New ODI Regime-Master Series (Part I)

 

OVERSEAS INVESTMENTS – NEW INDIA

In a bid to enhance the ease of doing business, India's finance ministry on 22^nd August, 2022 notified rules and the Reserve Bank of India brought in revamped regulations for overseas investment by Indian entities.

Investments by Indians and Indian entities outside India is a corporate decision not so common due to RBI rules and regulations yet several companies have presence outside India. Overseas investments by a person resident in India were governed by the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015.

Now, extant regulations pertaining to Overseas Investments and Acquisition and Transfer of Immovable Property Outside India have been subsumed within the Foreign Exchange Management (Overseas Investment) Rules, 2022 which are accompanied by the Foreign Exchange Management (Overseas Investment) Regulation, 2022 and the Foreign Exchange Management (Overseas Investment) Directions, 2022.

The new mechanism simplifies the existing structure for overseas investment by person’s resident in India by widening the umbrella of approved economic activities and significantly reducing specific approvals requirements.

The core to these Rules & Regulations are three distinct definitions of Overseas Direct Investment (ODI), Overseas Investment(OI) and Overseas Portfolio Investment(OPI).

Overseas Direct Investment (ODI) –

Overseas Portfolio Investment (OPI) -

Means, any investment, other than ODI, in Foreign Securities, not including any investment in Unlisted Debt Instrument OR securities issued by person resident in India not in an IFSC.

Overseas Investment(OI) –

Financial Commitment + OPI, by person resident in India

We at Factum Legal are bringing to you a short series on new ODI Rules, Regulations and related Directions. The series shall be of seven chapters, covering:

i                    Key Points of the Foreign Exchange Management (Overseas Investment) Rules, 2022.

ii.             Key points of the Foreign Exchange Management (Overseas Investment) Regulations, 2022.

iii.                ODI by Indian Entity under new regime.

iv.                 OPI by Indian Entity under new regime.

v.                   OI by Resident Individual under new regime.

vi.            OI person resident in India other than Indian entity and Resident Individual under new regime.

vii.              OI in IFSC by person resident in India under new regime.

 

OIs, ODIs and OPIs shall be now governed in accordance with the FEMA Act, OI Rules and OI Regulations. The investments already made in accordance with the erstwhile ODI Regulations will be deemed to have been made under OI Rules and Regulations.

So to make you understand the new regime and familiarize with the new provisions, we now present to you our first chapter:

 This Article has been Compiled by Divyansh Jaiswal (Associate) and Arun Gupta (Partner). 

  You can direct your queries or comments to the author at info@factumlegal.com

  Disclaimer-

  The contents of this article should not be construed as legal opinion. This article is             intended to provide a general guide to the subject matter. Specialist advice should be     sought about your specific circumstances. We expressly disclaim any financial or other   responsibility arising due to any action taken by any person on the basis of this article.