Soon, minor equity recast may not need FIPB nod
Come 2008, companies going in for minor changes in their equity structures may not need Foreign Investment Promotion Board (FIPB) clearance unless it is a fresh FDI proposal.
By Rajat Guha, TNN |
NEW DELHI: Come 2008, companies going in for minor changes in their equity structures may not need Foreign Investment Promotion Board (FIPB) clearance, unless it is a fresh FDI proposal. The government plans to allow companies to allot fresh shares to their existing foreign shareholders, provided this does not breach the sectoral caps.
However, everytime, a company effects changes in its equity structure, it would have to mandatorily report to RBI.
The government is likely to come out with the changed policy early next year. Currently, issuing additional equity to foreign shareholders needs an FIPB clearance.
Foreign shareholders also would not require any government clearance if they intend to diversify or expand their portfolio in their Indian JVs. “But if the same foreign company intends to start a new business in India or forges a new JV with an another Indian partner, it would call for FIPB approval,” said an official.
If a company wishes to offer a certain equity stake to its foreign joint venture partner, it would have to enlarge its equity base so that its foreign partner’s share remains the same. “This would mean no breach of FDI caps and regulations,” the official said.
Sources said the proposal will make life easier for companies that have to seek clearances everytime they make changes in equity structures for induction of funds or go in for other activities with the same foreign partner in India.
However, everytime, a company effects changes in its equity structure, it would have to mandatorily report to RBI.
The government is likely to come out with the changed policy early next year. Currently, issuing additional equity to foreign shareholders needs an FIPB clearance.
Foreign shareholders also would not require any government clearance if they intend to diversify or expand their portfolio in their Indian JVs. “But if the same foreign company intends to start a new business in India or forges a new JV with an another Indian partner, it would call for FIPB approval,” said an official.
If a company wishes to offer a certain equity stake to its foreign joint venture partner, it would have to enlarge its equity base so that its foreign partner’s share remains the same. “This would mean no breach of FDI caps and regulations,” the official said.
Sources said the proposal will make life easier for companies that have to seek clearances everytime they make changes in equity structures for induction of funds or go in for other activities with the same foreign partner in India.
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At the same time, the government is also mulling stricter policies for foreign fund flows in sensitive sectors like real estate. In fact, the government is considering removing real estate from automatic route list. This implies every real estate FDI proposal would need clearance from FIPB. Download
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