Investment  in shares/con.debs. on repatriation basis.

1. Non Resident Indian [ NRI ] being an Indian citizen as also a foreign citizen of Indian origin is permitted to freely invest in shares and / or convertible debentures of Indian company carrying on almost every kind of business in India barring a few cases wherein prior approval of the Reserve Bank of India is necessary. These investment may be made on repatriation basis or non-repatriation basis. Repatriation is governed by various Investment caps / ceilings.

2. As the company is required to comply with the procedural aspects such as submission of necessary details, reports, certificates of Chartered Accountant etc., the NRI is not required to undertake any procedural aspect whatsoever.

 

Purchase of shares / convertible debentures under Foreign Direct Investment Scheme

The said scheme facilitates an NRI's investment in shares and debentures of a company by way of direct subscription to the company.

1)  Eligible investor : 

.01       A Indian citizen or foreign citizen of Indian origin [PIO] resident outside India other than citizen of Bangladesh or Pakistan. 

.02       An incorporated entity outside India other than entity in Bangladesh or Pakistan.

2) Permissible investments : 

.01       Equity shares

.02       Convertible preference shares and

.03       Convertible debentures

 3) Approval / Permission : 
 

01. Automatic Route/  Permission :

i) Eligible companies :

 All Indian companies other than the companies engaged in activity included in ANNEXURE-A 

 Securities can be issued upto the extent specified in Annexure-B 

ii)  Conditions : 

.01           The issue is subject to compliance with provisions notified by Secretariat for Industrial Assistance, Ministry of Commerce and Industry, Government of India.

.02           The company's activity should not require any industrial license under the Industries (Development Regulation) Act, 1951 or Industrial Policy of 1991, and

.03           The issue is not made for acquiring existing shares of other Indian company.

iii) Trading Company :

.01           A trading company can issue securities to the extent of 51 % of its capacity.

.02           Remittance of dividend to NRIs is permissible after necessary export registration is obtained.

.03           A small scale industrial unit (SSI) company (not engaged in items covered by Annexure-A) can issue securities to the extent of 24 % of its paid up capital.

.04           While Retail Trading per se is prohibited ;NRIs can invest upto 100% in a venture undertaking  Wholesale/cash  & carry trading and trading for exports and trading of items sourced from small  scale sector and upto 51% in case of single brand product retailing.

iii) Issue of securities for consideration other than forex

.01           Against Royalty/Lump sum fees due for payment for providing technology/technical know-how.

.02           Against ECB provided the foreign equity in the company after the conversion of Royalty/Lump sum fee/ECB  into equity is within the sectoral cap notified,if any.

iv) Mode of Investment :

.01           From Non Resident External account -[ NRE ]

.02           From Foreign Currency Non Resident account -[ FCNR ]

.03           Foreign Exchange Remittance from abroad.

 2.        It may be noted that investment made by way of foreign exchange remittance from abroad will require Know Your Customer (KYC) Certificate of Indian bank who will require such KYC from foreign bank remitting the funds.  Hence, it is advisable to invest from Non-Resident External (NRE) / Foreign Currency Non Resident (FCNR) account.

v) Compliance by Indian Companies :

.01           The Indian company issuing the securities on repatriation basis should within 30 days of receipt of application money and also within 30 days of issue of shares / debentures submit various details to the Reserve Bank of India briefly stated herein:

                                                    [i].            Name and address of the NRI investor ; amount of investment ; share of NRI participation ;name and address of bank through which the funds have been received and other relevant facts about the investor . 

                                                  [ii].            Name and address of the Company ; its business ; authorised capital ; paid-up capital ; share of NRI participation ;present value of shares as per specified guide lines  and other relevant facts about the company together with professional chartered accountant / company secretary's certificates etc.

                                                [iii].            Said information and submission is not required to be submitted if the shares / debentures are issued on non-repatriation basis.

 

 vi) If shares are not issued within 180 days of receipt of application money ,such application money is to be refunded to the investor.

vii)   Sectoral Caps on Investment by Persons Resident Outside India :
 

4.         Remittance of sale proceeds :

.01           Net sale value (after payment of taxes) can be repatriated out of India / credited to NRE / FCNR/ NRO account if the shares are purchased on repatriation basis.

.02           Net sale value (after payment of taxes) can be credited to NRO account if shares are purchased on non-repatriation basis.

.03           The amount invested in shares or convertible debentures under this Scheme on non-repatriation basis normally cannot be repatriated abroad, however now under the liberal remittance scheme,  balance held in NRO account can be remitted / repatriated abroad upto US$ 1 mn  per financial year.

5.         Prior permission : A person proposing to be a collaborator or acquiring entire share holding of new Indian company requires prior permission of the Central Government if such person has a previous venture or tie-up in India through investment in shares or debenture ;

technical collaboration ; trade mark agreement , or investment by whatever name called in the same field or allied field in which the Indian company is engaged.