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READY
RECKONER ON INVESTMENT POLICY |
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1.What are the
forms in which business can be conducted by a
foreign company in India? |
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Foreign companies can make investments or operate
their business in a number of ways as given
below:
 Liaison/
representative office 1
Project
office 1
Branch
office 1
Wholly
owned subsidiary 2
Joint
venture company 3
Financial /Technical /Techno-financial
Approval is given by
1. RBI
2.Government/ FIPB
3.Government/ FIPB /RBI(Automatic
in respect of Annex-III industries, 100% Subsidary
in Power, Roads, Ports, Highways etc is covered
under automatic approval subject to certain
conditions.
Any company set up with FDI has to be incorporated
under the Indian Companies Act with the Registrar
of Companies and all Indian operations would
be conducted through this company. |
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2. How does a
foreign company invest in India ? |
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Either
through :-
a) Automatic Approval - by the country's Central
Bank, the Reserve Bank of India (RBI), Bombay;
or
b) Through the Foreign Investment Promotion Board
(FIPB).
i) Automatic Approval through Reserve Bank of
India can be availed if the FDI in the equity
of the company does not exceed :
50%
in industries given in Annexure III A of the New
Industrial Policy.
51%
in industries given in Annexure III B of the New
Industrial Policy.
74%
in industries given in Annexure III C of the New
Industrial Policy.
100%
in Industries given in Annexure III D of the New
Industrial Policy.
No prior approval required. The compny is only
required to report to RBI within 30 days of receipt
of foreign equity/allotment of shares.
ii) FIPB approval is required for all other proposals
not eligible for Automatic Approval.
Applications to be submitted in Form IL-FC or
plain paper to the SIA. |
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3.
What is the FIPB ? |
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I) It is a high level
single window agency to clear all proposals relating
to FDI (with or without technology transfer) and
for all matters relating to investment promotion;
ii) It has the flexibility of purposeful negotiation
with investors and considers project proposals
in totality and free from parameters;
iii) It makes recommendation on each proposal
which is approved by Government; and;
iv) Decisions are communicated normally within
30 days by SIA, which functions as its secretariat. |
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4.
What are the factors considered by the FIPB while
examining proposals ? |
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To
impart greater transparency to the approval
process, guidelines have been issued which govern
the consideration of FDI proposals by the FIPB.
These are given at Annexure IV of the Manual.
|
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5.
Is a 100% foreign owned subsidiary allowed ? |
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Yes.
The criteria for allowing such investments have
been detailed in the guidelines given at Annexure
IV of the Manual. |
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6.
How are investments in 100% Export Oriented Units
(EOUs) allowed ? |
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There
are three schemes for such units. They are the
100% EOUs, Electronics Hardware Technology Parks
(EHTPs) and Software Technology Parks (STPs).
Approvals for these are given by both the Automatic
and Government routes. |
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7.
Is investment by Non-Resident Indians (NRIs) permitted
? |
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The
Government attaches importance to investments
by NRIs and Overseas Corporate Bodies (OCBs) i.e
in which NRIs hold at least 60% of equity. Government
have provided a liberalised policy framework for
approval of NRI investments by both the Automatic
and the Government route. NRI/OCBs are permitted
to invest upto 100% equity in the Real Estate
and Civil Aviation sectors.
Automatic Approval is given by the RBI to all
NRI/OCB proposals with their investment upto 100%
equity in high priority industries listed in Annexure
III, Part A, B, C & D.
Government approval is given for all other proposals
not qualifying for Automatic Approval. |
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8.
How is FDI permitted in the Small Scale Sector
? |
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Equity
participation upto 24% by any other Industrial
undertaking is allowed. For equity participation
in excess of this or if a non-SSI unit wishes
to manufacture a reserved item, it would be
required to obtain industrial licence and undertake
export obligation of 50% of production. |
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9.
Is enhancement of foreign equity in an existing
joint venture permitted? |
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Yes.
Approval is accorded both on the Automatic under
certain conditions and FIPB route. Applications
should be accompanied by a Resolution of the
Board of Directors of the existing company and
a consent letter from the Indian partner/foreign
collaborator. |
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10.
How are foreign technology agreements approved? |
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Approval
is granted by two routes
a) Automatic approval by RBI;
Available for any proposal with lumpsum payment
not exceeding US $ 2 million, and royalty of upto
5% on domestic sales and 8% on exports.
b) Government approval In all other cases. |
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11.
How are products/services classified ? |
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Investors
are required to give the description of activities
in the National Industrial Classification of
all Economic Activities (NIC), 1987, while submitting
applications to the RBI/SIA.
Copies of the NIC, 1987 published by the Ministry
of Planning, Central Statistical Organisation,
can be obtained on payment from the Controller
of Publications, 1 Civil Lines, Delhi 110 054
or from any authorised agent. |
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12.
Can profits, dividends, royalty, knowhow payments
be repatriated from India? |
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All
profits, dividends, royalty, knowhow payments
that have been approved by the Government/RBI
can be repatriated. Exception is in respect
of 22 specified consumer industries where the
condition of dividend balancing is applicable,
i.e only repatriation of dividends is to be
balanced by export earnings over a period of
7 years. |
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12.
a. Is it possible to use foreign brand names/trade
marks in India ? |
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Yes. |
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12.
b. Is national treatment accorded to a Foreign
Direct Investment ? |
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Yes.
A Foreign company incorporated under the Companies
Act is treated at par with any domestic Indian
company within the scope of approved and subject
to all Indian laws. |
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13.
What proposals require an Industrial Licence (IL)
and how is it obtained ? |
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In
the New Industrial Policy, all industrial undertakings
are exempt from licencing except for those m
products given in Annexure I and II and those
reserved for the Small Scale Sector. The project
should not be located within 25 kilometres of
a city with a population of more than one million
(list appended).
The Government has substantially liberalised
the procedures for obtaining an Industrial Licence.
An IL is approved by the Government.
The application in form IL-FC should be filed
with the SIA. Approvals normally available within
6-8 weeks. |
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14.
What is the procedure for a delicensed sector
? |
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An
Industrial undertaking exempted from licencing
needs only to file information in the Industrial
Entrepreneurs Memorandum (IEM) with the SIA
which will issue an acknowledgement. No further
approvals are required. |
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15.
What are the latest measures by the Government
relaxing foreign equity in specific sectors? |
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Recent
changes in FDI policy are displayed in SIA website
under the heading "Latest Changes in Policy/FIPB/PAB"
under "Policy & Procedure" |
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16.
Would foreign companies involved in charitable
activities, interested in bringing FDI, require
FIPB permission ? |
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FIPB
approval is given only for proposals of commercial
nature. The proposals involving charitable activities
would be considered by Ministry of Home Affairs
under Foreign Contribution Regulation Act (FCRA) |
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17.
How to down load IEM & IL-FC forms from SIA Website? |
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IEM,
IL-FC forms are available in SIA Website under
the heading "Manual on Policy & Procedure" in
WORDPERFECT File (WPD 8). The same could be down
loaded. Printed forms are also available at Government
Book shops/oulets |
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18.
What is the policy of conversion of non-repatriable
shares into repatriable shares? |
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RBI/FIPB
approval is required, as the case may be, and
as per sectoral policy parameters |
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19.
From where one can get the information on Patents? |
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For
Patents, please visit the website of Department
of Industrial Development (www.pk2id.delhi.nic.in) |
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20.
Can 100% subsidiary pay royalty or technical know
hoe fee to its foreign parent? |
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No
royalty payment is allowed for 100% subsidiary.
Payments of technical know how/lumpsum fee can
be permitted depending on the merits of the
proposal and the sectoral policy |
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21.
What is the policy on purchase of shares of Indian
Company by a Foreign company? |
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For
purchases of shares of an Indian Company following
routes are available
a) Through foreign Institutional Investors (FIIs)
by portfolio investment.
b) By Preferential Allotment of shares
c) By Right Issue of shares
d) By acquisition of shares from existing shareholders
For a) - RBI/SEBI guidelines will be followed
For b) & c) - RBI/FIPB approval is required as
the case may be
For d) - FIPB approval is required
For acquisition of shares of an existing company
board resolution is a pre-condition for consideration
of the proposal by FIPB. Issue/valuation of shares
is subject to SEBI/RBI guidelines including SEBI
takeover code |
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22.
What is the investment policy for trading companies
? |
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Trading
companies are permitted foreign equity upto 100%
through FIPB route for the following activities
subject to dividend balancing (through exports
of thier own items covered under Annexure III)
and no local/retail trading activity :
a) exports;
b) bulk imports with export/exbonded warehouse
sale;
c) cash and carry wholesale trading;
d) other import of goods or services provided
at least 75% is for procurement and sale of goods
and services among the companies of the same group. |
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23.
What are the FDI trends in the company? |
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For
information on FDI trends in the country, please
refer SIA Newsletter under 'Publication' of
SIA Website |
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24.
Whether FIPB approval is required for 100% EOU
units involving FDI from foreign companies? |
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Yes,
FIPB approval is required for 100% EOU units
involving FDI as automatic approval facility
for FDI is not available for setting up 100%
EOU units. |
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25.
Would it be possible to get official document
on FIPB meetings? |
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Yes,
the information is available in 'FIPB Application
Status' under Policy & Procedure with links
from Site Map and Home Page (www.nic.in/indmin). |
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26.
Where can one get the information on Indian Standards
for any product? |
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Please
refer to the website of Bureau of Indian Standards
(http://www.del.vsnl.net.in/bis.org) |
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27.
Kindly advise whom to contact for NIC Classification
? |
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Please
go to "Manual on Industrial Policies & Procedures
in India" in 'Policy & Procedure' of SIA Website
(http://www.nic.in/indmin/) for "NIC Codes". |
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28.
Who is the concerned officer in your Departmenr
for FIPB related matters? |
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Director
(Foreign Collaboration / Foreign Direct Investment
/ FIPB) Shri I. Srinivas may be contacted (Tel:
011-3014218, Fax : 011-3015245, e-mail: srinivas@ub.nic.in) |