Direct Tax
Consulting
ESG Advisory
Indirect Tax
Growth Advisory
Internal Audit
BFSI Audit
Industry Audit
Valuation
RBI Services
SEBI Services
IRDA Registration
AML Advisory
IBC Services
NBFC Compliance
IRDA Compliance
Finance & Accounts
Payroll Compliance Services
HR Outsourcing
LPO
Fractional CFO
General Legal
Corporate Law
Debt Recovery
Select Your Location
India has a comprehensive Foreign Direct Investment (FDI) Policy. FDI Policy permits foreign investments in India under two routes i.e. automatic route and the government approval route. In the year 2020, the government amended the FDI Policy and imposed stricter norms on foreign investors from neighbouring countries. Subsequently, even the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules) were also amended. To align with these amendments, a series of amendments were introduced by the Ministry of Corporate Affairs (MCA) pertaining to foreign investments from neighbouring countries.
To prevent hostile takeovers of Indian companies by foreign investors from neighbouring countries, the DPIIT amended the FDI policy vide Press Note No. 3 dated 17th April 2020. As per the amendment, foreign investors from neighbouring countries are permitted to invest in India only with prior government approval. In the erstwhile regime, only individuals and entities from Pakistan and Bangladesh were required to obtain government approval before investing in India. However, pursuant to the amendment, investments from individuals or entities from Pakistan, Afghanistan, China, Bhutan, Nepal, Myanmar, and Bangladesh can invest in India only after obtaining government approval.
Table of Contents
If foreign investors from neighbouring countries want to invest in India, they will have to get prior approval from the Government of India before investing in the shares of an Indian company. The amendment will apply in two cases:
Pursuant to the amendment in the FDI Policy, subsequent changes were also made by the Ministry of Corporate Affairs[1] in the Company Law Rules. These amendments have been discussed in detail below:
Indian companies accepting foreign investments in the form of share issues should check if the shareholder confirms the status of the proposed shareholder. In the case of a foreign investor from a neighbouring country, the company has to ensure that approval from the government has been acquired by the proposed shareholder. To ensure government approval, the MCA has introduced mandatory reporting compliance in the NDI Rules. The mandatory reporting requirements implemented by MCA are as follows:
To protect Indian entities from opportunistic takeovers, India amended its FDI Policy. This move will prevent foreign investors from neighbouring countries from actively investing in Indian start-ups, eroding the Indian-ness of Indian entities. This move was taken during the pandemic to protect Indian entities whose valuations have been hit given the correction in equity markets arising from the pandemic and lockdown. However, it will have a long-lasting beneficial effect. The intention behind the amendment is to preserve the Indian manufacturing and technology sectors.
Read our Article: All you need to know about Foreign Investment
A joint venture is a strategic business arrangement in which two or more companies collaborate...
With the rising inflation rates and various other economic factors, wealthy Americans are incre...
Before approaching the new suppliers or any other third parties, you should always go for the v...
With the increasing landscape of Fintech Companies, it is increasingly vital that fintech compl...
This blog gives a detailed description through an audit report for industrial waste by examinin...
Are you human?: 5 + 7 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Amidst the Covid-19 pandemic, the Government of India has brought out different forms of measures to deter foreign...
10 Sep, 2022
Overview of Investment in India The government of India has brought out various modes of foreign investment through...
Chat on Whatsapp
Hey I'm Suman. Let's Talk!