May 7, 2014
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Foreign Direct Investment (FDI) in India – Reporting mechanism for transfer of equity shares/ fully and mandatorily convertible preference shares/ fully and mandatorily convertible debentures
As per Reserve Bank of India’s circular dated September 6, 2013, a non-resident (NR) [including a Non Resident Indian (NRI)], who has acquired and continues to hold control in an Indian company in accordance with SEBI (SAST) Regulations, had been permitted, under the FDI scheme, to acquire shares of that company on a stock exchange in India through a registered broker. In case of transfer of shares, Form FC-TRS had to be submitted to the AD Category – I bank within 60 days from the date of receipt of the amount of consideration.
Reserve Bank of India has reviewed the existing procedure and thereafter issued the Circular no: A.P. (DIR Series) Circular No. 127 dated May 2, 2014 which states as under:
The AD Category-I bank may approach Regional Office concerned of Reserve Bank of India, Foreign Exchange Department to regularize the delay in submission of form FC-TRS, beyond the prescribed period of 60 days and in all other cases, form FC-TRS shall continue to be scrutinised at AD bank level as per extant practice.
Foreign Direct Investment in Pharmaceuticals sector – clarification
As per the extant regulations, Foreign Direct Investment (FDI) up to 100 per cent is permitted under automatic route for greenfield investments and FDI up to 100 per cent is permitted under Government approval route for brownfield investments (i.e. investments in existing companies) in pharmaceuticals sector.
The Reserve Bank of India has issued the Circular no: A.P. (DIR Series) Circular No. 124 dated April 21, 2014 reviewing the extant FDI policy for pharmaceutical sector and has now decided with immediate effect that the existing policy would continue with the condition that ‘non-compete’ clause would not be allowed except in special circumstances with the approval of the Foreign Investment Promotion Board (FIPB) of the Government of India.
Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP)
The Reserve Bank of India has issued the Circular no: A.P. (DIR Series) Circular No. 123 dated April 16, 2014 permitting Limited Liability Partnerships (“LLP”) formed and registered under the Limited Liability Partnership Act, 2008 to accept Foreign Direct Investment subject to the conditions specified in the circular.
The instructions issued in the above said circular shall be effective from May 20, 2011.
However, reporting requirement of FDI in LLP shall come into force from the date of issue of instructions by the Reserve Bank in this regard. The LLP which have received foreign investment in terms of FIPB approval between May 20, 2011 to the date of the above circular, shall comply with the reporting requirement in respect of FDI within 30 or 60 days, as applicable, from the date of this circular.
External Commercial Borrowing (ECB) Policy – Review of all-in-cost ceiling
The Reserve Bank of India (“RBI”) has issued circular no: A.P. (DIR Series) Circular No.121 dated April 10, 2014 after reviewing the all-in-cost ceiling of External Commercial Borrowing. It has been decided to continue the ceiling limit as mentioned below till June 30, 2014:
|Average Maturity Period
||All-in-cost over 6 month LIBOR*
|Three years and up to five years
|More than five years
|* for the respective currency of borrowing or applicable benchmark
Trade Credits for Imports into India – Review of all-in-cost ceiling
The Reserve Bank of India (“RBI”) has issued circular no: A.P. (DIR Series) Circular No.122 dated April 10, 2014 wherein it has been notified that all-in-cost ceiling of Trade Credits for Imports into India as specified earlier in terms of circular dated September 11, 2012 will continue to be applicable till June 30, 2014.
||All-in-cost ceilings over 6 months LIBOR*
|Up to one year
||350 basis points
|More than one year and up to three years
|More than three years and up to five years
|* for the respective currency of credit or applicable benchmark
Foreign investment in India in Government Securities
The Reserve Bank of India (“RBI”) has issued the circular no: A.P. (DIR Series) Circular No.118 dated April 7, 2014 with respect to investment in Government Securities by SEBI registered FIIs, QFIs, long term investors and FPIs. In order to encourage longer term flows, RBI has reviewed the limits of investment by the above category of investors, and the revised position is as follows:
|Government dated securities – Securities having residual maturity of one year and above.
||USD 30 billion
||RFPIs (including existing FIIs and QFIs) and Long term investors registered with SEBI – SWFs, Multilateral Agencies, Pension/ Insurance / Endowment Funds and foreign Central Banks.
||Existing investment in T-bills and Government dated securities of less than one year residual maturity shall be allowed to taper off on maturity/sale.
No fresh investment in T-bills and Government dated securities of less than one year residual maturity allowed.
Foreign Exchange Management Act, 1999 (FEMA) Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules) - Compounding of Contraventions under FEMA, 1999.
The Reserve Bank of India (“RBI”) has issued Circular no: A.P. (DIR Series) Circular No.117 dated April 4, 2014 delegating powers to compound the following contraventions to the Regional Offices:
The above contraventions can be compounded by all Regional Offices (except Kochi and Panaji) without any limit on the amount of contravention. Kochi and Panaji Regional offices can compound the above contraventions for amount of contravention below Rupees one hundred lakh (Rs.1,00,00,000/-). The contraventions above Rupees one hundred lakh (Rs.1,00,00,000/-) under the jurisdiction of Panaji and Kochi Regional Offices and all other contraventions of FEMA will be compounded by Cell for Effective Implementation of FEMA (CEFA), Mumbai.
||Brief Description of Contravention
||Paragraph 9(1)(A) of Schedule I to FEMA 20/2000-RB dated May 3, 2000
||Delay in reporting inward remittance received for issue of shares.
||Paragraph 9(1)(B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000
||Delay in filing form FC(GPR) after issue of shares.
||Paragraph 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000
||Delay in issue of shares/refund of share application money beyond 180 days, mode of receipt of funds, etc.
||Paragraph 5 of Schedule I to FEMA 20/2000-RB dated May 3, 2000
||Violation of pricing guidelines for issue of shares.
||Regulation 2(ii) read with Regulation 5(1) of FEMA 20/2000-RB dated May 3, 2000
||Issue of ineligible instruments such as non-convertible debentures, partly paid shares, shares with optionality clause, etc.
||Paragraph 2 or 3 of Schedule I to FEMA 20/2000-RB dated May 3, 2000
||Issue of shares without approval of RBI or FIPB respectively, wherever required.
By CS P. Surya Prakash gg 0 Comments