Companies must disclose FDI from neighbours

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Companies must disclose FDI from neighbours

The Ministry of Corporate Affairs has made amendments under the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022, requiring Indian entities to reveal if investments are made by a company that is incorporated in, or a national of, a country that shares a land border with India.

The amendment, which came into effect on 5 May, was made to keep a check on foreign direct investment (FDI) from neighbouring countries that may result in a hostile takeover. India shares land borders with China, Pakistan, Bangladesh, Nepal, Myanmar, Afghanistan and Bhutan.

In 2020, the government had mandated that all FDI from bordering countries are subject to prior government approval through the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules.

The new norms require Indian companies to disclose in their applications for share allotments whether they require approval under the foreign exchange management rules.