Measures taken by govt- The Government of India has issued a Notification No. 5(5)/2020-FDI Policy, dated 17/04/2020, Press Note No. 3(2020 Series) to review existing FDI policy to curb opportunistic takeovers/acquisitions of Indian companies during COVID 19. It has amended para 3.1.1 of FDI policy. Insights are as under:

Extract of the provisions are as follows:
1. Present Position Para 3.1.1: A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

Our view: In the prior section, it was provided that any NRI can invest in India as per directions provided under the FDI policy. However countries like Pakistan and Bangladesh were specifically restricted to invest in India however, it had been provided that the aforesaid countries can invest in India only through the Government route ie., approval route in sectors which are not restricted by the government for foreign investment.

2. Revised Position Para 3.1.1: 3.1.1(a) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land borders with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

Our view: Now the provision has been amended and it is extended to other neighboring countries as well. It had been provided that any country sharing a land borders with India or any person who is a beneficial owner of any investment being done in India is a citizen of those countries required to invest only through the Government route.

Basically there are 7 Countries sharing the border with India which are Afghanistan and Pakistan to the North-West, China, Bhutan and Nepal to the north, Myanmar to the far East and Bangladesh to the east. Sri Lanka (from the south-east) and Maldives.

3.1.1(b) In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval.

Our view: There may be a cases that the where there is any ownership transfer, currently or in future of FDI park in India, which may be done directly or indirectly. In any of the cases, if the same is come under the purview of aforesaid provisions then the same also required to be made through Government approval only. MEASURES TAKEN BY GOVT.

transfer of shares from resident to non resident

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