December 26, 2018
New FDI Restrictions Introduced For E-Commerce Marketplace Entities
On December 26, 2018, the Department of Industrial Policy and Promotion under the Ministry of Commerce (the "DIPP"), through a press note introduced certain changes to the conditions applicable to e-commerce entities under the consolidated foreign direct investment policy of 2017 (the "FDI Policy").
The DIPP has given companies time until February 1, 2019, to comply with the guidelines introduced by the Press Note.
Key take aways are :
1. Control of Inventory
(a) In addition to ownership, if an e-commerce marketplace entity exercises control over inventory, it will be deemed to be an inventory-based model and cannot receive FDI.
A marketplace entity will be deemed to control the inventory of a vendor if more than 25% of the purchases of such a vendor are from the marketplace entity or its group companies.
(b) A vendor will not be allowed to sell on a marketplace entity's platform if the control of the vendor's inventory is deemed to be with such marketplace entity or its group companies.
(c) The Previous 25% Restriction has been removed.
2. Services by the Marketplace Entity
The clarification introduced under the Press Note is that services may be provided to vendors on an e-commerce marketplace, only at arm's length and in a fair and non-discriminatory manner by: (a) marketplace entities; or (b) other entities in which a marketplace entity has direct or indirect equity participation or common control (the "Fairness Requirement"). These services include, among other things, logistics, warehousing, advertising, marketing, payments and financing.
Interestingly, the Press Note specifically sets out that cashback provided to buyers by group companies of a marketplace entity shall be fair and non-discriminatory. This appears to be the only exemption contemplated for now. However, a marketplace entity providing services to a vendor on terms which are not made available to other vendors in similar circumstances, will be deemed unfair and discriminatory. The Press Note is silent on what will be considered similar circumstances.
3. Equity Ownership
The Press Note has introduced a new restriction which states that a vendor will not be allowed to sell on a marketplace entity's platform if such marketplace entity or its group companies hold any stake or have equity participation in the vendor.
The Press Note has introduced a new restriction which states that a marketplace entity shall not mandate any vendor to sell any product exclusively on such marketplace entity's platform.
5. Submission to the Reserve Bank of India
The Press Note has introduced a new requirement for marketplace entities to provide a certificate, along with a report of a statutory auditor, to the Reserve Bank of India (the "RBI"), confirming compliance with the guidelines under the Press Note, by the 30th of September every year, for the preceding financial year. Therefore, the first set of documents, post the Press Note, will have to be submitted to the RBI by September 30, 2019, for the financial year 2018-2019.
April 29, 2018
FOREIGN EXCHANGE MANAGEMENT (ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA) REGULATIONS, 2018
The Reserve Bank of India, earlier, made the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 vide Notification No. 21/2000-RB dated 03.05.2000 which came into effect from 01.06.2000.
Now the Reserve Bank of India, in supersession of the said notification as amended from time to time, made ‘The Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, vide Notification NO. FEMA 21(R)/2018-RB, dated 26.03.2018. These regulations came into effect from 26.03.2018.
These regulations provide for-
I) Acquisition and transfer of property in India by a non resident Indian or an Overseas Citizen of India;
II) Acquisition of immovable property for carrying on a permitted activity;
III) Purchase/sale of immovable property by foreign embassies/Diplomats/Consulate Generals;
IV) Joint acquisition by the spouse of an NRI or an OCI;
V) Acquisition by a Long Term visa holder.
VI) Repatriation of sale proceeds.
I) Acquisition and transfer of property in India by a NRI or OCI
Regulation 2(c) defines the expression ‘nonresident Indian’ (NRI) as a person resident outside India who is a citizen of India.
Regulation 2(d) defines the expression ‘Overseas Citizen of India’ (OCI) as a person resident outside India who is registered as an Overseas Citizen of India Card holder under section 7(A) of the Citizenship Act, 1955.
1. An NRI or an OCI may acquire immovable property in India other than agricultural land and/farm house/plantation property.The consideration, if any, for transfer shall be made out-
a) funds received in India through banking channels by way of inward remittance from any place outside India; or
b) funds held in any nonresident account maintained in accordance with the provisions of the Act, rules or regulations framed there under.
c) No payment for any transfer of immovable property shall be made either by traveler’s cheque or by foreign currency notes or by any other mode other than those specifically permitted under this clause.
2. An NRI or OCI may acquire any immovable property in Indian other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from an NRI or from an OCI, who in any case is a relative as defined in section 2(77) of the Companies Act, 2013. section 2(77) of the Companies Act, 2013 defines the term ‘relative’ with reference to any person, means anyone who is related to another, if-
a) they are members of a Hindu Undivided Family;
b) they are husband and wife; or
c) one person is related to the other in such manner as may be prescribed;
3. An NRI or OCI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property-
a) in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations; or
b) from a person resident in India.
4. An NRI or OCI may transfer any immovable property in India to a person resident in India.
5. An NRI or OCI may transfer any immovable property other than agricultural land/farm house/plantation property to an NRI or an OCI.
II)Acquisition of immovable property for carrying on a permitted activity
A person resident outside India who has established in India, a branch, office or other place of business for carrying in India any activity, excluding a liaison office may acquire any immovable property in India, which is necessary for or incidental to carrying on such activity provided all applicable laws, rules, regulations or directions for the time being in force are duly complied with and the person files with the Reserve Bank of India, a declaration in the form IPI as prescribed by Reserve Bank of India, from time to time, not later than 90 days from the date of such acquisition.
A person resident outside India who has established in India, a branch office or other place of business for carrying in India any activity, excluding a liaison office may transfer by way of mortgage to an authorized dealer as a security for any borrowing the immovable property acquired.
No person of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Hong Kong or Macau or Nepal or Bhutan or Democratic People’s Republic of Korea shall acquire immovable property, other than on lease not exceeding 5 years without prior approval of the Reserve Bank of India.
III) Purchase/sale of immovable property by Foreign Embassies/Diplomats/Consulate Generals
A foreign Embassy/Diplomat/Consulate General may purchase/sell immovable property in India, other than agricultural land/plantation property/farm house provided-
a) clearance from Government of India, Ministry of External Affairs is obtained for such purchase/sale; and
the consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channels.
IV) Joint acquisition by the spouse of an NRI or an OCI
A person resident outside India, not being a NRI or an OCI, who is a spouse of a NRI or an OCI may acquire one immovable property, other than agricultural land/farm house/plantation property, jointly with his/her NRI/OCI spouse, subject to the following-
The consideration for transfer shall be made out-
1) Funds received in Indian through banking channels by way of inward remittance from any place outside India; or
2) Funds held in any nonresident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.
3)No payment for any transfer of immovable property shall be made either by traveler’s cheque or by foreign currency notes or any other mode other than those specifically permitted;
4) If the marriage has been registered and substituted for a continuous period of not less than 2 years immediately preceding the acquisition of such property;
5) The nonresident spouse is not otherwise prohibited from such acquisition.
V) Acquisition by a Long Term Visa holder
A person, being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who is residing in India and has been granted a Long Term Visa by the Central Government may purchase only one residential immovable property in India as dwelling unit for self-acquisition and only one immovable property for carrying out self employment subject to the following conditions-
1) The property should not be located in and around restricted/protected areas so notified by the Central Government and cantonment areas;
2) The person submits a declaration to the Revenue Authority of the District where the property is located, specifying the source of funds and that he/she is residing in India on LTV;
3)The registration documents of the property should mention the nationality and the fact that such person is on LTV;
4) The property of such person may be attached/confiscated in the event of his/her indulgence in anti-India activities;
5) A copy of the documents of the purchased property shall be submitted to the Deputy Commissioner of Police (DCP)/Foreigners Registration Office (FRO)/Foreigners Regional Registration Office (FRRO) concerned and to the Ministry of Home Affairs (Foreigners Division);
6) Such person shall be eligible to sell the property only after acquiring Indian citizenship.
7) However transfer of the property before acquiring Indian citizenship shall require prior approval of DCP/FRO/FRRO.
VI) Repatriation of sale proceeds
Section 6(5) of FEMA Act provides that the Reserve Bank may, in consultation with the Central Government, specify a person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India.
Such person or his successor shall not except with the general or specific permission of RBI, repatriate outside India, the sale proceeds of any immovable property referred to as above.
Regulation 2(e) defines the expression ‘repatriation outside India’ as the buying or drawing of foreign exchange from an authorized dealer in India and remitting it outside India through banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorized dealer from which it can be converted in foreign currency.
In the event of sale of immovable property other than agricultural land/farm house/plantation property in Indian by an NRI or an OCI, the authorized dealer may allow repatriation of the sale proceedings outside India, subject to the following conditions-
A) The immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of his acquisition or the provisions of these regulations;
B) The amount for acquisition of the immovable property was paid in foreign exchange received through banking channels or out offunds held in Foreign Currency Non Resident Account or out of funds held in Non Resident External account;
C) In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
In the event of failure in repayment of ECB availed by a person resident in India under the provisions of FEMA (Borrowing or Lending in Foreign Exchange) Regulations,2000 as amended from time to time, a bank which is an authorized dealer may permit the Overseas lender or the security trustee to sell the immovable property on which the said loan has been secured only to a person resident in India and to repatriate the sale proceeds towards outstanding dues in respect of the said loan and not any other loan.
The Regulations impose prohibition-
1) on acquisition or transfer of immovable property in India by citizens of certain countries;
2) on transfer of immovable properties in India.
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Hong Kong or Macau or Democratic People’s Republic of Korea (DPRK) without prior permission of the RBI shall acquire or transfer immovable property in India, other than lease, not exceeding five years. This prohibition shall not apply to an OCI.
The RBI may, for sufficient reasons, permit the transfer, subject to the conditions as may be considered necessary. A bank which is an authorized dealer may, subject to the directions issued by the RBI in this behalf, permit a person resident in India or on behalf of such person to create charge on his immovable property in India in favor an Overseas lender or security trustee, to secure an ECB availed under the provisions of the FEMA (Borrowing or Lending in Foreign Exchange) Regulations,2000, as amended from time to time.
An authorized dealer in India being the Indian correspondent of an overseas lender may, subject to the directions issued by the RBI in this regard, create a mortgage on an immovable property in India owned by an NRI or an OCI, being a director of a company outside India, for a loan to be availed by the company from the said overseas lender.
The funds shall be used by the borrowing company only for its business purposes overseas. In case of invocation of charge, the Indian bank shall sell the immovable property to an eligible acquirer and remit the sale proceeds to the overseas lender.
A person resident outside India who has acquired any immovable property in India in accordance with foreign exchange laws in force at the time of such acquisition or with the general or specific permission of the Reserve bank may transfer such property to a person resident in India provided the transaction takes place through banking channels in India and provided that the resident is not otherwise prohibited from such acquisition.
March 31, 2018
India and the Hong Kong Special Administrative Region (HKSAR) of China sign Double Tax Avoidance Agreement
The DTAA will give protection against double taxation to over 1,500 Indian companies and businesses that have a presence in Hong Kong as well as to Hong Kong-based companies providing services in India.
It will provide clarity to businesses regarding tax rates and tax jurisdictions, as they will now be taxed in only one of the signatory countries. This will allow investors to be more confident about their investment decisions.
Aside from tax relief, there are several other benefits that the India-Hong Kong DTAA will offer to the concerned businesses. These include:
Lower withholding tax (tax deducted at source or TDS) rates, which can be as high as 40 percent in the absence of a DTAA;
Lower dividend distribution tax (DDT), which is an additional tax levied on foreign investors besides the corporate income tax; and
In certain circumstances, credits for taxes paid on the double-taxed income that can be encashed at a later date.
Investors will benefit from a lower withholding tax of 10 percent on interest or royalties – provided they prove that their transactions are not designed specifically to avoid taxes. The India-Hong Kong DTAA also provides for capital gains taxation of indirect transfers – gains from the sale of shares of a company deriving more than 50 percent of its value from property situated in a country will be taxed in that country.
Jan 10, 2018
FDI policy further liberalized in key sectors
1) 100% FDI under automatic route for Single Brand Retail Trading
2) 100% FDI under automatic route in Construction Development
3) Foreign airlines allowed to invest up to 49% under approval route in Air India
4) FIIs/FPIs allowed to invest in Power Exchanges through primary market
5) Definition of ‘medical devices’ amended in the FDI Policy
December 29, 2017
Private Equity sector sees record $24.4b inflow in 2017
The private equity sector has seen robust growth in 2017 with average deal size doubling in the year although deal volume declined.
Overall deal volume fell by 22% to 570 deals in 2017 from 726 in the previous year, even as the average deal size surged to $42.8 million from $21.2 million.
India received a record $24.4 billion in private equity (PE) investments in 2017, 26% more than the previous highest $19.3 billion recorded in 2015, according to data compiled by Venture Intelligence, a researcher focused on private company financials, transactions and valuations.
December 15, 2017
Regulator allows PE funds to be promoters of insurance firms with lock-in period
The Insurance Regulatory Development Authority of India has approved a proposal, which allows private equity funds to become promoters of an insurance company
“They will have to provide for future capital as required,” the official said. The minimum capital requirement for insurance companies is Rs 100 crore.
November 24, 2017
Indian private equity vehicles head towards breaking fundraising records in 2018
The Indian private equity market has seen a record number of funds close this year but it is 2018 that is set to see records breached as more domestic vehicles set out to raise dry powder. According to a recent report by Preqin, in 2017 so far a record 24 India-based private equity funds have achieved closing, securing a combined sum of $2.9 billion. At present, there are 101 funds on the road targeting to raise around $14.4 billion.
September 30, 2017
SoftBank Vision Fund to invest as much as $100 million in Sun Mobility.
Sun Mobility is a joint venture between Chetan Maini’s Virya Mobility 5.0 and Khemka family’s Sun Group, which has investments across sectors such as energy, mining and real estate.
Sun Mobility is developing smart batteries for a wide spectrum of electric vehicles including cars, buses and scooters. The company also plans to develop a network of renewable energy-powered battery-charging stations
July 01, 2017
Online Filing System for Foreign Venture Capital Investors Introduced by SEBI.
1.In order to facilitate ease of operations in terms of applying for registration, reporting and various compliances under SEBI (Foreign Venture Capital Investors) Regulations, 2000 (hereinafter referred to as ‘FVCI Regulations’), SEBI has introduced an online system for filings related to Foreign Venture Capital Investors(FVCI).
2. The online system can be used for application for registration, reporting and filing under the provisions of FVCI Regulations.2.All applicants desirous of seeking registration as a FVCI are now required to submit their applications online only, through SEBI Intermediary Portal at https://siportal.sebi.gov.in.Furthermore, all SEBI registered FVCIs are now required to file their compliance reports and submit applications for any request under the provisions of FVCI Regulations, through the online system only. The aforesaid online filing system for FVCI has been made operational from July 1, 2017
May 01, 2017
India to see $35-40 billion worth impact investments by 2025
India is projected to see impact investments worth up to $40 billion by 2025 as the country is in a "sweet spot" with high potential to deliver solutions for various problems, according to global grouping GIIN.
Based in New York, the Global Impact Investing Network (GIIN) is a not-for-profit group that works to promote impact investments and has around 230 members.
Generally, impact investments refer to those made with the aim of having a social and environmental impact along with the investors getting financial returns.
GIIN's Advisor for South Asia, Anil Sinha said, there has been tremendous development in India around impact investing activities in the last five years and the country is in a sweet spot.
"In India, about $ 4 billion has been invested as part of impact investments in about five years. He noted that financial inclusion and energy have been dominant areas in the $ 4 billion impact investment portfolio in India.
APRIL 29, 2017
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002- Section 3 (1) (b) - Requirement of Net Owned Fund (NOF) for Asset Reconstruction Companies - Notification DNBR (PD-ARC) No. 05/ED(SS)-2017 dated April 28, 2017
RBI fixes the minimum NOF requirement for ARCs at Rs 100 crore on an ongoing basis with effect from the date of the above Notification.
NOF shall be arrived at by reducing from Owned Fund (OF), the amounts representing -
i. investments of the ARC in shares of –
a. its subsidiaries;
b. companies in the same group;
c. all other ARCs; and
ii. the book value of debentures, bonds, outstanding loans and advances made to, and deposits with,
a. subsidiaries of the ARC; and
b. companies in the same group, to the extent such amount exceeds 10% of the OF(Owned funds)
All the ARCs which are already registered with Reserve Bank of India as on the date of the Notification and not having the revised minimum NOF as on date shall achieve a minimum NOF of Rs 100 crore latest by March 31, 2019.
APRIL 02, 2017
1) FIPB clears Shanghai Fosun's deal to buy India's Gland Pharma
The Foreign Investment Promotion Board (FIPB) cleared Shanghai Fosun's deal to buy India's Gland Pharma. It approved 10 FDI proposals including Gland Pharma's proposal which is worth Rs 4,300 crore
2) FDI worth Rs 61,000 received in defence sector post revision of policy: MoS Defence Subhash Bhamre
"Foreign investment beyond 49 per cent and upto 100 per cent is permitted through government approval, wherever it is likely to result in access to modern technology," said MOS Subhash Bhamre
“FDI in defence sector is subject to industrial licence under the Industries (Development & Regulation) Act, 1951. From July 2016 to January 2017, FDI to the amount of Rs 0.61 lakh (61,000) has been received from M/s Elbit Systems Land and C41 Ltd, Israel in M/s BF Elbit Advanced Systems Pvt Ltd,” Bhamre said.
He added around 36 FDI proposals or joint ventures have been approved in defence sector for manufacture of various defence equipment
March 04, 2017
Government to soon announce relaxations in the Foreign Direct Investment
The government is expected to soon announce relaxations in the foreign direct investment (FDI) policy in certain sectors, including single brand retail.
The further liberalisation in the FDI policy is aimed at providing better business environment by removing impediments, an official said.
The easing of the policy will be on the lines of the announcements made by Finance Minister Arun Jaitley in the Budget for 2017-18.
The government last year relaxed FDI norms in over a dozen sectors, including defence, civil aviation, construction and development, private security agencies, real estate and news broadcasting.
Union Minister Harsimrat Kaur Badal recently stated that the government will consider the demands made by foreign retailers for allowing non-food items such as homecare products under the policy.
The government is also considering a proposal to increase FDI limit in print media to 49 per cent from 26 per cent.
What We Do
We have a thorough understanding of the economic and legal environment and are equipped to provide advisory on the following areas
1) Overview of Foreign Direct Investment in India;
2) Setting up of a business unit in India like Company, Branch Office, Liaison Office;
3) Facilitating approvals/ clearances from government departments/ regulators/statutory agencies such as Foreign Investment Promotion Board (FIPB), Director General of Foreign Trade (DGFT), Department of Industrial Policy & Promotion (DIPP), Secretariat for Industrial Assistance (SIA) and Reserve Bank of India (RBI);
4) Obtaining approvals in case the enterprise intends to establish an Export Oriented Unit (EOU), Special Economic Zone (SEZ) and Software Technology Park (STP);
5) Advising and drafting of various agreements such as joint venture agreement, shareholders' agreements, share purchase agreements, trade mark license agreements, memorandum and articles of association of a joint venture company;
6) Tax planning with respect to setting up a business in India;
7) Advisory services on pre and post set up compliance with the regulatory and legal framework