FinMin in consultation with RBI amends overseas investment rules. Details here

Currently, overseas investment by a person resident in India is governed by the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and the Foreign Exchange Management (Purchase and Transfer of Immovable Property outside India) Regulations ), 2015.

In its statement on Monday, the Finance Ministry said, “Given the evolving needs of businesses in India, in an increasingly integrated global market, there is a need for Indian corporates to be part of the global value chain. Regulatory Framework The revised Overseas Investments provide for the simplification of the existing framework for overseas investments and are aligned with the current business and economic dynamics.”

“Clarity on Foreign Direct Investments and Overseas Portfolio Investments has been brought and various transactions related to overseas investments which were earlier under the approval route are now under the automatic route, significantly increasing the Ease of Doing Business,” he added. FinMin.

Here are some of the changes under the overseas investment rule.

According to the new amendment, the net worth of a registered partnership firm or LLP will be the sum of the capital contribution of the partners and the retained earnings of the partners after deducting from them the total value of accumulated losses, deferred expenses and miscellaneous expenses. unwritten. off, according to the last audited balance.

Meanwhile, the amendment directs that when investment by a person resident in India in the equity capital of a foreign entity is classified as ODI (Foreign Direct Investment), such investment will continue to be treated as ODI even if the investment falls to a level below 10. % of paid-up capital or such person loses control in the foreign economic entity.

Further, any Indian resident who has acquired and continues to hold the equity of any foreign entity — may invest in the equity issued by such entity as a rights issue; or may be granted bonus shares subject to terms and conditions as per these rules.

Also, the RBI may, if necessary, in consultation with the central government, determine the ceiling for total outflows during a financial year on account of financial commitment or portfolio investment abroad. Further, the RBI may prescribe the limit beyond which the amount of financial commitment by a person resident in India in a financial year shall require its prior approval.

Any Indian resident whose account is classified as a non-performing asset, or willful default by any bank, or is under investigation by a financial services regulator — will need to obtain a ‘No Objection Certificate’ from the lending bank or regulatory body or investigative agency before making any financial commitment or undertaking disinvestment.

The amendment states that pricing will be on a per arm basis. It said, “AD Bank, before facilitating a transaction under sub-rule (1), shall ensure compliance with the equitable price by considering valuation under any internationally accepted pricing methodology for valuation.”

In addition, any Indian resident may transfer his equity by way of sale to a person resident in India who is entitled to make such investment under these rules, or to a person resident outside India.

In case the transfer is due to merger, amalgamation or demerger or due to acquisition of foreign securities, such transfer or liquidation shall have the approval of the competent authority under the laws applicable in India or the laws of the host country. or the host jurisdiction, as the case may be.

No person resident in India shall make a financial commitment to a foreign entity that has invested or has invested in India, at the time of making such financial commitment or at any time thereafter, directly or indirectly, resulting in a structure with more than two layers of subsidiaries, according to the amended rule.

An Indian entity having an office abroad may purchase immovable property outside India for business purposes and for the residence of its staff.

Meanwhile, an Indian resident can purchase immovable property outside India from a person resident abroad by inheritance, purchase from currency held in RFC account; purchase of remittances sent under the Liberalized Remittance Scheme established by the RBI; together with a relative; from income or proceeds from sale of assets other than ODI.

An Indian entity which is not engaged in financial services activity in India may make ODI in a foreign entity which is directly or indirectly engaged in financial services activity, other than banking or insurance, provided that a Indian entity to have posted net profits during the previous period. three financial years.

In particular, an Indian entity that is not engaged in the insurance sector may do ODI in general and health insurance where such insurance business is supporting the principal activity undertaken overseas by such Indian entity.

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