Set up of an Indian company by the foreign entity (FDI)In
order to strategically invest in India, NRIs can invest in Indian
Company through Foreign Direct Investment (FDI). A foreign company
planning to set up business operations in India may incorporate a
company under the Companies Act, 2013, as a Joint Venture or a Wholly
Owned Subsidiary. A person resident outside India or an entity
incorporated outside India (except for citizen of Pakistan and
Bangladesh and entities in Pakistan and Bangladesh), can invest in
India, subject to the FDI Policy of the Government of India.
Depending
on the sector of the company, percentage limits upto which investment
can be made in a particular sector have been stated in the FDI Policy.
Further, FDI policy also states whether any approvals from
RBI/FIPB/Other governmental authorities is required to be obtained or
not. FDI is prohibited in the following sectors:
(a) Lottery Business including Government/ private lottery, online lotteries, etc.
(b) Gambling and Betting including casinos etc.
(c) Chit funds
(d) Nidhi company
(e) Trading in Transferable Development Rights (TDRs)
(f) Real Estate Business or Construction of Farm Houses
(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
(h)
Activities / sectors not open to private sector investment e.g. Atomic
energy and Railway operations (other than permitted activities mentioned
in the FDI Policy)
Note: Foreign technology collaboration
in any form including licensing for franchise, trademark, brand name,
management contract is also prohibited for Lottery Business and Gambling
and Betting activities.
Types of Instrument: Indian
companies can issue equity shares, fully and mandatorily convertible
debentures, fully and mandatorily convertible preference shares and
warrants subject to the pricing guidelines / valuation norms and
reporting requirements amongst other requirements as prescribed under
FEMA Regulations.
Remittance of sale proceeds: Bank can
allow the remittance of sale proceeds of a security (net of applicable
taxes) to the seller of shares resident outside India, provided the
security has been held on repatriation basis, the sale of security has
been made in accordance with the prescribed guidelines and NOC / tax
clearance certificate from the Income Tax Department has been produced.