This is a member perspective and the views of the author are their own and do not necessarily reflect the views or position of IIUSA.
By: Prashant Ajmera, Founder, Lawyer & Author, AJMERA LAW GROUP
India is a very important market for EB-5 stakeholders. At the same time, remitting investment outside of India is very challenging. In August 2022, The Reserved Bank of India (RBI – Central Bank of India) introduced new regulations to allow foreign investment by Indian citizens and entities.
In a move to enhance the ease of doing business and to bring more clarity and transparency in undertaking Overseas Investments (OI), the Government of India, in consultation with RBI, issued revised regulations, rules and guidelines.
The regulations provide several changes which are summarized below:
Foreign investee entity:-
The term Joint Venture (JV) and Wholly Owned Subsidiary (WOS) has been replaced by the term ‘foreign entity’ that is formed or registered or incorporated outside India.
- (a) It has been further clarified that such a foreign entity should have ‘limited liability’ (viz, limited liability company, limited liability partnership, etc.) where the liability of the person resident in India is clear and limited.
- (b) This restriction would not be applicable to entities with core activity in any strategic sector which includes energy and natural resource sectors such as oil, gas, coal, mineral ores, submarine cable system and start-ups, and any other sector or sub-sector as deemed necessary by the Central Government.
Overseas Direct Investment (ODI) & Overseas Portfolio Investment (OPI):-
Overseas Direct Investment is an investment by way of acquisition of:
- (a) Unlisted equity capital of a foreign entity; or
- (b) Subscription as a part of the memorandum of association of a foreign entity; or
- (c) In case of a listed foreign entity:
- – Investment in 10%, or more of the paid-up equity capital of the listed foreign entity; or
– Investment with control where investment is less than 10% of the paid-up equity capital of the listed foreign entity.
By redefining the ODI definition, an ODI in a foreign entity shall continue to be treated as ODI even if such investment falls below 10% of the paid-up equity capital or the investor loses control in the foreign entity…CONTINUE READING
