The issue of whether put options, exits at assured returns and guarantee arrangements between Indian and foreign parties are enforceable under the provisions of the Foreign Exchange Management Act, 1999 (FEMA) has received much regulatory and judicial attention lately. The dispute between Tata Sons and NTT Docomo heard by the Delhi High Court was being watched very closely until the case was...
Abolition of the Foreign Investment Promotion Board
The economic liberalization that began in India in 1991 brought with it a substantial increase in foreign direct investment (FDI) since then. Those involved in, or following, these developments, since the 1990s will remember the rather significant role played by the Foreign Investment Promotion Board (FIPB) in approving FDI into the country. Foreign investors (or their Indian partners or investee...
Issue of Convertible Notes by Startups Permitted
[The following guest post is contributed by Bhushan Shah & Neha Lakshman from Mansukhlal Hiralal & Company. The views expressed in the post are personal] A convertible note is an instrument issued as debt and convertible into equity of a startup at the option of the holder, upon a future contingency taking place, usually when the startup obtains an additional round of investments...
Measuring outputs v. outcomes: Did the restriction on foreign investment in local debt achieve the intended outcome?
[The following guest post is contributed by Anurag Dutt, Arpita Pattanaik and Bhargavi Zaveri, who are researchers at the Finance Research Group at the Indira Gandhi Institute of Development Research, Mumbai.] A good policymaking process requires significant regulatory capacity. Before the policy is enacted, the State must (a) identify a market failure and an appropriate intervention to address...
The Hubtown Case: Supreme Court on the FDI Policy
[The following guest post is contributed by Tanavi Mohanty, who is a corporate lawyer practising in Mumbai] The decision of the Bombay High Court in the summary suit of IDBI Trusteeship Services Limited (ITSL) v. Hubtown Limited (Hubtown), better known as the Hubtown case has received a lot of attention for being the Bombay High Court’s pioneering judgment which unearthed a colourable structure...
Foreign Portfolio Investments in Unlisted Non-Convertible Debentures
[The following post is contributed by Amitabh Robin Singh, who is a corporate lawyer practising in Mumbai.] Last month, the Reserve Bank of India (“RBI“) allowed Foreign Portfolio Investors (“FPIs“) to invest in unlisted non-convertible debentures (“NCDs“). This has been done by way of an amendment to the Foreign Exchange Management (Transfer or Issue of...
Foreign Investments in Category III Alternative Investment Funds
[The following guest post is contributed by Kemi Gupta, who is a 5th year B.A., LL.B (Hons.) student at NALSAR University of Law] In a matter of only a few years,[1] India’s alternative investment industry has grown to Rs. 20,700 crore in size,[2] and is yet claimed to be in its early stages. Alternative investment funds (“AIFs”) constitute any privately pooled investment...
Liberalization of RBI’s Policies
The Reserve Bank of India (RBI) last week issued a series of circulars liberalizing and streamlining its policies on various types of equity investments as well as on external commercial borrowings (ECBs). The key pronouncements are highlighted below: 1. Foreign Investment in “Other Financial Services” In the case of non-banking finance companies...
An Update on the FDI Reforms
[The following guest post is contributed by Bhushan Shah and Neha Lakshman of Mansukhlal Hiralal & Company. The views expressed are personal.] After significant changes in the Foreign Direct Investment (FDI) policy in November 2015, the Union Government through Press Note No. 5 (2016 Series) issued on 24 June 2016[1] announced further important changes to the FDI Policy. Changes introduced in...
Easy-commerce?
[The following guest post is contributed by Arup Pereira, who is a Principal Associate at J. Sagar Associates, Mumbai] The Government’s foreign direct investment (“FDI”) policy on retail trading in India encourages foreign companies and Indian companies with foreign investment to “Make in India”. At present, FDI is not permitted in an Indian company engaging in business to consumer (“B2C”) e...
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