FDI Regulations - Recent Amendments
- Issuance of shares against import of capital goods/ machinery now excludes second hand machinery (January 10)
- Issuance of shares against pre-incorporation/ pre-operative expenses covers payment directly made to the Indian company as well as expenses incurred through the bank account opened by the foreign investor under FEMA (May 17)
- No double reporting of investments by FVCI – reporting either under FC-GPR/FC-TRS or through custodian bank (June 12)
- Guidelines issued under Press Notes 2,3,4 of 2009 now notified under the FDI Regulations (Regulation 14) with retrospective effect from February 13, 2009 [AP DIR Circular dated July 4, 2013 read with Notification dated June 7, 2013]
- Investments before February 13, 2009 grandfathered
- All investments between February 13, 2009 and June 7, 2013 to be intimated to RBI within 90 days starting from July 4, 2013
- RBI shall consider treating any non-conformity with Notification dated June 7, 2013 as compliant with the present regulations
- Banking companies: Distinction between strategic investments and investments on account of CDR/ defaults in loan / any other loan restructuring mechanism
- Usage of internal accruals – not permitted under Notification dated June 7, 2013 unless the company was an investing company. Position now clarified under Notification dated August 27, 2013.
- Burden of compliance with downstream investment norms caps/ conditions on the first level Indian company (i.e., company that has received FDI directly)
- Compliance certificate to be obtained from the statutory auditor on an annual basis (compliance with FEMA and norms on downstream investment)
- Statutory auditor certificate details to be mentioned in the director’s report section of the annual report
- Any qualifications by statutory auditor to be brought to the notice of the RBI immediately by the Indian company
In over a decade of drafting wills and trust, I have noticed that many people do their downstream planning but forget to do upstream planning.