Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016
This Notification has amended Notification No. FEMA. 20/2000-RB dated 3rd May 2000 as under: –
A. In Regulation 2 – new clause (viiAA) has been inserted as under: –
“(vii AA) “Manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.”
B. In Regulation 14 the following amendments have been made
a. In sub-regulation 1, existing clause (i) and clause (ia) have been amended.
b. In sub-regulation 3, existing sub-clause (D) in clause (iv) has been amended.
c. Sub-regulation 5 – Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in sectors under government approval route – has been amended.
d. In sub-regulation 6, the existing clause (ii) has been amended.
C. In Schedule 1 the following amendments have been made: –
a. In paragraph 2, paragraph beginning with “Provided further that the shares or convertible debentures…..” and ending with “…………permitted to the extent specified in Regulation 14.” has be deleted.
b. In paragraph 2, new clause (v), has been inserted as under: –
“(v) by way of swap of shares, provided the company in which the investment is made is engaged in an automatic route sector, subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.
c. Note: A company engaged in a sector where foreign investment requires Government approval may issue shares to a non-resident through swap of shares only with approval of the Government”
d. In paragraph 3, the existing sub-paragraph (c) has been deleted.
e. In ‘Annex B’, the existing table – Foreign Investments caps and entry route in various sectors – has been substituted.
D. In Schedule 9 the following amendments have been made: –
a. Existing paragraph 4 – Entry Route – has been amended.
b. Existing paragraph 8 – Downstream Investment – has been deleted.
E. E xisting Schedule 11 – Investment by a person resident outside India in an Investment Vehicle – has been substituted.
