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The Reserve Bank Of India Mandates Compounding For Issuance Of Partly Paid-Up Units By AIFs Prior To March 14, 2024

The Reserve Bank of India (“RBI”) vide its circular dated May 21, 2024 (“Circular”),[1] has required that issuance of partly paid-up units by Alternative Investment Funds (“AIFs”) to foreign investors prior to March 14, 2024, should be regularised through compounding under Foreign Exchange Management Act, 1999 (“FEMA”). Compounding by RBI is prescribed for the contravention of foreign exchange regulations as per Foreign Exchange (Compounding Proceedings) Rules, 2000, and involve payment of a fees. In many instances, compounding requires payment of a monetary penalty to RBI.

Continue Reading The Reserve Bank Of India Mandates Compounding For Issuance Of Partly Paid-Up Units By AIFs Prior To March 14, 2024
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This post analyses the permissibility of and key legal considerations for share-based benefits/ incentives, like ESOPs, RSUs, SARs, etc., that foreign companies offer to the employees of their Indian group companies.

Continue Reading Employee Share-based Incentives by foreign companies for employees of group companies in India: Should it be an ESOP, RSU, ESPS, SAR or Phantom Stock?
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The Department for Promotion of Industry and Internal Trade (“DPIIT”) released a new standard operating procedure for processing foreign direct investment (“FDI”) proposals on August 17, 2023 (“New SOP”)[1]. It replaced the erstwhile standard operating procedure dated November 9, 2020 (“Erstwhile SOP”)[2], which covered the manner in which FDI proposals that required government approval under the Consolidated FDI Policy 2020 (“FDI Policy”) and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, were being processed.

Continue Reading New Norms For Processing FDI Proposals
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Mergers & Acquisitions

Introduction

While some Indian corporates have been bold acquirers in big-ticket overseas acquisitions, such transactions are rare, often complex, and risky. Indian acquirers have typically used internal accruals or resorted to overseas debt to finance offshore acquisitions due to regulatory restrictions preventing them from using their stock as consideration for the acquisition. Recent liberalisations in the overseas investment framework suggest that this constraint may be going away. While these regulatory changes may provide additional structuring options for cross-border M&A/ restructuring, decisions of certain tribunals on these (relatively recent) amendments may play spoilsport.

Continue Reading Cross-Border Demergers: Navigating muddy waters
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LSF – The Journey

The uniform ‘late submission fee’ (“LSF”) is a relatively new concept in the Indian exchange control regime. The Foreign Exchange Management Act, 1999 (“FEMA”), as originally introduced by the legislature, did not envisage the concept of LSF. Resolving a delay in reporting of equity or debt transactions under FEMA would necessarily require compounding of offences before the Reserve Bank of India (“RBI”). Given that compounding is not the most time efficient or simple process, it implied that even for insignificant or genuine delays, parties would have to undergo several steps, thus making the system clogged with late filings and filings becoming more cumbersome than they needed to be.

Continue Reading Uniformisation of Late Submission Fee under FEMA: A One Stop Shop?
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New ODI Regime

Background

The Ministry of Finance (“MoF”) and Reserve Bank of India (“RBI”) notified the new overseas investment (“OI”) regime on August 22, 2022 (“New Regime”).

The New Regime inter alia comprises the OI Rules, 2022[1] notified by the MoF (“Rules”), the OI Regulations, 2022[2] notified by the RBI and the Master Directions issued by the RBI to authorised persons. It supersedes FEMA 120[3] and the circulars and directions issued thereunder (“Old Regime”).

Continue Reading New ODI Regime: What RBI needs to clarify?

Overseas Direct Investment

Background

Outbound investments in India have witnessed a significant decline from its peak in the golden period of 2005-08. As per the data collated by the Reserve Bank of India (“RBI”), in July 2011, the total outbound financial commitment was at USD 5,478.15 million. This figure has declined over the decade to USD 2,047.79 million in December 2021.

Continue Reading RBI’s proposed regulatory architecture for the ODI Regime – Does it meet India Inc’s expectations?

Liberalisation of FDI In Insurance Companies – A look at the step(s) taken since the Big Budget Announcement

The industry is now well versed with the move to liberalise foreign direct investment (“FDI”) in Indian insurance companies to 74%, from the existing cap of 49%. The announcement was first made by the Finance Minister Ms. Nirmala Sitharaman on February 1, 2021, as part of her Budget presentation. The move followed the raise in FDI limits to 100% in insurance intermediaries, which was announced by Ms. Sitharaman in July 2019 and effected in September 2019. Continue Reading Liberalisation of FDI In Insurance Companies – A Look at the Step(s) Taken Since the Big Budget Announcement

FDI IN DIGITAL MEDIA - A CASE FOR FURTHER CLARIFICATION

 

The Government of India recently issued a clarification on FDI in digital media sector. The pre-cursor to this clarification is Press Note 4 of 2019 (“Press Note 4”) that allowed up to 26% FDI in entities engaged in uploading/ streaming of news and current affairs through digital media platforms under the Government approval route, similar to the print media sector. We have analysed the implications of the recent clarifications on entities that are engaged in the digital media sector.

Press Note 4 did not provide a definition of “Digital Media” and accordingly there were concerns regarding entities that fall within its ambit. The Government of India therefore issued the “Clarification on FDI Policy for uploading/streaming of news and current affairs through Digital Media” on October 16, 2020 (“Clarification”). The Clarification inter alia provides that Press Note 4 shall apply to the following types of entities registered or located in India: Continue Reading FDI IN DIGITAL MEDIA: A CASE FOR FURTHER CLARIFICATION

FDI in Brownfield Pharma – Will COVID-19 be the catalyst for policy reforms

The pharma sector has gained renewed global attention due to the crisis brought about by COVID-19, a pandemic having an unprecedented impact on health and wellbeing of citizens across geographical boundaries. It is estimated that around 76 pharma companies across the world are in a race to develop and mass-produce an effective vaccine in the fight against COVID-19[1]. Indian pharma companies too are playing a vital role in this search.[2] The Indian pharmaceutical industry has responded to the rapid challenges arising from disruption in supply chains and is working in an integrated manner to drive local expertise by production and export of essential formulation to countries across the globe, and live up to its title as the ‘Pharmacy of the World’. Continue Reading FDI in Brownfield Pharma – Will COVID-19 be the Catalyst for Policy Reforms?