In this final post in the series, we look at the one change introduced by the Consolidated FDI Policy, Circular No. 1 of 2011 to the sectoral requirements in the agricultural sector, and also briefly touch upon some areas that have been overlooked in the current round of policy review (but yet are under active consideration). Earlier, FDI under the automatic route up to 100% was available for...
Changes to FDI Policy – Part IV: Downstream Investments
Indirect foreign investment into Indian companies had been a subject matter of ambiguity in the FDI policy. For instance, if an Indian company (that has foreign investors) makes investments into another Indian company, would that downstream investment be treated as domestic investment or foreign investment? While rules govern such investment? In order to streamline the policy, the Government had...
Changes to FDI Policy – Part III: Previous Venture
A significant condition in the FDI policy, first included in Press Note 18 of 1998 operated to restrict foreign investments. It required foreign investors to obtain prior Government approval to invest where they had a previous joint venture in India. In such cases, the automatic route was not available. This became an obstacle because FIPB, in considering applications, required a no-objection...
Changes to FDI Policy – Part II: Shares Against Non-Cash Consideration
The FDI policy allows issue of shares by Indian companies to foreign investors only against cash remittances received through normal banking channels. However, the only exceptions to this are conversion of external commercial borrowings outstanding as well as payment obligations towards lump sum fee or royalty for technical collaborations. Any other type of transaction involving an issue of...
Changes to FDI Policy – Part I: Convertible Securities
The Department of Industrial Policy and Promotion (DIPP), Government of India today released its new edition of the Consolidated FDI Policy, Circular 1 of 2011 that comes into effect April 1, 2011. This is part of the bi-annual review process that the DIPP commenced last year so as to ensure that the policy is in tune with dynamics in the economy and industry. The recent round of review has...
More Hurdles for LLPs
As we have previously noted on this Blog, the popularity of limited liability partnerships (LLPs) has not met with expectations since introduction of that business vehicle in April 2009. While the Government has taken certain steps to boost the utility of LLPs, such as by considering the possibility of foreign investment into LLPs discussed in this paper issued by the Department of Industrial...
A New Edition of the Consolidated FDI Policy
On April 1 this year, the Government gave effect to a consolidation exercise by locating all policies relating to FDI in a single document known as the Consolidated FDI Policy (as discussed here). That was not meant to be a static policy, but something that was to be reviewed every six months. Lo and behold, promptly at the end of the first six-month period, the Government today issued a revised...
FDI: Shares for Consideration Other than Cash
In another of a series of discussion papers, the Department of Industrial Policy & Promotion (DIPP) has issued one on issue of shares for consideration other than cash. In the past, foreign investment policy has mandated that shares be issued by Indian companies to foreign investors under the automatic route only against remittances received through normal banking channels. The only...
Proposal for FDI in Limited Liability Partnerships
Limited liability partnerships (LLPs), which are a relatively novel concept to India, have been recognised since April 1, 2009. LLPs are different from general partnerships in several ways, but there are two prominent differences. First, partners in LLPs carry limited liability for acts of the firm. Second, the partnership firm possesses separate legal personality and to that extent it has...
Bits of Interest
1. SEBI and Auditors: It was reported a few days ago that the Bombay High Court has allowed SEBI to proceed with its enquiry against the auditors in connection with the Satyam scam. The judgment is now available on the Bombay High Court website. 2. Satyam Saga: With all the accused persons now having been released on bail, questions are being raised regarding the investigative and prosecutorial...
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