Rahul Bansal

Finalist

35929 Points Joined September 2009

2. What are the regulations regarding Portfolio Investments by NRIs/PIOs

Non Resident Indian (NRIs) and Persons of Indian Origin (PIOs) can purchase/sell shares/convertible debentures of Indian companies on Stock Exchanges under Portfolio Investment Scheme. For this purpose, the NRI/PIO has to apply to a designated branch of a bank, which deals in Portfolio Investment. All sale/purchase transactions are to be routed through the designated branch.

An NRI or a PIO can purchase shares up to 5% of the paid up capital of an Indian company. All NRIs/PIOs taken together cannot purchase more than 10% of the paid up value of the company. (This limit can be increased by the Indian company to 24% by passing a General Body resolution).

The sale proceeds of the repatriable investments can be credited to the NRE/NRO etc. accounts of the NRI/PIO whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts.

The sale of shares will be subject to payment of applicable taxes.

Rahul Bansal

Finalist

35929 Points Joined September 2009

Investment in Government Securities and Corporate debt

Rahul Bansal

Finalist

35929 Points Joined September 2009

1. Can a Non-resident Indian invest in Government Securities/Treasury bills and Corporate debt?

Under the FEMA Regulations only NRIs and SEBI registered FIIs are permitted to purchase Government Securities/Treasury bills and Corporate debt. The details are as under;

A.     A Non-resident Indian can purchase,

(1) i)   Government dated securities (other than bearer securities) or treasury bills or
              units of domestic mutual funds;

ii) bonds issued by a public sector undertaking(PSU) in India;

iii) shares in Public Sector Enterprises being disinvested by the Government of India.

(2) They can also invest, on non-repatriation basis, in dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates on non-repatriation basis. The guidelines for these schemes are framed by the concerned Government agencies.

B.

A SEBI registered Foreign Institutional Investor may purchase, on repatriation basis, dated Government securities/treasury bills, non-convertible debentures/bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such securities or through a registered stock broker on a recognised stock exchange in India. The FIIs is required to ensure that;

i) the FII allocation of its total investment between equity and debt instruments (including dated Government Securities and Treasury Bills in the Indian capital market) should not exceed the ratio of 70:30.

ii) In case the FII is set-up as a 100% debt FII, it can invest the entire corpus in dated Government Securities including Treasury Bills, non-convertible debentures/bonds issued by an Indian company subject to limits, if any, stipulated by SEBI in this regard.

The Investment in Government Securities/Treasury bills and Corporate debt is subject to a ceiling decided in consultation with the Government of India. Investment limit for the FIIs as a group in Government securities currently is USD 3.2 Billion. The limit for investment in Corporate debt is USD 1.5 billion. At present, the FIIs can also invest in Innovative instruments such as Upper Tier-II capital upto a limit of USD 500 million.

Rahul Bansal

Finalist

35929 Points Joined September 2009

Foreign Venture Capital Investment

Rahul Bansal

Finalist

35929 Points Joined September 2009

What are the regulations for Foreign Venture Capital Investment?

A SEBI registered Foreign Venture Capital Investor with general permission from the Reserve Bank of India can invest in a Venture Capital Fund or an Indian Venture Capital Undertaking, in the manner and subject to the terms and conditions.

Rahul Bansal

Finalist

35929 Points Joined September 2009

Procedure for

opening

Branch/Project/Liaison Office

Rahul Bansal

Finalist

35929 Points Joined September 2009

1. How can foreign companies open Liaison/Project/Branch office in India?

Foreign company can set up Liaison/Branch Offices in India after obtaining approval from Reserve Bank of India. Reserve Bank of India has given general permission to foreign companies to establish Project Offices in India subject to certain conditions.

Rahul Bansal

Finalist

35929 Points Joined September 2009

2. What is the procedure to be followed for obtaining Reserve Bank's approval for opening Liaison Office/Representative Office?

A Liaison office can carry on only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office abroad. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers.

The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. This form is available at www.rbi.org.in

Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by the Regional Office in whose jurisdiction the office is set up. Liaison/Representative offices have to file an Activity Certificate on annual basis from a Chartered Accountant to the concerned Regional Office of the Reserve Bank of India , stating that the Liaison Office has undertaken only those activities permitted by Reserve Bank of India .

Rahul Bansal

Finalist

35929 Points Joined September 2009

3. What is the procedure for setting up Project Office?

Foreign companies are granted projects in India by Indian entities where:

the project is funded directly by inward remittance from abroad; or

the project is funded by a bilateral or multilateral International Financing Agency; or

the project has been cleared by an appropriate authority; or

a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.

However, if the above criteria are not met, or if the parent entity is established in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, such applications have to be forwarded to Central Office of the Foreign Exchange Department of the Reserve Bank at Mumbai for approval.

Rahul Bansal

Finalist

35929 Points Joined September 2009

4. What is the procedure for setting up Branch office?

Reserve Bank permits companies engaged in manufacturing and trading activities abroad to set up Branch Offices in India for the following purposes:

To represent the parent company/other foreign companies in various matters in India e.g. acting as buying/selling agents in India

To conduct research work in the area in which the parent company is engaged

To undertake export and import activities and trading on wholesale basis

To promote possible technical and financial collaborations between the Indian companies and overseas companies.

Rendering professional or consultancy services

Rendering services in Information technology and development of software in India

Rendering technical support to the products supplied by the parent/Group companies.

A branch office is not allowed to carry out manufacturing, processing activities directly/indirectly. A Branch Office is also not allowed to undertake Retail Trading activities of any nature in India. Branch Offices have to submit Activity Certificate from a Chartered Accountant on an annual basis to the Central Office of FED. For annual remittance of profit Branch Office may submit required documents to an authorised dealer.

Permission for setting up branch offices is granted by the Reserve Bank of India. Reserve Bank of India considers the track record of the Applicant Company, existing trade relations with India, the activity of the company proposing to set up office in India as well as the financial position of the company while scrutinising the application.

Rahul Bansal

Finalist

35929 Points Joined September 2009

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MINI

TEACHER

27 Points Joined January 2010

What are the formalities that I need to comply while transferring the shares of a private company to a person resident outside India from a person resident in India under the current guidelines of Fema?

Kindly do reply for this query.

Thank u in anticipation