What is Foreign Investment finance?
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This type of investment is made by individuals or companies in foreign countries for better growth. Trading in equity stakes of foreign companies on stock exchanges.
Eligibility Criteria depends on various factors like age of individual, repayment history, business sales/turnover& Creditworthiness ...etc.
What is Foreign Investment finance?
How can an Indian company receive foreign investment?
The routes under which foreign investment can be made is as under:
What are the Capital instruments permitted for receiving foreign investment in an Indian company?
‘Capital Instruments’ means equity shares, debentures, preference shares and share warrants issued by the Indian company. Equity shares are those issued in accordance with the provisions of the Companies Act, 2013 and will include partly paid equity shares issued on or after July 8, 2014. Share warrants issued on or after July 8, 2014 will be considered as capital instruments. Debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest.
What is a convertible note?
A convertible note is an instrument issued by a start-up company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument.
Who can invest in a convertible note and what are the instructions in this regard?
A person resident outside India (other than an individual who is a 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 five lakh rupees or more in a single tranche.
What is meant by Foreign Investment, Foreign Direct Investment and Foreign Portfolio Investment?
Foreign Investment means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP. Foreign direct investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased (OECD) defines control as owning 10% or more of the business. Foreign Portfolio Investment is any investment made by a person resident outside India in capital instruments.
What is meant by capital on a fully diluted basis?
Fully diluted basis means the total number of shares that would be outstanding if all possible sources of conversion are exercised.
Whether the foreign investment will be classified as FDI or FPI based on the schedule under which the investment is being made.
No, FDI and FPI are agnostic from the point of view of the schedule under which investment has been made. It is the percentage which defines whether it is direct or portfolio investment.
For an FPI investment, once the investment is classified as FDI (basis total holding), if the FDI holding comes back to <10%, will the holdings be classified as FDI again?
Once an FDI always an FDI.
Whom to approach for Government approval or in case of doubt regarding the concerned Administrative Ministry/ Department or regarding the classification of an activity or the sectoral route?
Please refer to the ‘Standard Operating Procedure (SOP) for Processing FDI Proposals’ issued by Department of Industrial Policy & Promotion, Government of India.
Whether the definition of Indian company in FEMA 20(R) covers companies incorporated under both the Companies Act, 1956 and Companies Act, 2013
Indian company includes all those entities covered under section 1(4) of the Companies Act, 2013.
Whether the percentage of foreign investment should be calculated at the time of issuance of Employee Stock Options (ESOP) or vesting stage or exercising stage?
Foreign investment percentage has to be calculated on a fully diluted basis i.e. at the time of issuance of Employee Stock Options.
Whom to approach for clarifications if any required, related to Schedule 5 to FEMA 20(R)
Financial Markets Regulation Department, FINANCE SEVA.
Are the investments and profits earned in India repatriable?
All foreign investments are repatriable (net of applicable taxes) except in cases where the investment is made or held on non-repatriation basis.
What is meant by investment on repatriation basis and investment on non-repatriation basis?
Investment on repatriation basis means an investment, the sale/ maturity proceeds of which are, net of taxes, eligible to be repatriated out of India. The expression investment on non-repatriation basis may be construed accordingly.