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PERMISSION UNDER FEMA IS REQUIRED TO OFFER SECURITIES TO COMPANIES OF NEARBY COUNTRIES OR COUNTRIES SHARING BROTHERS WITH INDIA.
The government of India has changed the FDI regime to curb unscrupulous activity and protect the dysphoria of India’s business community from Chinese investors. As Chinese investors around the world are eager to acquire companies and get involved in money laundering, tax evasion, fraudulent practices and especially spying activities through companies they have acquired.
The Department of Corporate Affairs (MCA) has notified the corporate change rules (Prospectus and Securities Allocation) for 2022 and has made some changes to the Foreign Direct Investment (FDI) regime.
The Notice stated that “No offer or solicitation of securities under this rule shall be made to any legal entity incorporated in or a national of a country sharing a land border with India, unless such legal entity or the national, as the case may be the case is. be, have obtained government approval under the 2019 FEMA (Non-Debt Instruments) Rules.”
The Rules for Businesses (Prospectus and Allotment of Securities), 2014, namely:-
1. (1) These rules may be referred to as the Amendment Rules for Companies (Prospectus and Allotment of Securities), 2022. (2) They come into force from the date of publication in the Official Gazette.
2. In the Rules for Companies (Prospectus and Allotment of Securities), 2014, ―
(i) in Rule 14, in sub-rule (1), after the fourth reservation, the following reservation is inserted, namely:-
Provided that no offer or solicitation of securities under this rule shall be made to any legal person incorporated in, or a national of, a country sharing a land border with India, unless such legal person or the national, as the case may be possible, have obtained government approval under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 and have attached it to the Private Placement Offer and Cover Letter.”
(ii) in the Annex, in Form PAS-4, in Part B, the following is inserted after serial number (vii), namely:
“(viii) Please tick as appropriate:
(a) Applicant is not required to obtain government approval under the Foreign Exchange Management (non-debt Instruments) Rules, 2019 prior to the subscription of Shares.
(b) Applicant must obtain and obtain governmental approval under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 prior to the subscription of Shares, and is attached hereto.
CONCLUSION: This is a remarkable move by the government; it is necessary to protect Nation from these cross-border entities. If we are to win an economic war in the world, then we must pay attention to all the activities of our neighbors. We cannot change or replace our neighbors, but we will be vigilant in our dealings with our borderlands. The FDI regime has changed and companies now require FEMA approval before inviting or offering securities to investors living in border countries. In the event that companies have offered securities to such entities, they must provide a statement that approval has been given for the transaction and must attach a letter of approval along with the private placement offer and a cover letter.
DISCLAIMER The article presented here is for sharing information with readers only. Views expressed are the personal views of the author. Consult with professionals if necessary.