There are mainly 2 procedures for receiving foreign direct investment in an Indian company namely:
Automatic: In this scenario, FDI is allowed for the investment without the prior approval of the government including the RBI in all activities considered in FDI policy.
Government: FDI requires prior approval of the government including RBI, FIPB, Department of Economic Affairs, and Ministry of Finance.
The sectors where FDI activities are prohibited for both government and automatic routes are as follows:
● Atomic Energy
● Lottery Business
● Gambling and Betting
● Chit fund business
● Nidhi Company
● TDRs
● Cigar products
A resident person who is willing to transfer security by way of a gift to a non-resident person has to make an application to the foreign exchange department, and Reserve Bank of India, confessing the name, address, and reason for making a gift.
The Foreign Exchange Management Act. 1999 is a legal framework for foreign transaction applications for all the organisations of India as well as abroad.
Respecting the guidelines issued by the Government of India as well Reserve Bank of India, investment can be made in shares issued by an unlisted company which compliance with FEMA.
FEMA rules and regulations don’t prohibit foreign investment in the right shares issued by an Indian company at a discount. Shares are issued at the same price whether the person is a resident or non-resident.
Yes, FCCBs can be issued by Indian companies in the overseas market concerning the scheme for the issue of Foreign currency Convertible Bonds and Ordinary shares. Furthermore, the issue needs to conform to the external commercial borrowing guidelines, issued by RBI.
Downstream investment is an investment made by the company in another company by way of subscription or taking control of shares. If the investment is made by an Indian company to another Indian company already having foreign investment is termed as downstream investment.
An Indian company will be treated as ‘resident owned’ if more than 50% of the company capital is owned by the resident Indian citizen/Indian companies which are controlled by the resident Indian citizen.
No, only NRIs/PIOs are included in the rules to set up partnership/proprietorship concerns in India.