Searching for answers in new FDI proposal

On 28 August 2019 the government announced its new proposal on Foreign Direct Investment (FDI). While the announcement has been made, the fine print of the proposed changes to the existing FDI policy has still to be revealed and the government will need to make certain policy and regulatory changes to support the ease of doing business in sectors affected by the changes. The following are the key points in the proposal.

Clarifications awaited on changes to SBO regime

On 13 June 2018, the Ministry of Corporate Affairs (MCA), released the Companies (Significant Beneficial Ownership) Rules, 2018. The rules, along with amendments to sections 89 and 90 of the Companies Act, 2013, marks an effort to make Indian laws consistent with global anti-money laundering standards. While 11 September 2018 was indicated as the last date for compliance with reporting requirements under the rules, the MCA issued a circular on 10 September 2018 clarifying that Form BEN-1 under the rules was being revised and advised stakeholders to wait for the revision.

Liberalisation of Oveeseas Investment Regulations - Opening of new opportunities.

The Foreign Exchange Management Act, 1999 (“FEMA”) was, pursuant to the Finance Act, 2015, amended on October 15, 2019, to grant powers to the Reserve Bank of India (“RBI”) to prescribe permissible class(es) of capital account transactions related to debt instruments (in the form of regulations); while the Central Government were given powers to deal with permissible capital account transactions not involving debt instruments (in the form ofrules). 

SEBI rationalises overseas investment guidelines for AIFs and VCFs.

SEBI, by way of a circular on August 17, 2022 (“Circular”), issued new guidelines for investments by Alternative Investment Funds (“AIFs”) and Venture Capital Funds (“VCFs”) in securities of companies set up overseas.