Foreign Direct Investment (FDI) Regulations

 
FOREIGN DIRECT INVESTMENT
 
Agenda
 
01 Basic Concept
Overview
02 Illustrations
FDI, FPI and DI
03 Provision
Entry Route, Acquisition and Pricing
04 Reporting and late Submission Fee,
Approval Route
FC-GPR, FC-TRS, DI and LSF
05 Budget 2019
Prime Minister's vision of a 5 trillion dollar
economy
 
Overview
 
FERA  & FEMA;
Dealing in Foreign Exchange;
Holding of Foreign Exchange;
Export of Goods and Services;
Capital Account transaction;
Current Account transaction;
Sectoral Caps;
Capital instruments;
Online Portals;
Parties Involved- Indian Entity, Indian Company,
NRI & OCI.
 
 
 
 
Basic Concept
 
Rules & Regulations;
DIPP (now DPIIT) & RBI;
FDI Policy & FEMA Regulation;
Master Circular & Master Direction;
Automatic Route & Approval Route;
Foreign Direct Investment & Indirect
Foreign Investment; and
Repatriable & Non-repatriable.
 
 
 
 
 
 
 
 
 
 
 
Capital Instruments
 
As per Para 4 of RBI- Master
Direction on Foreign Investment
in India the capital instruments
are as follows:
 
FDI v/s FPI
0
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02
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03
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04
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Illustration 1
 
0
 
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02
 
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03
 
04
 
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E ltd
(Listed/Unlisted
Entity)
(Non-repat)
A ltd
(Listed Entity)
B ltd
(Listed Entity)
D ltd
(Unlisted Entity)
C ltd
 (Unlisted Entity)
 
10% on fully
diluted basis
 
9% on fully
diluted basis
 
10% on fully
diluted basis
 
8% on fully
diluted basis
 
10% on fully
diluted basis
 
Downstream 
Investment
 
Indirect 
foreign investment 
means 
Downstream
 
Investment
1.
Investment in 
the 
capital 
instruments 
of 
another Indian
 
company
 
by 
an 
Indian 
entity
 
which
has 
received foreign 
investment 
and:
o
is 
not 
owned 
and not 
controlled 
by 
resident 
Indian 
citizens;
 
or
o
is 
owned 
or 
controlled 
by 
persons resident 
outside
 
India.
 
Note
: 
Ownership of an Indian company shall mean beneficial holding of more than 50 percent of the
capital instruments of such company.
 
Illustration 2
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here
 
 
Case 1: 
A Inc hold shares in B ltd (i.e. 80%)
,  
what 
will
be 
extent of 
indirect foreign  
investment in C Ltd?
80%
60%
48%
None of
 
above
 
Answer:
 
60%
 
Case 
2:
 
What 
will
 
be  
extent 
of indirect foreign 
investment 
in 
C 
Ltd i
f
100 % is
 
held  
by 
B
 Ltd?
80%
100%
None of
 
above
 
 
Answer:
 
80%
 
80
%
 
60
%
 
Provision
 
0
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03
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text here
04
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your own text
here
 
Reporting
0
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02
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text here
03
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text here
04
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your own text
here
 
 
Form FC-GPR
Issuing capital instruments to a person resident outside India;
Thirty days from the date of allotment of capital instruments;
To be reported Form FC-GPR.
 
Form FC-TRS
PROI holding capital instruments in an Indian company on a repatriable basis and PROI
holding capital instruments on a non-repatriable basis; and
PROI holding capital instruments in an Indian company on a repatriable basis and a PRI.
Within sixty days of transfer of capital instruments or receipt/ remittance of funds
whichever is earlier.
 
Form DI
An Indian entity or an investment Vehicle making downstream investment in another
Indian entity which is considered as indirect foreign investment for the investee Indian
entity.
Within 30 days from the date of allotment of capital instrument.
 
 
 
 
Delay in Reporting
0
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lace your own tet
here
02
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text here
03
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text here
04
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your own text
here
 
The LSF shall be applicable for the
transactions undertaken on or after
November 7, 2017.
The payment of LSF is an option for
regularising reporting delays without
undergoing the compounding
procedure.
The late submission fee is for
reporting delays only
T
he payment of LSF is an additional
facility for regularising reporting
delays without undergoing the
compounding procedure..
 
Procedure Under Approval Route
Application to
be filed online
Foreign Investment
Facilitation Portal
Whether Digitally signed
Yes
No
Yes
No
Yes
No
Yes
 
Approval/ Rejection letter will be sent online by the competent authority to the applicant, consulted Ministries/Departments
and DIPP
No
Yes
 
Budget 2019
 
 
 
 
 
 
By Burhanuddin Dohadwala
Executive
Vinod Kothari & Company
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Explore the essential concepts and regulations surrounding Foreign Direct Investment (FDI) including FDI policy, FEMA regulations, capital instruments, equity shares, and the distinction between FDI and Foreign Portfolio Investment (FPI). Gain insights into FDI entry routes, acquisition strategies, pricing agendas, and the vision for a robust economy.

  • Foreign Direct Investment
  • FDI Regulations
  • Capital Instruments
  • Equity Shares
  • FPI

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  1. FOREIGN DIRECT INVESTMENT

  2. 01 Basic Concept Overview 02 Illustrations FDI, FPI and DI 03 Provision Entry Route, Acquisition and Pricing Agenda 04 Reporting and late Submission Fee, Approval Route FC-GPR, FC-TRS, DI and LSF 05 Budget 2019 Prime Minister's vision of a 5 trillion dollar economy

  3. Overview FERA & FEMA; Dealing in Foreign Exchange; Holding of Foreign Exchange; Export of Goods and Services; Capital Account transaction; Current Account transaction; Sectoral Caps; Capital instruments; Online Portals; Parties Involved- Indian Entity, Indian Company, NRI & OCI.

  4. Basic Concept Rules & Regulations; DIPP (now DPIIT) & RBI; FDI Policy & FEMA Regulation; Master Circular & Master Direction; Automatic Route & Approval Route; Foreign Direct Investment & Indirect Foreign Investment; and Repatriable & Non-repatriable.

  5. Equity shares Capital Instruments Convertible Notes Share warrants Capital Instruments under FDI As per Para 4 of RBI- Master Direction on Foreign Investment in India the capital instruments are as follows: Preference Shares Debentures

  6. FDI v/s FPI Investment in capital instruments by PROI Text Title Text Title Place your own tet here Listed company Unlisted company 0 0 Text Title Text Title Place your own text here 02 02 below 10% of the post issue paid- up equity capital on fully diluted basis Foreign Direct Investment in 10% or more of the post issue paid- up equity capital on fully diluted basis Tet Title Tet Title Place your own text here 03 03 Foreign Direct Investment Text Title Text TitlePlace your own text here Foreign Portfolio Investment 04 04

  7. A ltd Illustration 1 (Listed Entity) 10% on fully diluted basis Text Title Place your own tet here 0 10% on fully diluted basis 9% on fully diluted basis E ltd B ltd Text Title Place your own text here (Listed/Unlisted Entity) (Listed Entity) 02 Manoj Inc (PROI) (Non-repat) 8% on fully diluted basis 10% on fully diluted basis 03 Text TitlePlace your own text here 04 C ltd D ltd (Unlisted Entity) (Unlisted Entity)

  8. Downstream Investment Indirect foreign investment means Downstream Investment 1. Investment in the capital instruments of another Indian company by an Indian entity which has received foreign investment and: o is not owned and not controlled by resident Indian citizens; or o is owned or controlled by persons resident outside India. Note: Ownership of an Indian company shall mean beneficial holding of more than 50 percent of the capital instruments of such company.

  9. Illustration 2 Case 1: A Inc hold shares in B ltd (i.e. 80%), what will be extent of indirect foreign investment in C Ltd? 80% 60% 48% None of above A Inc (PROI) 80% B Ltd (PRII) Text Title Text Title Place your own tet here 0 0 60% C Ltd (PRII) Text Title Text Title Place your own text here 02 02 Answer:60% Case 2: What will be extent of indirect foreign investment in C Ltd if 100 % isheld byB Ltd? 80% 100% None of above Tet Title Tet Title Place your own text here 03 03 Text Title Text TitlePlace your own text here 04 04 Answer:80%

  10. Provision

  11. Entry Route and Permitted Sector Approval Route Automatic Route Acquisition Through Text Title Text Title Place your own tet here Rights Issue or Bonus issue 0 0 ESOP or Sweat Equity Shares Text Title Text Title Place your own text here 02 02 Convertible Notes by Startup Merger or demerger or amalgamation of Indian companies Tet Title Tet Title Place your own text here 03 03 Pricing Guidelines Applicability Text Title Text TitlePlace your own text here 04 04 Non-Applicability

  12. Reporting Form FC-GPR Issuing capital instruments to a person resident outside India; Thirty days from the date of allotment of capital instruments; To be reported Form FC-GPR. Text Title Text Title Place your own tet here 0 0 Form FC-TRS PROI holding capital instruments in an Indian company on a repatriable basis and PROI holding capital instruments on a non-repatriable basis; and PROI holding capital instruments in an Indian company on a repatriable basis and a PRI. Within sixty days of transfer of capital instruments or receipt/ remittance of funds whichever is earlier. Text Title Text Title Place your own text here 02 02 Tet Title Tet Title Place your own text here 03 03 Form DI An Indian entity or an investment Vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity. Within 30 days from the date of allotment of capital instrument. Text Title Text TitlePlace your own text here 04 04

  13. Delay in Reporting The LSF shall be applicable for the transactions undertaken on or after November 7, 2017. Amount involved in reporting(in INR) Late Maximum amount of LSF applicable Submissio n Fee (LSF) as % of amount involved* 0.05% The payment of LSF is an option for regularising reporting delays without undergoing the compounding procedure. Upto 10 million INR 1 million or 300% of the amount involved, whichever is lower. Text Title Text Title Place your own tet here 0 0 Text Title Text Title Place your own text here than 10 02 02 More million The late submission fee is for reporting delays only 0.15% INR 10 million or 300% of the amount involved, whicheveris lower. Tet Title Tet Title Place your own text here 03 03 The payment of LSF is an additional facility for regularising reporting delays without undergoing the compounding procedure.. Text Title Text TitlePlace your own text here The % of LSF will be doubled every twelve months 04 04

  14. Procedure Under Approval Route Foreign Investment Facilitation Portal Application to be filed online Whether Digitally signed Whether one signed physical copy submitted within 5 days of communication to DIPP No Yes No Physical copy to be submitted No Yes if the signed physical copy is not filed with the Competent Authority within 7 days of the communication from DIPP, the date of filing of the physical application would be reckoned as the reference date for calculation of time limits. Date of online filing will be reference for calculation of time limit for disposal

  15. Whether proposal for Investment requiring security clearance Whether any specific issues requiring DIPP clarification? After receipt of proposal DIPP to circulate online Yes No Yes To RBI to comment from FEMA perspective Forward to Ministry of External Affairs and Dept of revenue for information and contents Refer to DIPP Refer to Ministry of Home Affairs and also forward to Ministry of External Affairs and Dept. of Revenue for information & comments Comments to be given to the concerned Administrative Ministry/Department Whether proposal involves total inflow of more than INR 5000 crores?

  16. No Yes Competent Authority shall place the same for consideration of Cabinet Committee on Economic Affairs within the above timelines. After the receipt of the decision of Cabinet Committee on Economic Affairs, approval letter shall be issued within 1 week. Scrutinize proposal and documents, ask queries, documents, if any, online or by email Approval/ Rejection letter will be sent online by the competent authority to the applicant, consulted Ministries/Departments and DIPP

  17. Liberalizing Sectoral caps Budget 2019 Budget 2019 Investment by Non- Resident Indian (NRI) under PIS Foreign Portfolio Investments Invt in Debt securities by FPIs

  18. Mini Budget Current Scenario

  19. By Burhanuddin Dohadwala Executive Vinod Kothari & Company

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