Foreign Exchange Management (Non-debt Instruments) Rules Amended to prevent opportunistic takeover of domestic firms

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The Ministry of Finance vide its gazette notification dated 22nd April 2020 has notified the Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2020 in which it has made it mandatory that foreign investments from countries that share a land border with India to obtain prior approval from the government to prevent opportunistic takeover of domestic firms amid COVID-19 pandemic.

The Amendment is brought under Rule 6 which deals with Investments by person resident outside India in which A person resident outside India may make investment by purchase or sale of equity instruments of an Indian company to Provide the condition that an entity of a country, which shares land border with India or the beneficial owner of an investment into India who is situated in or is a citizen of any such country, shall invest only with the Government approval.

Provided further that, a citizen of Pakistan or an entity incorporated in Pakistan shall invest only under the Government route in sectors or activities other than defense, space, atomic energy which are prohibited.

 Provided also that in the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction or purview of the above provisos, such subsequent change in beneficial ownership shall also require government approval.

Click here to read the Notification.

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