FEMA requires observation of its provisions in letter and spirit and if any contravention may land in penalties on the erring company and individuals. There are various conditions and stipulations in case of FDI , ODI , investment by individuals in foreign shares , purchase of assets in foreign countries , extending guarantees , availing ECBs , supplier's credit . In this column , I will discuss all intricacies and complications involving the interpretation of FEMA Act provisions in detail.
Wednesday, February 26, 2014
Definition of ‘group company’ under FEMA
Foreign Direct Investment (FDI) in India –definition of ‘group company’
Attention of Authorised Dealer Category – I (AD Category-I)
banks is invited to the Foreign Exchange Management (Transfer or Issue
of Security by a Person Resident outside India) Regulations, 2000
notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time.
The extant FDI policy has since been reviewed and it has been
decided to incorporate the definition for ‘group company’ as under;
‘Group company’ means two or more enterprises which, directly or indirectly, are in position to:
(i) exercise twenty-six per cent, or more of voting rights in other enterprise; or
(ii) appoint more than fifty per cent, of members of board of directors in the other enterprise.
Ref:A.P. (DIR Series) Circular No.68 dated November 01, 2013