RBI/2008-09/ The Reserve Bank of India (RBI) has announced some policies last week. The salient features are as follows: 1. External Commercial Borrowings (ECB) Policy – Liberalisation By a Circular dated January 2, 2009, the RBI dispensed with the requirement of all-in-cost ceilings on ECBs under the approval route, until June 30, 2009. This relaxation has now been extended until December...
Lock-in for Realty FDI
Press Note 2 of 2005, which deals with foreign direct investment (FDI) in the real estate sector, imposes a three-year lock in foreign investments. It states: Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB The question...
Demystifying concepts and terms used in agreements
My colleague, Daksh Trivedi has recently written an interesting article in The Mint, where he has discussed the various legal concepts/ terms used in shareholders and share purchase agreements. He begins with: Typical documents used for capturing terms of equity investments, that is, share-purchase agreements or shareholders’ agreements, are now complex and ridden with industry terminology such...
Indirect FDI: A Further Press Note
Continuing with the series of press notes on the issue of indirect foreign direct investment (FDI), the Government has issued Press Note 4 of 2009 that clarifies the position on downstream investment by Indian companies. Here are some quick thoughts on the new Press Note: 1. The Press Note divides downstream investments into three categories: a. Only operating companies: Here, the usual foreign...
Indirect FDI: More Changes on the Anvil
In order to address the concern that Press Notes 2 and 3 of 2005 (discussed here) will allow foreign investors to take indirect stakes in sectors where foreign investment is otherwise prohibited (e.g. multi-brand retail trading), it is reported in the Economic Times that the Government is proposing to issue another Press Note that clarifies this issue. The concern arises because, under these...
Direct and Indirect Foreign Investment: Is There Clarity Now?
Last week, we had blogged about new guidelines that were announced on indirect foreign investments, wherein some questions were raised regarding the scope of these guidelines. However, since then, the Government has issued two Press Notes on February 13, 2009 that contain detailed provisions for implementation of the new guidelines. Press Note 2 of 2009 deals with calculation of total foreign...
FDI in Indian Investing Companies
Indirect investment into Indian operating companies that are the subject matter of sectoral percentage caps on foreign investment has always been a vexed question. For instance, if a foreign company invests directly into an Indian operating company, and also invests in another Indian company that in turn invests into the operating company, how should the investments be treated for the purpose of...
Foreign Investment in Partly-paid Shares
One of our regular readers, Rajvendra Sarswat, brings to our attention a recent news report indicating a proposal for allowing foreign investors to take up partly-paid shares in Indian companies. As Rajvendra rightly observes, “currently, if a foreign investor wishes to invest in India in installments, such as by paying half of the price for shares now, and the balance over a period of time, the...
FDI and Globalisation: Where Does India’s Policy Stand?
(This is a cross-post from the Law and Other Things Blog) The theme for the January 2009 issue of Halsbury’s Law Monthly is Foreign Direct Investment (FDI) and Globalisation. The issue carries two articles that generally deal with FDI and three that specifically discuss issues on Indian policy. The first, an article titled “Globalisation and Foreign Direct Investment: Topical Issues and...
FIPB Overrules Press Note 1 Objections
Press Note 1 of 2005 issued by the Department of Industrial Policy & Promotion (DIPP) requires foreign companies to obtain the prior permission of the Foreign Investment Promotion Board (and thereby making the automatic route for investment inapplicable) if they had a joint venture with another Indian partner in the same field. This condition is applicable for joint ventures existing in...
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