The Government with the aim of enhancing the 'ease of doing business' and simplifying the existing framework for overseas investment by persons resident in India to cover wider economic activity and significantly reduce the need for seeking specific approvals has issued new overseas investment rules and regulations.
Foreign Exchange Management (Overseas Investment) Rules, 2022 (‘Overseas Investment Rules’) have been notified by the Central Government vide Notification No. G.S.R. 646(E) dated 22 August 2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022 (‘Overseas Investment Regulations’) have been notified by the Reserve Bank of India vide Notification No. FEMA 400/2022-RB dated 22 August 2022 (herein collectively referred as ‘New OI Rules/Regulations’) in supersession of the Notification No. FEMA 120/2004-RB dated 07 July 2004 [Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] (‘Erstwhile ODI Regulations’) and Notification No. FEMA 7 (R)/2015-RB dated 21 January 2016 [Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015] (‘Erstwhile Immovable Property Regulations’).
RBI has also issued the Foreign Exchange Management (Overseas Investment) Directions, 2022 (‘Overseas Investment Directions’) covering the operational requirements under New OI Rules/Regulations along with guidance on the interpretation, grouping the requirements and other operational instructions to all the Category – I Authorised Dealer Banks.
Some of the significant changes brought about through the New OI Rules/Regulations are summarised below:
(i) enhanced clarity with respect to various definitions;
(ii) introduction of the concept of “strategic sector”;
(iii) dispensing with the requirement of approval for:
a. deferred payment of consideration;
b. investment/disinvestment by persons resident in India under investigation by any investigative agency/regulatory body;
c. issuance of corporate guarantees to or on behalf of second or subsequent level step down subsidiary (SDS);
d. write-off on account of disinvestment;
(iv) introduction of “Late Submission Fee (LSF)” for reporting delays
In the newsflash, we have tried to cover the significant changes bought in the New OI Rules/Regulations.