Foreign direct invest in India

These are the highlights if you want to know foreign direct invest (FDI) in India.  This entry was drafted by Indconlegal Law Firm. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case Indcolegal Law Firm is an excellent option in india.

Startup companies and Entry Routes for Investment

India Market size

The total FDI investments India received during April-June 2017 stood at US$ 14.55 billion, indicating that government’s effort to improve ease of doing business and relaxation in FDI norms is yielding results. Data for April-June 2017 indicates that the services sector attracted the highest FDI equity inflow of US$ 1.88 billion, followed by computer software and hardware – US$ 1.32 billion and trading – US$ 769 million. Most recently, the total FDI equity inflows for the month of June 2017 touched US$ 3.12 billion.

During April-June 2017, India received the maximum FDI equity inflows from Mauritius (US$ 3.29 billion), followed by Singapore (US$ 3.01 billion), Germany (US$ 798 million), USA (US$ 660 million), and Netherlands (US$ 584 million).

Indian impact investments may grow 25 per cent annually to US$ 40 billion from US$ 4 billion by 2025.

Startup Companies

Start-ups can issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance, as per the FEMA Regulation. In addition, start-ups can issue convertible notes to person resident outside India subject to the following conditions:

• A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered / incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian startup company for an amount of twenty five lakh rupees or more in a single tranche.
• A startup company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with approval of the Government.
• A startup company issuing convertible notes to a person resident outside India shall receive the amount of consideration by inward remittance through banking channels

Entry Routes for Investment

Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route, are considered by respective Administrative Ministry/Department.

Foreign investment in sectors/activities under government approval route will be subject to government approval where:

• An Indian company is being established with foreign investment and is not owned by a resident entity or
• An Indian company is being established with foreign investment and is not controlled by a resident entity or
• The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. or
• The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc.