Consolidated FDI Policy Of India 2012 By DIPP: Definitions

The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India (GOI) has released the Consolidated FDI Policy of India 2012. The FDI policy 2012 has become effective from April 10, 2012.

The FDI policy 2012 has provided certain crucial definitions that must be well known to all concerned. Some of the definitions that have been selected by Perry4Law and Perry4Law Techno Legal Base (PTLB) to be shared with their viewers are:

(a) 2.1.5- Capital means equity shares; fully, compulsorily and mandatorily convertible preference shares; fully, compulsorily and mandatorily convertible debentures. However, warrants and partly paid shares can be issued to person/ (s) resident outside India only after approval through the Government route. This is so because review of FDI policy to include warrants and partly-paid shares is under consideration of the Indian Government.

(b) 2.1.6- Capital account transaction means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6 of FEMA.

(c) 2.1.7-A company is considered as “Controlled” by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company .

(d) 2.1.8- Depository Receipt (DR) means a negotiable security issued outside India by a Depository bank, on behalf of an Indian company, which represent the local Rupee denominated equity shares of the company held as deposit by a Custodian bank in India. DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg, etc. DRs listed and traded in the US markets are known as American Depository Receipts (ADRs) and those listed and traded anywhere/elsewhere are known as Global Depository Receipts (GDRs).

(e) 2.1.9- Erstwhile Overseas Corporate Body (OCB) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by non-resident Indian and includes overseas trust in which not less than sixty percent beneficial interest is held by non-resident Indian directly or indirectly but irrevocably and which was in existence on the date of commencement of the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) ) Regulations, 2003 (the Regulations) and immediately prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Regulations.

(f) 2.1.11- FDI means investment by non-resident entity/person resident outside India in the capital of an Indian company under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000.

(g) 2.1.14-Foreign Institutional Investor (FII) means an entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the SEBI (FII) Regulations 1995.

(h) 2.1.15- Foreign Venture Capital Investor (FVCI) means an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations.

(i) 2.1.16- Government route means that investment in the capital of resident entities by non-resident entities can be made only with the prior approval of Government (FIPB, Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy & Promotion, as the case may be).

(j) 2.1.17- Holding Company‘ would have the same meaning as defined in Companies Act 1956.

(k) 2.1.18- Indian Company means a company incorporated in India under the Companies Act, 1956.

(l) 2.1.19- Indian Venture Capital Undertaking (IVCU) means an Indian company:─

(i) Whose shares are not listed in a recognised stock exchange in India;

(ii) Which is engaged in the business of providing services, production or manufacture of articles or things, but does not include such activities or sectors which are specified in the negative list by the SEBI, with approval of Central Government, by notification in the Official Gazette in this behalf.

(m) 2.1.20- Investing Company means an Indian Company holding only investments in other Indian company/ (ies), directly or indirectly, other than for trading of such holdings/securities.

(n) 2.1.21- Investment on repatriable basis means investment, the sale proceeds of which, net of taxes, are eligible to be repatriated out of India and the expression investment on non-repatriable basis shall be construed accordingly.

(o) 2.1.22- Joint Venture (JV) means an Indian entity incorporated in accordance with the laws and regulations in India in whose capital a non-resident entity makes an investment.

(p) 2.1.26- A company is considered as ‘Owned‘ by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned and controlled by resident Indian citizens;

(q) 2.1.27- Person includes

(i) an individual
(ii) a Hindu undivided family,
(iii) a company
(iv) a firm
(v) an association of persons or a body of individuals whether incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and
(vii) any agency, office, or branch owned or controlled by such person.

(r) 2.1.29- Person resident in India means -
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include –
(A) A person who has gone out of India or who stays outside India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) A person who has come to or stays in India, in either case, otherwise than-
(a) for or on taking up employment in India; or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India.

(s) 2.1.32- A Qualified Foreign Investor (QFI) means a non-resident investor (other than SEBI registered FII and SEBI registered FVCI) who meets the KYC requirements of SEBI for the purpose of making investments in accordance with the regulations/orders/circulars of RBI/SEBI.

(t) 2.1.39- Transferable Development Rights (TDR) means certificates issued in respect of category of land acquired for public purposes either by the Central or State Government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole.

(u) 2.1.40- Venture Capital Fund (VCF) means a Fund established in the form of a Trust, a company including a body corporate and registered under Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996, which

(i) has a dedicated pool of capital;
(ii) raised in the manner specified under the Regulations; and
(iii) invests in accordance with the Regulations.