{"id":272111,"date":"2022-08-23T18:00:51","date_gmt":"2022-08-23T12:30:51","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=272111"},"modified":"2022-08-23T18:00:51","modified_gmt":"2022-08-23T12:30:51","slug":"rbi-introduces-overseas-direct-investment-vide-fem-overseas-investment-regulations-2022","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2022\/08\/23\/rbi-introduces-overseas-direct-investment-vide-fem-overseas-investment-regulations-2022\/","title":{"rendered":"RBI issues Overseas Direct Investment vide FEM (Overseas Investment) Regulations, 2022"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"text-indent: 18pt;\">\n<p style=\"text-indent: 18pt; margin-bottom: 3%;\">On 22-08-2022, the Reserve Bank of India (\u2018RBI&#8217;) has issued the Foreign Exchange Management (Overseas Investment) Regulations, 2022 to facilitate business between Indian and foreign entities.<\/p>\n<p style=\"font-weight: bold;\">Key Points:<\/p>\n<ol>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">Indian entity can lend or invest in any debt instrument issued by the foreign entity or extend non- fund-based commitment after fulfilling the conditions-<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">Eligible to make Overseas Direct Investment (\u2018ODI&#8217;)<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">ODI should be in the foreign entity<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-bottom: 3%;\">The Indian entity has acquired control in foreign entity at the time of making commitments<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">While lending or investing in debt instruments, the Indian entity should check whether the loan is duly backed by a loan agreement or not and if the rate of interest is charged on an \u201carm&#8217;s length\u201d.<\/p>\n<p style=\"text-indent: 18pt; margin-bottom: 3%;\">Note: \u201cArm&#8217;s length\u201d means a transaction between 2 related parties that is conducted as if they were unrelated to avoid any conflict of interest.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In the case of financial commitment by way of a guarantee, it can be issued to or on behalf of the foreign entity:<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">Corporate or performance guarantee by Indian entity<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">Corporate or performance guarantee by a group of Indian entity in India, being a holding company (holding 51% stake in Indian entity), or subsidiary company (51% held by Indian entity), or a promoter group company which should be a corporate body.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">Personal guarantee by the resident individual promoter<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-bottom: 3%;\">Bank guarantee backed by a counter- guarantee or by collateral by the Indian entity and issued by a bank in India.<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In case where a guarantee is extended jointly by 2 or more Indian entities, 100% of the amount has to be reckoned towards the individual limits of both the Indian entities.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In case there is a performance guarantee, 50% of the amount has to be reckoned towards the financial commitment limit.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In case of financial commitment by way of pledge, the Indian entity can pledge the equity capital of the foreign entity, held directly by the Indian entity in a foreign entity, in favour of Authorized Dealer (\u2018AD&#8217;) Bank or a public financial institution in India or an overseas lender, for availing fund based or non- fund-based facilities for itself or for any foreign entity in which it has made ODI.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In case of financial commitment by creating charge by way of mortgage, pledge, hypothecation on<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">The assets in India in favour of an AD bank or a public financial institution in India or an overseas lender as security for availing of the fund based or non-fund-based facility or both, for any foreign entity in which it has made ODI or for its step-down subsidiary outside India<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-bottom: 3%;\">The assets outside India of the foreign entity y in which it has made ODI or of its step-down subsidiary outside India in favour of an AD bank in India or a public financial institution in India as security for availing of the fund based or non-fund-based facility or both, for itself or any foreign entity in which it has made ODI or for its step-down subsidiary outside India or in favour of a debenture trustee registered with SEBI in India for availing fund-based facilities for itself<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In case of acquisition or transfer by way of deferred payment, the payment of amount of consideration for the equity capital ca deferred for a definite period from the date of the agreement as is contained in the agreement in accordance with the conditions:<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">The foreign securities equivalent to the amount of total consideration should be transferred or issued, upfront by the seller to the buyer<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-bottom: 3%;\">The full and final consideration should be in compliance with the applicable pricing guidelines<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">The resident of India acquiring equity capital has to submit the share certificates to the AD bank within 6 months from the date of effecting remittance\/ the date on which the dues to such person are capitalized\/ the date on which the amount due was allowed to be capitalized.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">An Indian resident having ODI in a foreign entity should realize and repatriate to India all the dues receivable from the foreign entity, within 90 days from the date when such receivables fall due\/ the date of transfer or disinvestment\/ the date of actual distribution of assets made by the official liquidator.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">A person resident in India who has made ODI or making financial commitment or undertaking disinvestment in a foreign entity have to report the financial commitment, disinvestment within 30 days of receipt of such proceeds and restructuring within 30 days from the date of such restructuring.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In the case of Overseas Portfolio Investment or its transferring, a report of the same has to be made within 60 days from the end of the half- year in which such investment or transfer is made as of September or March end.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">An Annual Performance Report needs to be submitted with respect to each foreign entity every year by 31<span style=\"vertical-align: super;\">st<\/span> December.<\/p>\n<\/li>\n<li>\n<p class=\"List\u00a0Paragraph\" style=\"margin-left: 0.0mm;\">In case of delay in reporting, Late submission fee has to be submitted. This facility can be availed within a maximum period of 3 years from the date of submission or filing.<\/p>\n<\/li>\n<\/ol>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>On 22-08-2022, the Reserve Bank of India (\u2018RBI&#8217;) has issued the Foreign Exchange Management (Overseas Investment) Regulations, 2022 to facilitate business between 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