The Department of Industrial Policy and Promotion (DIPP) has deleted clause 3.3.2.1 of the foreign direct investment (FDI) policy relating to equity securities with built-in options. The clause was introduced on 30 September.
Clause had stated that equity securities would be eligible as FDI instruments only if they have no in-built options of any type. Were an equity security to be issued or transferred with any option attached to it (a put option or a call option, for example), it would lose its equity character. Such instruments would have had to comply with the extant external commercial borrowing regulations, which are more restrictive in terms of the borrowing limits, eligible borrowers and lenders, and end-use norms.
Many observers predicted that the clause that now stands deleted could have significantly affected FDI flows into India, especially those from private equity investors and joint venture transactions involving an Indian party.
You must be a
subscribersubscribersubscribersubscriber
to read this content, please
subscribesubscribesubscribesubscribe
today.
For group subscribers, please click here to access.
Interested in group subscription? Please contact us.
你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章，欢迎成为我们的订阅会员成为我们的订阅会员。
The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
