Bare Acts Live

[(ja) 'find Depository' Receipts'-- shall" have the same meaning as assigned to it in the Companies (Issue of Indian Depository Receipts) Rules, 2004]

(k) "Indian party" means a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act, 1932 making investment in a Joint Venture or Wholly Owned Subsidiary abroad, and includes any other entity in India as may be notified by the Reserve Bank:-

(l) "Investment banker" means an Investment banker registered with the Securities and Exchange Commission in USA, or the Financial Services Authority in UK, or appropriate regulatory authority in Germany, France, Singapore or Japan;

(m) "Joint Venture (JV)" means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment;

(n) "mutual fund" means a mutual fund referred to in clause (23-D) of section 10 of the Income Tax Act, 1961;

(o) "Net worth" means paid up capital and free reserves;

(p) "Real estate business" means buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges;

(q) "Wholly Owned Subsidiary (WOS)" means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party;

[(qa) "venture capital fund" means a fund as defined under the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996;]

[(qb) "trust" means a Trust registered under the Indian Trust Act, 1882;

(qc) "society" means a society registered under the Societies Registration Act, 1860;]

(r) "agricultural operations" means agricultural operations as defined in the "National Bank for Agriculture and Rural Development Act, 1981;

[(s) "Foreign Currency Exchangeable Bond" means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an issuing company and subscribed to by a person who is a resident outside India in foreign currency and exchangeable into equity share of offered company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments;

(v) "promoter group" has the same meaning as defined in the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000;]

[(w)] words and expressions used but not defined in these regulations shall have the meanings respectively assigned to them in the Act.

(a) total "financial commitment" including all forms of guarantees remains within the overall ceiling stipulated for overseas investment by an Indian party, and

(b) no guarantee is "open ended";]

(d) utilisation of the amount raised by issue of ADRs/GDRs by the Indian party;

(e) external Commercial Borrowing in conformity with other parameters of the ECB guidelines;

[(f) swap of shares;]

[(g) ADR/GDR stock swap subject to the valuation norms and sectoral cap.]

[(h) Fifty per cent of the value of performance guarantee issued by Indian party to or on behalf of the JV/WOS.

Explanation : In cases where invocation of the performance guarantees breach the ceiling for the financial exposure of 100%, or as decided by the Reserve Bank from time to time, of the net worth of the Indian party, the Indian party shall seek the prior approval of the Reserve Bank before remitting funds from India, on account of such invocation.]

[(i) hundred per cent of the value of the bank guarantee issued by a resident bank on behalf of an overseas JV/WOS of the Indian party, which is backed by a counter guarantee/collateral by the Indian party.]

Explanation .-For the purpose of reckoning net worth of an Indian party, the net worth of its holding company (which holds at least 51% stake in the Indian party) or its subsidiary company (in which the Indian party holds at least 51% stake) may be taken into account to the extent not availed of by the holding company or the subsidiary independently and has furnished a letter of disclaimer in favour of the Indian party:

(b) for the purposes of investment by acquisition of shares of an existing company outside India where the consideration is to be paid fully or partly by issue of the Indian party's shares, shall be accompanied by the valuation carried out by a Category I Merchant Banker registered with the SEBI or an Investment Banker/Merchant Banker registered with the appropriate regulatory authority in the host country.]

(a) prima facie viability of the Joint Venture/Wholly Owned Subsidiary outside India;

(b) contribution to external trade and other benefits which will accrue to India through such investment;

(c) financial position and business track record of the Indian party and the foreign entity;

(d) expertise and experience of the Indian party in the same or related line of activity of the Joint Venture or Wholly Owned Subsidiary outside India.

(3) An unlisted Indian Party, who has set up WOS abroad or have at least 51 per cent stake in an overseas JV, is permitted to write off capital and other receivables up to 25 per cent of the equity investment in the JV/WOS under the Approval Route.]

17. Transfer by way of sale of shares involving write-off. - Where the transfer by way of sale of shares or security referred to in sub-regulation (1) of regulation 16 by any Indian party listed on any stock exchange in India, is for a price less than the amount invested in the share or the security transferred,--

PART II

Investments Abroad By Individuals In India

(b) the Indian concern's shareholding in any one company outside India by virtue of shares accepted as aforesaid shall not exceed ten per cent of the paid-up capital of the company outside India, whose shares are accepted.]

(c) Other persons .resident in India including resident individuals may hold the underlying shares only for the purpose of sale within a period of 30 days from the date of conversion of the IDRs into underlying shares.]

23. Transfer of a foreign security by a person resident in India. - A person resident in India, who has acquired or holds foreign securities in accordance with the provisions of the Act, rules or regulations made thereunder, may transfer them by way of pledge for obtaining fund based or non-fund based facilities in India from an authorised dealer.

[(a) acquire foreign security as qualification shares issued by an entity incorporated outside India for holding the post of a director in the entity provided that:

(i) the extent of acquiring the qualification shares is as per the law of the host country where the entity is located and

(ii) the limit of remittance for acquiring such qualification shares shall be within the overall ceiling prescribed for the resident individuals under the Liberalised Remittance Scheme (LRS) in force at the time of acquisition.]

(b) acquire foreign securities by way of rights shares in a company incorporated outside India:

(c) where such person is an employee or a director of the Indian promoter company, acquire by way of purchase shares of a Joint Venture or Wholly Owned Subsidiary outside India of the Indian promoter company, in the field of software:

(i) the consideration for purchase does not exceed the ceiling as stipulated by RBI from time to time;

(ii) the shares so acquired do not exceed 5% of the paid-up capital of the Joint Venture or Wholly Owned Subsidiary outside India; and

(iii) after allotment of such shares, the percentage of shares held by the Indian promoter company, together with shares allotted to its employees is not less than the percentage of shares held by the Indian promoter company prior to such allotment.

[SCHEDULE V]

[See Regulation 20A]

A. Overseas Direct Investments by Resident Individuals

1. Resident individual is prohibited from making direct investment in a JV or WOS abroad which is engaged in the real estate business or banking business or in the business of financial services activity.

2. The JV or WOS abroad shall be engaged in bona fide business activity.

3. Resident individual is prohibited from making direct investment in a JV / was [set up or acquired abroad individually or in association with other resident individual and / or with an Indian party] located in the countries identified by the Financial Action Task Force (FATF) as "non co-operative countries and territories" as available on FATF website www.fatf-gafi.org or as notified by the Reserve Bank.

4. The resident individual shall not be on the Reserve Bank's Exporters Caution List or List of defaulters to the banking system or under investigation by any investigation I enforcement agency or regulatory body.

5. At the time of investments, the permissible ceiling shall be within the overall ceiling prescribed for the resident individual under Liberalised Remittance Scheme as prescribed by the Reserve Bank from time to time.

[Explanation: The investment made out of the balances held in EEFC / RFC account shall also be restricted to the limit prescribed under LRS.]

6. The JV or was, to be acquired / set up by a resident individual under this Schedule, shall be an operating entity only and no step down subsidiary is allowed to be acquired or set up by the JV or WOS.

7. For the purpose of making investment under this Schedule, the valuation shall be as per Regulation 6(6)(a) of this Notification.

8. The financial commitment by a resident individual to I on behalf of the JV or was, other than the overseas direct investments as defined under Regulation 2(e) read with Regulation 20A of this Notification, is prohibited.

B. Post Investment Changes

Any alteration in shareholding pattern of the JV or was may be reported to the designated AD within 30 days including reporting in the Annual Performance Report as required to be submitted in terms of Regulation 15 of this Notification.

C. Disinvestment by Resident Individuals

1. A resident individual, who has acquired / set up a JV or was under the provisions of this Schedule, may disinvest (partially or fully) by way of transfer / sale or by way of liquidation / merger of the JV or WOS abroad.

2. Disinvestment by a resident individual shall be allowed after one year from the date of making first remittance for setting up or acquiring the JV or was abroad.

3. The disinvestment proceeds shall be repatriated to India immediately and in any case not later than 60 days from the date of disinvestment and the same may be reported to the designated AD.

4. No write off shall be allowed in case of dis-investments by the resident individuals.

D. Reporting Requirements

[1. The resident individual, making overseas direct investments under the provisions of this Schedule, submits duly completed Part I of the Form ODI, as prescribed by the Reserve Bank from time to time, to the designated authorised dealer, within 30 days of making the remittance.]

[2. The investment, as made by a resident individual, shall be reported by the designated authorised dealer to the Reserve Bank in Form ODI Part I and II, as prescribed by the Reserve Bank from time to time, within 30 days of receipt of disinvestment proceeds.]

3. The obligations as required in terms of Regulation 15 of this Notification shall also apply to the resident individuals who have set up or acquired a JV or WOS under the provisions of this Schedule.

[4. The disinvestment by the resident individual may be reported by the designated AD to the Reserve Bank in Part IV Form ODI, as prescribed by the Reserve Bank from time to time, within 30 days of receipt of disinvestment proceeds.]

[FORM ODI]

PART I

Section A: Details of Indian Party

Section B : Details of Investment in New Project

Section C : Details of Investment in Existing Project

Section D : Funding for JV / WOS

Section E : Declaration by the Indian Party

Section F: Certificate by the Statutory Auditors of the Indian Party

(i) the investment is not in real estate oriented or banking business, and

(ii) the amount of foreign exchange proposed to be purchased for remittance towards the investment together with remittances for all overseas investments already made and exports and other dues capitalised / swap of shares / investment from ECB / FCCB balances for investment abroad under the Automatic Route is within the limit stipulated by the Reserve Bank from time to time. This has been verified with reference to the net worth of the Indian party as on the date of last audited balance sheet, i.e.,..............(date)

(iii) has complied with the valuation norms prescribed for the investment

(iv) has complied with the ECB guidelines #

(v) that the Indian party (a) has made net profits during the preceding three years from the financial services activity, (b) has fulfilled the prudential norms of capital adequacy as prescribed by the regulatory authority in India; (c) has been registered with the appropriate regulatory authority in India for conducting financial services activity and (d) has obtained approval for the investment in financial services sector activities from the regulatory authorities concerned in India and abroad*.

PART II

REPORTING OF REMITTANCES

DETAILS OF CURRENT REMITTANCES EFFECTED

(i) has been allowed under the Automatic Route based on the certification given by the Statutory Auditors confirming compliance with the prescribed terms and conditions by the Indian party ;

(ii) is in accordance with the terms and conditions of the approval letter issued by the Reserve Bank ; and

(iii) in respect of the invoked guarantee remittance has been made after satisfying that the claim is in conformity with the terms and conditions of the guarantee issued to/on behalf of the JV/WOS abroad.

PART III

ANNUAL PERFORMANCE REPORT (APR)

PART IV

REPORT ON CLOSURE/DISINVESTMEMT/VOLUNTARY LIQUIDATION/WINDING UP OF JV/WOS

To be submitted by the designated AD Category -I bank

(All Amounts in FCY, in thousands)

(b) if the shares are not listed on the stock exchange, and the shares are dis-invested by a private arrangement, the share price is not less than the value certified by a Chartered Accountant /Certified Public Accountant as the fair value of the shares based on the latest audited financial statements of the Joint Venture or Wholly Owned Subsidiary;

(c) The Indian party does not have any outstanding dues by way of dividend, technical know-how fees, royalty, consultancy, commission or other entitlements, and/or export proceeds from the Joint Venture or Wholly Owned Subsidiary;

(d) The overseas concern has been in operation for at least one full year and the Annual Performance Report for that year has been submitted to the Reserve Bank;

(e) The Indian party is not under investigation by CBI/ED/SEBI/IRDA or any other regulatory authority in India.

.......................................................................

(Signature of authorised official of the bank)