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JC - Legal Updates - Central Government simplifies the existing framework for overseas investment

Legal Updates

23 Aug 2022

Central Government simplifies the existing framework for overseas investment

Do you have a joint venture or a wholly owned subsidiary overseas? If so, changes in the existing norms pertaining to overseas direct investments may be applicable to you. Do read on further for more details!

Brief Overview:

The changes simplify the existing framework for overseas investment by persons resident in India to cover wider economic activity and significantly reduces the need for seeking specific approvals. This will reduce the compliance burden and associated compliance costs.

Overseas investments by persons resident in India enhance the scale and scope of business operations of Indian entrepreneurs by providing global opportunities for growth and are important drivers of foreign trade and technology transfer.

Technical Details:

Some of the significant changes brought about through the new rules and regulations are summarised below:

1)       enhanced clarity with respect to various definitions;

2)       introduction of the concept of “strategic sector”;

3)       dispensing with the requirement of approval for:

(a)      deferred payment of consideration,

(b)      investment/disinvestment by persons resident in India under investigation by any investigative agency/regulatory body,

(c)      issuance of corporate guarantees to or on behalf of second or subsequent level step down subsidiary (SDS), and

(d)      write-off on account of disinvestment; and

4)       introduction of “Late Submission Fee (LSF)” for reporting delays.

To this effect, the Foreign Exchange Management (Overseas Investment) Rules, 2022 and the Foreign Exchange Management (Overseas Investment) Regulations, 2022, each dated 22nd August 2022 (collectively referred to as the “New Overseas Framework”) have been notified by the Central Government of India in supersession of the Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004 dated 7th July 2004 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015 dated 21st January 2016. In this regard the Reserve Bank of India has also published the Foreign Exchange Management (Overseas Investment) Directions, 2022 dated 22nd August 2022 which shall be read with the provisions contained in the New Overseas Framework.

A detailed analysis will follow shortly.

Foreign Exchange Management (Overseas Investment) Regulations, 2022:

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12380&Mode=0

Foreign Exchange Management (Overseas Investment) Rules, 2022:

https://rbidocs.rbi.org.in/rdocs/content/pdfs/GazetteRules23082022.pdf

Foreign Exchange Management (Overseas Investment) Directions, 2022:

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12381&Mode=0 

If this is of interest to you, then you can ping any one of us and we will be happy to chat (the 1st discussion is on us!):

Mr. Ankit Sinha (ankit.sinha@jclex.com)

Mr. Saurabh Sharma (saurabh.sharma@jclex.com)

Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com)

Ms. Teza Jose (teza.jose@jclex.com)