, 'warrant' includes Share Warrant issued by an Indian Company in accordance with the regulations made by the Securities and Exchange Board of India (SEBI), the Companies Act, 2013 or any other applicable law. 1.2 Para 2.1.9 of the FDI Policy is amended to be read as under: 'Convertible Note' means an instrument issued by a startup company acknowledging 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 ten 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. 1.3 Para 2.1.17 of FDI Polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of 'Real Estate Business' under Para 5.1(f) and Note (i) to Para 5.2.10.2 of the FDI Policy, are amended and aligned in the following manner: (i) Para 5.1(f) of the FDI Policy is amended to be read as under: Real Estate Business or Construction of Farm Houses `Real estate business' means dealing in land and immovable property with a view to earning profit there from and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014. Further, earning of rent/income on lease of the property, not amounting to transfer, will not amount to real estate business. (ii) Note (i) to Para 5.2.10.2 of the FDI Policy is amended to be read as under: It is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs). Real estate business means deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisions of the Insurance Act, 1938 and the condition that Companies receiving FDI shall obtain necessary license/approval from the Insurance Regulatory and Development Authority of India for undertaking insurance and related activities. (d) (I) In an Indian Insurance Company having foreign investment,- i. a majority of its directors; ii. a majority of its Key Management Persons; and iii. at least one among the Chairperson of its Board, its Managing Director and its Chief Executive Officer shall be Resident Indian Citizens. Explanation: For the above purposes, the expression - Key Management Person shall have the same meaning as assigned to it in guidelines made by the Insurance Regulatory and Development Authority of India on corporate governance for insurers in India. (II) An Indian Insurance company having foreign investment shall comply with the provisions under the Indian Insurance Companies (Foreign Investment) Rules, 2015, as amended from time to time and applicable rules/regulations notified by the Department of Financial Services/Insurance Regulatory and Development Authority of India from ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector of the insurance intermediary shall be a resident Indian citizen; iii. shall take prior permission of the Authority for repatriating dividend; iv. shall bring in the latest technological, managerial and other skills; v. shall not make payments to the foreign group or promoter or subsidiary or interconnected or associate entities beyond what is necessary or permitted by the Authority; vi. shall make disclosures in the formats to be specified by the Authority of all payments made to its group or promoter or subsidiary or interconnected or associate entities; vii. composition of the Board of Directors and key management persons shall be as specified by the concerned regulators; (j) The provisions of paragraphs (i) (b) and (d) of Annexure 8 relating to Banking-Private Sector , shall be applicable in respect of bank promoted insurance companies. (k) Terms Equity Share Capital , Foreign Direct Investment (FDI), Foreign Investors , Foreign Portfolio Investment , Indian Insurance Company , Indian Company , Non-resident Entity , Public Financial Institution , Resident Indian Citizen , Total Foreign Investment will have the same meaning as pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isitions taking place in sectors under automatic route. 1.12 Para 5 of Annexure 3 of the FDI Policy is amended to be read as under: Issue of Employees Stock Option (ESOP) scheme / sweat equity shares/ Share Based Employee Benefits An Indian company may issue 'employees' stock option', and/or 'sweat equity shares' and/or Share Based Employee Benefits to its employees/ or directors or to the employees/ or directors of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, provided that: - (a) the scheme has been drawn either in terms of regulations made under the Securities Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act, 2013 or as per any other applicable law, as the case may be; (b) the 'employee's stock option' or 'sweat equity shares' or Share Based Employee Benefits issued to non-resident employees/ or directors under the applicable rules/ or regulations or other law are in compliance with the sectoral cap applicable to such company; (c) ..... 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