After 11 months of the draft overseas investment rules having been published by the Reserve Bank of India (RBI), the Indian Government, pursuant to discussions with industry players and bodies corporate finally notified on 22 August 2022 the Foreign Exchange Management (Overseas Investment) Rules 2022, the Foreign Exchange Management (Overseas Investment) Regulations, 2022 and the Foreign Exchange Management (Overseas Investment) Directions, 2022 (collectively, the New Regime).
Contrary to the expectations set by the draft rules, the New Regime offers a far more cogent and comprehensive overseas investment framework for Indian corporates and individuals. The Central Government and the RBI have attempted to align the investment framework with the recent trends in the market, including: (i) externalisation of business to foreign locations to attract more investment; (ii) out-bound mergers and acquisitions of foreign companies with Indian subsidiaries; (iii) guarantee, indemnity and deferred consideration; (iv) increased usage of employee stock options and sweat equity to incentivise workforce; and (v) investment in strategic sectors and startups.
The key changes introduced by the New Regime include:
While not delving into the changes themselves, this update highlights the impact of the New Regime on Indian corporates, entities and individuals and provides an insight into the practical challenges they may continue to face.Download PDF to read more
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