Guidelines for transfer of ownership or control of
Indian companies in sectors with caps from resident Indian citizens to
non-resident entities
Presently, transfer of shares from residents to
non-residents, including acquisition of shares in an existing company, is on
the automatic route, subject to the sectoral policy on FDI. This Press Note
lays down guidelines for transfer of ownership or control of Indian companies
in sectors with caps from resident Indian citizens to non-resident entities.
Foreign investment shall include all types of foreign
investments i.e., FDI, investment by FIIs, NRIs, ADRs, GDRs, Foreign
Currency Convertible Bonds (FCCB) and convertible preference shares,
regardless of whether the said investments have been made under Schedule 1, 2,
3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside
India) Regulations.
In sectors with caps, including inter alia defence
production, air transport services, ground handling services, asset
reconstruction companies, private sector banking, broadcasting, commodity
exchanges, credit information companies, insurance, print media,
telecommunications and satellites, Government approval/FIPB approval would be
required in all cases, where :
1. An Indian company is being established with foreign
investment and is owned by a non-resident entity or
2. An Indian company is being established with foreign
investment and is controlled by a non-resident entity or
3. The control of an existing Indian company, currently
owned or controlled by resident Indian citizens and Indian companies, which
are owned or controlled by resident Indian citizens, will be/is being
transferred/passed on to a non-resident entity as a consequence of transfer
of shares to non-resident entities through amalgamation, merger,
acquisition, etc. or
4. The ownership of an existing Indian company, currently
owned or controlled by resident Indian citizens and Indian companies, which
are owned or controlled by resident Indian citizens, will be/is being
transferred/passed on to a non-resident entity as a consequence of transfer
of shares to non-resident entities through amalgamation, merger,
acquisition, etc.
These guidelines will not apply for sectors / activities
where there are no foreign investment caps, that is, 100% foreign investment
is permitted under the automatic route.
This Press Note has amplified Annexure to Press Note 7
(2008), dated June 16, 2008 to the extent stated therein.
