FDI RELATED ADVISORY
India is one of the fastest growing economies in the world. It ranks among the top 10 attractive destinations for inbound investments. The country offers an extensive marketplace for products and services of diverse sectors. Moreover, the regulatory environment for foreign investment has been considerably eased to make it more investor-friendly. Government is making constant efforts to increase the scope of foreign direct investment by opening new sectors for investment, increase the sectorial limit of already existing sectors and simplifying other provisions of the FDI policy. Therefore, FDI in India is considered to be very lucrative and secure. These are few of the major reasons for attracting huge Foreign Direct Investments (FDI) in various sectors in India.
At present, the most desirable and enticing economic sectors of India to foreign companies are information technology, retail, catering and hospitality, education, infrastructure, real estate and construction, insurance, mining and minerals, power and energy, telecommunication, aviation, and many others.
Providing advisory services for business expansion into India
Sharing knowledgeable insights on FDI guidelines, rules and regulations for the smooth process of FDI in India.
Advisory on (can it be rephrased) appropriate mix of capital, business structure formation and company formation for foreign investors.
Advisory on various FIPB and RBI compliance to be adhered to, including documentation, liasoning, representation, approval process, etc.
Advisory regarding regulatory registrations, documentation, compliances and affiliations with State and Central bodies of India
Advisory for setting up branch office, project office and liaison office in India
Advising on legal and procedural matters falling under the ambit of FEMA for setting up FDI project in India
Drafting of Memorandum of Understanding, Shareholders Agreement, Promoters Agreement and Commercial Agreements.
Foreign Direct Investment (FDI) is an investment made by an individual or a company, of one country in business of another country. (Can it be rephrased).The company investing or acquiring interest in the foreign company has to own 10% or more of foreign company’s shares to be called as FDI. (Need to confirm with the law and give us a reference).
The Foreign Direct Investment in Indian business sectors can easily be made in two ways, i.e. either through the Automatic route or through the Governmental route.
- Automatic Route: Under automatic route, FDI is allowed without requiring any prior approval from the Central Government or the Reserve Bank of India. Here the FDI can be made in any of the sectors/activities that are specified and updated from time to time as per the provisions of the act.
- Government Route: Those sectors/activities which are not covered for foreign investment under automatic route fall under Government route. Investment in sectors/activities under this route requires prior approval of the Government. The application filled is considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs and Ministry of Finance.
The present policy prohibits foreign investment in the following sectors:
- Lottery business which includes Government lottery, private lottery, online lotteries, etc.
- Gambling and betting which includes casinos, etc. (Any form of foreign technology collaboration in the lottery, gambling or betting business is also prohibited)
- Services like accounting, auditing, bookkeeping and legal services
- Nidhi company (i.e. borrowing from members and lending to members only for mutual benefit)
- Chit fund business (i.e. a company that manages, conducts or supervises a chit scheme)
- Manufacturing of tobacco, cigars, cigarillos, cheroots, cigarettes and other tobacco substitutes
- Real Estate Business (does not include construction development) and Construction of Farm Houses
- Trading in Transferable Development Rights (TDRs)
- Activities/sectors not open to private sector investment (like Atomic energy, Railway operations)
A foreign company planning to set up business operations in India has the following options:
Incorporating a Company in India: A foreign company can incorporate a private or public, limited company in India It can be a joint venture or a wholly owned company. However, the foreign company has to comply with certain rules and regulations in this regard.
Limited Liability Partnerships: A foreign company can set up business operations in India by way of forming a limited liability partnership. It is allowed under Government route for sectors which have 100% FDI approval. It is also allowed under automatic route without imposing any restrictions. (Specify the source)
Sole Proprietorship/Partnership Firm: It is possible for a foreign company to set up a sole proprietorship or partnership firm in India by getting prior approval from Reserve Bank of India. (Specify the source)
Extension of Foreign Entity: A foreign company can opt to register a branch office, project office or liaison office in India. Setting up these offices requires RBI or Government approval. These offices can undertake only those activities that are specified by the RBI.
Yes, all the foreign investments in India are generally allowed to be repatriated, after payment of taxes due without any restriction and without any approval from RBI. However, there are exceptional cases where it is not allowed. Such cases are:
- where the investment is made or held on non-repatriation basis, or
- where the sectorial condition specifically mentions non-repatriation
The following can be an investor under FDI:
- An individual which includes financial institutions, foreign venture capital investors, pension or provident fund.
- Company which includes sovereign wealth funds, foreign trust, non-resident Indians or persons of Indian origin.
- Foreign Institutional Investors which includes private equity funds, partnership or proprietorship firm and others.
There are several ways by which an Indian Company can receive foreign investment. These ways are:
- By issuing equity shares as per the provisions of Companies Act, 2013.
- By issuing fully and mandatorily convertible preference shares; and fully and mandatorily convertible debentures. The price of these convertible instruments should be decided upfront while issuing them. The price should mandatorily be higher than the fair value worked out while issuing these instruments as per FEMA regulations.
- By issuing partly paid equity shares and warrants as per the provisions of Companies Act, 2013 and SEBI guidelines. (This can be simplified and cut short into 3 single lines)