FDI, up to 51%, under the government approval route, is permitted in the multi-brand retail trading sector

FDI, up to 51%, under the government approval route, is permitted in the multi-brand retail trading sector

As per paragraph 6.2.16.5 of `Circular 1 of 2013- Consolidated FD1 Policy’, effective from 5.4.2013, FDI, up to 51%, under the government approval route, is permitted in the multi-brand retail trading sector, subject to specified conditions.

Up to 10 state governments in India have given their consent for operating multi-brand retail in their states. Now , Himachal Pradesh government also joined the band and the following is the list of state government that have consented to allow FDI in multi-brand retail sector .

:

S.No.	Sector/ Activity	% of FDI Cap/ Equity	Entry route
6.2.16.5	Multi   Brand     Retail Trading	51%	Government
	(1)       FDI in… (2)       LIST  OF STATES/ UNION   TERRITORIES AS MENTIONED  IN PARAGRAPH 6.2.16.5(1)(viii) 1.        Andhra Pradesh 2.        Assam 3.        Delhi 4.        Haryana 5.        Himachal Pradesh 6.        Jammu & Kashmir 7.        Maharashtra 8.        Manipur 9.        Rajasthan 10.      Uttarakhand 11.      Daman & Diu and Dadra and Nagar Haveli (Union Territories

New Format for raising query on Foreign Direct Investment with the Department of Industrial Policy & Promotion

New Format for raising query on Foreign Direct Investment with the Department of Industrial Policy & Promotion (DIPP)

DIPP has prescribed the following format for raising any queries on FDI with it . Hence , any one wants a clarification from DIPP on the GOI FDIs policy may submit their query as per the following format.

Address :

MINISTRY OF COMMERCE & INDUSTRY

DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

UDYOG BHAWAN, NEW DELHI

EPABX NO: 011- 2306 1204/2306 1222-29

FAX NO: 011-2306 2626

TELEGRAPHIC ADDRESS: INDMINISTRY, NEW DELHI

 

1	Name of the  Existing / Proposed Investor
a)	Address
b)	Phone No
c)	Mail Id
d)	Date and Place of Incorporation
2)	Name of the Indian Investee entity/JV Partner
a)	Address
b)	Phone No
c)	Mail Id
d)	Date and Place of Incorporation
e)	Present Business Activities
f)	Copy of MOA
3	Proposed Amount of Investment
4	Percentage of foreign shareholding (pre and post investment )
5	Sector
6	NIC Code of the proposed activity
7	Gist (not exceeding 200 words ) of proposed business activity in India
8	Mention the paragraph number on which clarification
9	Please mention the issue in brief
10	Details of earlier SIA / FIPB/ RBI Approvals if any, Enclose copies
11	Any other information relevant to case or issue

 

 

 

RBI Clarification on Issue of equity shares under the FDI scheme allowed under the Government route against pre-operative/pre-incorporation expenses

 

Foreign Direct Investment (FDI) in India - Issue of equity shares under the FDI scheme allowed under the Government route against pre-operative/pre-incorporation expenses

Attention of Authorised Dealers Category – I banks is invited to Para 3 (II) of A.P. (DIR Series) Circular No. 74 dated June 20, 2011 read with A.P. (DIR Series) Circular No. 55 dated December 9, 2011, allowing thereby issue of equity shares/ preference shares under the Government route by conversion of import of capital goods, etc., subject to terms and conditions stated therein.

2. On review of the policy, it has now been decided to amend condition at (c) in the aforesaid para. The amended condition is given in the Annex.

3. All the other conditions contained in the A.P. (DIR Series) Circulars No. 74 dated June 20, 2011 and No. 55 dated December 9, 2011, shall remain unchanged.

4. AD Category - I banks may bring the contents of the circular to the notice of their customers/constituents concerned.

A.P.(DIR Series) Circular No. 74 dated June 30, 2011	Earlier Condition	Revised condition
Para 3(II)(c)	Payments should be made directly by the foreign investor to the company. Payments made through third parties citing the absence of a bank account or similar such reasons will not be eligible for issuance of shares towards FDI; and	Payments should be made by the foreign investor to the company directly or through the bank account opened by the foreign investor as provided under FEMA Regulations; and

Ref:

A.P. (DIR Series) Circular No. 104 May 17, 2013

Transfer of shares/convertible debentures from Resident to Non-Resident

Transfer of shares/convertible debentures from Resident to Non-Resident

 

Transfer of shares or convertible debentures by Resident to Non-Resident is allowed subject to various terms and conditions.

The ‘Person Resident outside India’ now includes incorporated non-resident entity, foreign national, NRI, FII other than erstwhile OCB.

The foreign national, NRI, FII were earlier excluded from the definition of the ‘Person Resident outside India’ for the purposes of transfer of shares/convertible debentures from resident to the non-residents.

Conversion of ECB/Lump sum Fee/Royalty etc. into Equity

 

Conversion of ECB/Lump sum Fee/Royalty etc. into Equity- Waiver of Condition for valuation from an Independent valuer from country of import

 

As per the FDI Policy, the companies are allowed to issue equity shares against the import of capital goods/ machinery/ equipment (excluding second-hand machinery), subject to compliance with the various conditions specified therein.

One of the conditions in the FDI policy was mandatory requirement of independent valuation of the capital goods/machinery/equipments (including second-hand machinery) by a third party entity, preferably by an independent valuer from the country of import along with production of copies of documents/certificates issued by the customs authorities towards assessment of the fair-value of such imports.

The said condition has been dispensed with through introduction of the new Consolidated FDI Policy dated 5th April, 2013.

 

Ref - Consolidated FDI Policy - April 2013

NEW FC-GPR FORM FROM APRIL 2013 - CHANGES IN THE FC-GPR FORM FROM APRIL 2013

NEW FC-GPR FORM FROM APRIL 2013 - CHANGES IN THE FC-GPR FORM FROM APRIL 2013

Every company, making allotment to any foreign individual or company incorporated outside India, is required to report to Reserve Bank of India (RBI) in form FC GPR within 30 days from the date of allotment. Apart from the various declarations in Form FC GPR, following two declarations have been deleted from the Form FC GPR with the introduction of new Consolidated FDI Policy dated 5th April, 2013.

a.     Foreign entity/entities—(other than individuals), to whom we have issued shares have existing joint venture or technology transfer or trade mark agreement in India in the same field and Conditions stipulated at Para 4.2 of Consolidated FDI policy Circular of Government of India have been complied with.

OR

Foreign entity/entities—(other than individuals), to whom we have issued shares do not have any existing joint venture or technology transfer or trade mark agreement in India in the same field.

For the purpose of the 'same' field, 4 digit NIC 1987 code would be relevant.  

b.     We are not an Industrial Undertaking manufacturing items reserved for small sector.

OR

We are an Industrial Undertaking manufacturing items reserved for small sector and the investment limit of 24 % of paid-up capital has been observed/ requisite approvals have been obtained.

Source- Consolidated FDI Policy - April 2013

Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP)

Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP) by Conversion of existing Company into LLP.

The Consolidated FDI Policy permits an Indian Company having FDI to be converted into the LLP with prior approval of FIPB/Government but subject to various conditions.

One of the conditions, prior to introduction of FDI Policy dated 5th April, 2013 was that Foreign Capital participation in LLPs will be allowed only by way of cash consideration, received by inward remittance, through normal banking channels or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank.

In case of Conversion of an Indian Company into LLP, the said condition has been dispensed with by introducing new Consolidated FDI Policy dated 5th April, 2013.

Ref- Consolidated FDI Policy April 2013

Formalities for Registration of Liaison , Renewal of Liaison office In India

Setting –up of Liaison office in India will be under Approval Route

As per the Notification No. 22/2000, dated 3-5-2000, no person resident outside India shall establish a office without prior approval of RBI. Therefore, before setting up of a branch/liaison office, approval of RBI should be taken. Application in Form FNC-1 is required to be made.

What are the documents to be filed along with Form FNC-1?

(1) Form FNC-1- Available in RBI website.

 (2) English version of the Certificate of incorporation/registration or memorandum of articles of association of the Foreign Company which wishes to set-up liaison office in India.

3) The above mentioned documents should be attested either by the Indian

Embassy or a notary public of that country should attest this document

4) Latest Audited Balance Sheet of the foreign company

5) Complete and exhaustive details of the activities that is going to be carried out in India by the foreign company

6) POA in favour of the Indian agent or consultant

7) Form FNC-1 should be signed by the foreign company authorised signatory ( a director ) and the Indian agent or consultant  is not authorised to sign the above.

Annual Filing Formalities

Every year , a certificate from Chartered Accountant  is to be filed to the regional office of the RBI.

However , the law does not require a liaison office to file audited statement of Indian operation but it is prudent practice to enclose the same.

Renewal of  Liaison Office

Renewal letter may be sent to the regional office of RBI well before the expiry of the renewal date. No need to send the renewal in Form FNC-1. Optionally , the LO can enclose the MOA and annual activity report and audited accounts with the renewal application.

Registration of All Liaison office with the Registrar of Companies (ROC) New Delhi.

All LO in India after getting the approval from RBI for establishing LO in India  shall have to register the same with ROC , New Delhi compulsorily .Renewal of Liaison Office is also to be reported to ROC , New Delhi

 

Foreign Companies carrying on business in India have to file prescribed documents to Registrar and file its annual accounts every year.

 

Form NO	Contents
44	Documents to be delivered by Foreign Company for registration
52	·         Change in the Particulars of the Authorized Person   ·         Change in the Principal Place of Registered Office   ·         Annual Accounts & List of Place of Business   ·         Cessation of Business

 

·         Further, Department of Company affairs has clarified that if the foreign company has only liaison office in India and has obtained RBI permission, it should only produce copy of letter of RBI and statement of receipts and payments made by Indian branches of the foreign company. Such statement should be certified by Chartered accountant and authorized representative of the company.

 

PROCEDURE FOR CONVERSION OF ECB INTO EQUITY

CONVERSION OF ECB INTO EQUITY

 

Conversion of ECB into equity is permitted subject to the following conditions:

 

(a) The activity of the company is covered under the Automatic Route for Foreign Direct Investment or Government (FIPB) approval for foreign equity participation has been obtained by the company, wherever applicable.

(b) The foreign equity holding after such conversion of debt into equity is within the sectoral cap, if any,

(c) Pricing of shares is as per the pricing guidelines issued under FEMA, 1999 in the case of listed/ unlisted companies.

 

(ii) Conversion of ECB may be reported to the Reserve Bank as follows:

 

(a) Borrowers are required to report full conversion of outstanding ECB into equity in the form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in form ECB-2 submitted to the DSIM, RBI within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" should be clearly indicated on top of the ECB-2 form. Once reported, filing of ECB-2 in the subsequent months is not necessary.

(b) In case of partial conversion of outstanding ECB into equity, borrowers are required to report the converted portion in form FC-GPR to the Regional Office concerned as well as in form ECB-2 clearly differentiating the converted portion from the unconverted portion. The words "ECB partially converted to equity" should be indicated on top of the ECB-2 form. In subsequent months, the outstanding portion of ECB should be reported in ECB-2 form to DSIM.

Following requirements have to be taken into account:

1.Consent letter from the ECB lenders for the conversion into equity

2. Board Resolution for the conversion

3.Reporting the Conversion to DSIM in ECB-2 Return

4. Filing of FC-GPR

 

FDI IN OIL & NATURAL GAS PROJECT WILL BE UNDER AUTOMATIC ROUTE

Foreign Investment in Oil And Natural Gas Projects

As per extant Foreign Direct Investment (FDI) policy, FDI, up to 100%, is permitted, under the automatic route, for exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG regasification infrastructure, market study and formulation and petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. Extant FDI policy, therefore, does not envisage Government approval for bringing FDI into companies carrying on these activities.