Foreign Direct Investment Policy, 2017

Foreign Direct Investment Policy, 2017

D/o IPP F. No. 5(1)/2017-FC-1 Dated the August 28, 2017

Eligible Investors

·      Non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited*. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

* Agriculture (excluding floriculture, horticulture, apiculture and cultivation of vegetables and mushrooms under controlled conditions, the development and production of seeds & planting materials etc.)

Gambling and Betting

Lottery business, including government or private lottery, online lotteries etc.

 Retails trading (expect single-brand product retailing)

Business of chit fund

Nidhi Company

Real estate business or construction of farm houses

Trading in transferable development rights (TDRs)

Manufacturing of tobacco, cigars, cheroots, cigarettes and other tobacco substitutes

·       NRI resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis, subject to the condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels.

·         A company, trust and partnership firm incorporated outside India and owned and controlled by NRIs can invest in India with the special dispensation as available to NRIs under the FDI Policy.

·     According to Schedule 2 and 2A of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, FII/FPI can invest in the capital of an Indian company under the Portfolio Investment Scheme, below 10% by an Individual of the capital of the Indian Company and the aggregate limit for FII/FPI investment upto 24% of the capital of the company. This aggregate limit of 24% can be increased to the sectorial cap/statutory ceiling, as applicable, by the Indian company concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body and subject to prior intimation to RBI. The aggregate FII/FPI investment, individually or in conjunction with other kinds of foreign investment, will not exceed sectorial/statutory cap.

Note: An Indian company which has issued shares to FIIs/FPIs under the FDI Policy for which the payment has been received directly into company’s account should report these figures separately under item no. 5 of Form FC-GPR.

·         A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an Indian company engaged in any activity mentioned in Schedule 6 of Notification No. FEMA 20/2000, including start-ups irrespective of the sector in which it is engaged, under the automatic route.

Eligible Investee

1.      Indian Company

2.      Partnership Firm/Proprietary Concern

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis provided;

a.      Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks.

b.      The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.

c.       Amount invested shall not be eligible for repatriation outside India.

(ii) Investments with repatriation option: NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.

(iii) Investment by non-residents other than NRIs/PIO: A person resident outside India other than NRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment in the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India.

(iv) Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media.

3.      Trust

FDI is not permitted in Trusts other than in ‘VCF’ registered and regulated by SEBI and ‘Investment vehicle.

4.      Limited Liability Partnerships (LLPs)

FDI in LLPs is permitted subject to the following conditions:

(i)                 FDI is permitted under the automatic route in Limited Liability Partnership (LLPs) operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI-linked performance conditions.

(ii)               An Indian company or an LLP, having foreign investment, is also permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions.

(iii)             Conversion of an LLP having foreign investment and operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI-linked performance conditions, into a company is permitted under automatic route. Similarly, conversion of a company having foreign investment and operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI-linked performance conditions, into an LLP is permitted under automatic route.

(iv)              FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008.

5.      Start-up Companies: (New Concept)

Start-ups can issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance, as per the FEMA Regulation. In addition, start-ups can issue convertible notes to person resident outside India subject to the following conditions:

1.      A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered / incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian start-up company for an amount of twenty 5 Lakh rupees or more in a single tranche.

Note: Explanation: For the purpose of this Regulation, a ‘start-up company’ means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 180(E) dated February 17, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, and as amended from time to time.

2.      A start-up company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with approval of the Government.

3.      A start-up company issuing convertible notes to a person resident outside India shall receive the amount of consideration by inward remittance through banking channels or by debit to the NRE / FCNR (B) / Escrow account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time.

Note: Provided that an escrow account for the above purpose shall be closed immediately after the requirements are completed or within a period of six months, whichever is earlier. However, in no case continuance of such escrow account shall be permitted beyond a period of six months.

4.      The start-up company issuing convertible notes shall be required to furnish reports as prescribed by Reserve Bank of India.

COMPARATIVE ANALYSIS AND EFFECT OF COMPANIES (AMENDMENT) BILL, 2017

SERIES - I

COMPARATIVE ANALYSIS AND EFFECT OF COMPANIES (AMENDMENT) BILL, 2017

Section	Companies Act, 2013	Companies (Amendment) Bill, 2017	Effect
2(6)	Definition of Associates Company: The expression “Significant influence” means control of at least 20% of total share capital, or business decisions under an agreement.	The expression “Significant influence means control of at least 20% of total voting power, or control of or participation in business decisions under an agreement. Now Joint Venture is defined under said bill; “Joint Venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.	1.. Only by holding of 20%  share capital of another company is not sufficient for making an associate company. 2. Now a company make another company as an associate company in spite of holding of less than 20% of share capital in another company, if he hold shares in another company as per provisions of section 43(a)(ii) read with Rule 4 of Companies (Share Capital and Debenture) Rules,2014,
2(30)	Definition of Debenture: Debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not.	Now a new proviso will be add after said definition:  “ Provided that--- (a). The instruments referred to in Chapter III-D of the RBI Act, 1934; and (b). Such other instrument, as may be prescribed by the central government in consultation with the RBI issue by a company shall not be treated as debenture;	Instrument referred in Chapter III-D of RBI Act, 1934— 1.       Derivative 2.       Money market Instrument 3.       Securities etc. Shall not be treated as deposit.
2(49)	Definition of Interested Director	Omitted
2(51)	Definition of KMP “key managerial personnel”, in relation to a company, means— (i) the Chief Executive Officer or the managing director or the manager; (ii) the company secretary; (iii) the whole-time director; (iv) the Chief Financial Officer; and(omitted) (v) such other officer as may be prescribed;	For sub clause (v) the following sub clauses shall be substituted; (v). Such other officer, not more than one level below the directors who is in whole time employment, designated as KMP by the Board; and (vi) such other officer as may be prescribed
2(76)	Definition of Related Party “related party”, with reference to a company, means— (i) a director or his relative;  (ii) a key managerial personnel or his relative; (iii) a firm, in which a director, manager or his relative is a partner; (iv) a private company in which a director or manager is a member or director; (v) a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital; (vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager; (vii) any person on whose advice, directions or instructions a director or manager is accustomed to act: Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity; (viii) any company which is— (A) a holding, subsidiary or an associate company of such company; or (B) a subsidiary of a holding company to which it is also a subsidiary; (ix) such other person as may be prescribed;	For sub clause (viii), the following sub clauses shall be substituted; Any body corporate which is— A.. a holding, subsidiary or an associate company of such company; B. a subsidiary of holding company to which it is also a subsidiary; Or C. an investing company or the venturer of the company Explanation: for the purpose of this clause the investing company  or venturer of a company means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.
2(85)	Definition of Small Company ‘‘small company’’ means a company, other than a public company,— (i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or (ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees: Provided that nothing in this clause shall apply to— (A) a holding company or a subsidiary company; (B) a company registered under section 8; or (C) a company or body corporate governed by any special Act;	In sub clause (i) for the word “5 Crore” rupees the word “10 Crore” rupees shall be substituted. (b) in sub-clause (ii),— (A) for the words "as per its last profit and loss account", the words "as per profit and loss account for the immediately preceding financial year" shall be substituted; (B) for the words "twenty crore rupees", the words "one hundred crore rupees" shall be substituted;
2(87)	Definition of Subsidiary Company “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company— (i) controls the composition of the Board of Directors; or (ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies: Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed. Explanation.—For the purposes of this clause,— (a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company; (b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors; (c) the expression “company” includes any body corporate; (d) “layer” in relation to a holding company means its subsidiary or subsidiaries;	in clause (87), in sub-clause (ii), for the words “total share capital”, the words “total voting power” shall be substituted;
3		Insertion of new section 3A. If at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued there for.".
4	Reservation of Name of Company: (i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of sixty days from the date of the application.	In section 4 of the principal Act, in sub-section (5), for clause (i), the following shall be substituted, namely:— "(i) Upon recepit of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of 20 Days from the date of approval or such other period as may be presecribed: Provided that in case of an application for reservation of name or for change of its name by an existing company, the Registrar may reserve the name for a period of sixty days from the date of approval.".	Now name of Company will be reserved only for 20 days in place of 60 days.
7	Incorporation of Company Section 7(1)(c) stated as: an affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;	for the words "an affidavit", the words "a declaration" shall be substituted	After come into effect of Company Amendment Bill , 2017, INC -9 shall not be required to file with ROC for incorporation of Company.
12	A company shall, on and from the 15 day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it. Sub section 4 sated as: Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date of incorporation of the company, shall be given to the Reigistrar within fifteen days of the change, who shall record the same.	In section 12 of the principal Act,— (i) in sub-section (1), for the words "on and from the fifteenth day of its incorporation", the words " within thirty days of its incorporation" shall be substituted; (ii) in sub-section (4), for the words "within fifteen days", the words "within thirty days" shall be substituted.

Disclaimer: Its First series of Companies (Amendment) Bill, 2017, Second series will be publishing soon. This is nothing but a knowledge sharing initiative by author and author do not intend to accost any business or profession. Whereas deep care has been taken by author to ensure the correctness and completeness of the information provided.

Format of Register of Directors and Key Managerial Personnel

Register of Directors and Key Managerial Personnel and their Shareholding [Pursuant to Section 170 of the Companies Act, 2013 and Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014]

Name of the Company: XYZ Private Limited

Registered office: ................................................

Director Identification Number	:
Present Name	:
Any former Name	:
Father’s Name	:
Mother’s Name	:
Spouse’s Name (if married)	:
Date of Birth	:
Residential address (present as well permanent)	:
Nationality	:
Occupation	:
Date of Board Resolution in which the appointment was made	:
Date of appointment and re-appointment in the Company	:
Date of cessation of office and reasons therefore	:
Office of director or Key Managerial Personnel held or relinquished in any other body corporate	:
Membership Number of the Institute of Companies Secretaries of the India in case of Company Secretary	:
Permanent Account Number (mandatory for key managerial personnel if not having DIN)	:

Details of Securities held in the Company, its holding Company, subsidiaries and associate Companies:

S.No.	1	2	3	4
Name of Company
Number of Securities
Description of Securities
Nominal Value of Securities
Date of Acquisition
Price paid for acquisition of securities
Other consideration paid for acquisition
Date of disposal
Price received on disposal
Other consideration received on disposal
Cumulative balance and number of securities held after each transaction
Mode of acquisition of securities
Mode of holding – Physical or dematerialised form
Securities have been pledged or any encumbrance has been created

Disclaimer: This document is suggestive only. Author shall not be responsible for any loss or damage caused due to any action taken on the basis of information contained in this document. Any person wishing to act on the basis of the information contained in this document should do so only after cross checking with the original source.