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August 2013

A. P. (DIR Series) Circular No. 01 dated July 04, 2013

By Gaurang Gandhi, Chartered Accountant
Reading Time 2 mins
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Notification No.FEMA.278/2013-RB dated June 07, 2013

Foreign Investment in India – Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

Vide the above Notification a new Schedule – Schedule 14 – has been added in Notification No. FEMA 20/2000-RB dated 3rd May 2000 (Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000). This Notification has come into effect, retrospectively, from 13th February, 2009.

Annexed to this circular are guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in Indian companies and for establishment of Indian companies/ transfer of ownership or control of Indian companies from resident Indian citizens to non-resident entities, in sectors with caps. Since these guidelines are to be applied retrospectively, this circular provides that: –

1. Any foreign investment already made in accordance with the guidelines in existence prior to 13th February, 2009 would not require any modification to conform to these guidelines.

2. All other investments, after the said date (i.e. 13th February, 2009), would come under the ambit of these new guidelines. Hence, in case of investments made between 13th February, 2009 and the date of publication of the FEMA notification (notified vide G.S.R. 393(E) dated 21st June, 2013), Indian companies have to intimate the concerned Regional Office of RBI, within 90 days from the date of this circular, through their bank, detailed position with regard to the issue / transfer of shares or downstream investment which is not in conformity with the regulatory framework. They have to then comply with the guidelines within 6 months or such extended time as considered appropriate by RBI in consultation with Government of India.

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