Procedure of allowance of Foreign Direct Investment (FDI) in India

Procedure of Allowance of FDI in India

FOREIGN DIRECT INVESTMENT

FDI up to 100% is allowed under the automatic route in all activities/sectors except the following, which require prior approval of the Government:-

1. Sectors prohibited for FDI
2. Activities that require an industrial license
3. Proposals in which the foreign collaborator has an existing financial or technical collaboration inIndiain the same field
4. Proposals for acquisitions of shares in an existing Indian company in financial service sector and where Securities and Exchange Board of India (substantial acquisition of shares and takeovers) regulations, 1997 is attracted)
5. All proposals falling outside notified sectoral policy/CAPS under sectors in which FDI is not permitted

In sectors fall under automatic route, investment could be made without approval of the central government. The sectors that are not in the automatic route, investment requires prior approval of the Central Government. The approval in granted by Foreign Investment Promotion Board (FIPB).

PROCEDURE UNDER AUTOMATIC ROUTE

Under automatic route there is no requirement of prior approval either by the Government or RBI. The investors are only required to notify the Regional Office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares of foreign investors.

PROCEDURE UNDER APPROVAL ROUTE

In pursuance of foreign investment inIndia, a foreign company and an Indian Company can jointly formed an Indian company. There are three possible conditions available.

CONDITION 1: The newly formed Indian company starts business, i.e., acting as an Operating company. The company would have to comply with the relevant sectoral conditions on entry route, conditionality and  caps in regard of the sector in which the Indian company is operating

CONDITION 2: The newly formed Indian company acts as downstream Investing Company and form a new operating company for doing business.

In this condition, company is to notify Secretariat for Industrial Assistance (SIA), DIPP and FIPB in the attached application form Annexure_1 with the scanned and signed copy of following documents with in 30 days of such investment-

1. Certificate of Incorporation of Foreign Investor Company.
2. Certificate of Incorporation of Indian Company.
3. Certificate of Incorporation of Indian Joint venture partners.
4. Certificate of Incorporation of Downstream Investee Company (if already formed).
5. Certificate of Memorandum of Association of the Foreign Investor Company.
6. Certificate of Memorandum of Association of the Indian company.
7. Certificate of Memorandum of Association of Indian Joint venture partners.
8. Certificate of Memorandum of Association of the Downstream Investee Company (if already formed).
9. Filled up application form in 15 copies.
10. FIRC
11. Copies of relevant past FIPB/SIA/RBI approvals, connected with the current proposal.
12. In case of transfer of existing equity, the Board Resolution of the investee company and the consent of transferor shareholders.
13. In case of fresh issue of shares, the Board Resolution of the issuing company.
14.  Declaration under Press Note 1 of 2005 in attached Performa from each of the foreign investor, on their official letter heads, with full name and contact address of the signatory of the declaration.
15. A copy of the JV agreement/Shareholders’ agreement / technology transfer/ trademark/ brand assignment agreement (as applicable), in case there are existing ventures.
16. The comments of the Indian partners/ technical/ trademark collaborators about the new venture, on their official letter heads, with full name and contact address of the signatory of the comments.
17. Provide any website link for more information.
18. Diagrammatical representation of the flow of funds from the original investor to the investee company.
19. Any other optional attachment.

CONDITION 3: The newly formed Indian company acts both as operating company and Investing Company, i.e, it is doing business on its own and also formed a new operating company for doing business.

In this condition, company is to notify SIA, DIPP and FIPB in the attached application form Annexure_2 with the scanned and signed copy of following documents-

1. Certificate of Incorporation of Foreign Investor Company.
2. Certificate of Incorporation of Indian Company.
3. Certificate of Incorporation of Indian Joint venture partners.
4. Certificate of Incorporation of Downstream Investee Company (if already formed).
5. Certificate of Memorandum of Association of the Foreign Investor Company.
6. Certificate of Memorandum of Association of the Indian company.
7. Certificate of Memorandum of Association of Indian Joint venture partners.
8. Certificate of Memorandum of Association of the Downstream Investee Company (if already formed).
9. Filled up application form in 15 copies.
10. FIRC
11. Copies of relevant past FIPB/SIA/RBI approvals, connected with the current proposal.
12. In case of transfer of existing equity, the Board Resolution of the investee company and the consent of transferor shareholders.
13. In case of fresh issue of shares, the Board Resolution of the issuing company.
14. Declaration under Press Note 1 of 2005 in attached Performa from each of the foreign investor, on their official letter heads, with full name and contact address of the signatory of the declaration.
15. A copy of the JV agreement/Shareholders’ agreement / technology transfer/ trademark/ brand assignment agreement (as applicable), in case there are existing ventures.
16. The comments of the Indian partners/ technical/ trademark collaborators about the new venture, on their official letter heads, with full name and contact address of the signatory of the comments.
17. Provide any website link for more information.
18. Diagrammatical representation of the flow of funds from the original investor to the investee company.
19. Any other optional attachment.