Foreign direct investment or FDI is when an investor invests in a business based in another country. These investments are government by a lasting interest in the business based in the host country. It is characterized by the notion of ‘direct control’. Under foreign direct investments, the foreign investor gets at least 10 per cent voting rights in the business.
India, one of the largest economies in the world, is a land of opportunities. However, if you are a businessperson looking to expand your existing business or building it up from the scratch, getting a foreign investor to invest in your business is not always easy. That is why it is recommended to bring in FDI facilitators not unlike us. We put you out on the right path and help you connect with the right investor for your business.
Now, investments in India are done under two routes- the automatic route and the government route. While under the government route a prior approval from the government is required, no such prior permissions are needed in the automatic route.
FDI in different sectors and activities under the government route will be subject to approval by the Government of India when:
- An Indian company is being set up by the means of foreign investment and is not owned by a resident entity.
- An Indian company is being set up with foreign investment and is not controlled by a resident entity.
- The control of an existing Indian business that is owned and controlled by an Indian citizen(s) is transferred or will be transferred in the coming future to a foreign entity as a consequence of transfer or issue of shares through an amalgamation, merger/demerger, acquisition etc.
- The ownership of an existing Indian business that is owned and controlled by an Indian citizen(s) is transferred or will be transferred in the coming future to a foreign entity as a consequence of transfer or issue of shares through an amalgamation, merger/demerger, acquisition etc.
- It is clarified that Foreign investment shall include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 9 (LLPs), 10 (DRs) and 11(Investment Vehicles) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations.
FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment.
- Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident outside India) Regulations will be considered to be a domestic investment, just like investments by Indian citizens residing in the country.
- A company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident outside India) Regulations and such investment will also be deemed domestic investment at par with the investment made by residents.
After receiving Foreign Direct Investment either under the Automatic Route or the Government Route, an Indian company is required to comply with provisions of the FDI policies, which include the reporting of the foreign investment to the Reserve Bank of India (RBI).