Questions? 

No, only NRIs are allowed to set up partnership/ proprietorship concerns in India on non-repatriation basis.

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Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:

i. Export / Import of goods

ii. Rendering professional or consultancy services

iii. Carrying out research work, in areas in which the parent company is engaged

iv. Promoting technical or financial collaborations between Indian companies and parent or overseas group company

v. Representing the parent company in India and acting as buying / selling agent in India

vi. Rendering services in information technology and development of software in India

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

viii. Foreign airline / shipping company.

Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.

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A foreign investor can commence business in India as:

1. Indian Company
2. Foreign Company
3. Limited Liability Partnership

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An FVCI can invest in an Indian company engaged in Biotechnology, IT related to hardware and software development, Nanotechnology, Seed research and development, Research and development of new chemical entities in pharmaceutical sector, Dairy industry, Poultry industry, Production of bio-fuels, Hotel-cum-convention centres with seating capacity of more than three thousand and Infrastructure sector.

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Yes, transfer of capital instruments from resident to non-resident is permitted, s.t. prior permissions from the Reserve Bank of India, except in following cases (as mentioned in detail in Sub section 5.2 of the Consolidated FDI Policy 2017):

1. where the pricing guidelines under FEMA, 1999 are not met, s.t. other conditions
2. where the transfer requires prior approval of the Government per the extant FDI Policy
3. where the transfer of shares attracts SEBI (Substantial Acquisition of Shares and Takeovers) Regulations
4. where the investee company is in the financial sector.

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An NRI needs to apply to a designated branch of a bank, which deals in Portfolio Investment. An NRI can purchase shares up to 5% of the paid-up capital of an Indian Company on a fully diluted basis. All NRIs taken together cannot purchase more than 10% of the paid-up value of the Company. The aggregate limit of up to 24%, with the approval of its Board of Directors and its General Body through a resolution and a special resolution, respectively.

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The FVCI is permitted to:

a) Purchase the securities/ instruments (permitted for FVCI) either from the issuer of these securities/ instruments or from any person holding these securities/ instruments.

b) Invest in securities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000, as amended from time to time.

c) Acquire, by purchase or otherwise, from, or transfer, by sale or otherwise, to, any person resident in or outside India, any security/ instrument it is allowed to invest in, at a price that is mutually acceptable to the buyer and the seller/ issuer.

d) Receive the proceeds of the liquidation of VCFs or of Cat-I AIFs or of schemes/ funds set up by the VCFs or Cat-I AIFs.

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Any person resident outside India may invest in units of Investment Vehicles subject to the conditions laid down in Schedule 8 to Notification No FEMA 20.
 A person resident outside India who has acquired or purchased units of an investment vehicle may sell or transfer in any manner or redeem the units as per regulations framed by SEBI or directions issued by the Reserve Bank.

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Investment Vehicle is an entity registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose. For the purpose of Schedule 8 of FEMA 20(R), an Investment Vehicle is a Real Estate Investment Trust (REIT) governed by the SEBI (REITs) Regulations, 2014, an Infrastructure Investment Trust (InvIt) governed by the SEBI (InvIts) Regulations, 2014 and an Alternative Investment Fund (AIF) governed by the SEBI (AIFs) Regulations, 2012. It does not include a Venture Capital Fund registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996.

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Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route, are considered by respective Administrative Ministry/Department. Foreign investment in sectors/activities under government approval route will be subject to government approval where:

a) An Indian company is being established with foreign investment and is not owned by a resident entity.

b) An Indian company is being established with foreign investment and is not controlled by a resident entity.

c) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to nonresident entities through amalgamation, merger/demerger, acquisition etc.

d) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to nonresident entities through amalgamation, merger/demerger, acquisition etc.

e) It is clarified that Foreign investment shall include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 9 (LLPs), 10 (DRs) and 11(Investment Vehicles) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment.

f) Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.

g) A company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations and such investment will also be deemed domestic investment at par with the investment made by residents.

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