Govt eases cross-border share swap rules to woo foreign money
equity instruments of a local company in exchange for those of a foreign firm in a significant rejig of foreign investment norms. Investments by an overseas citizen of India (OCI) on a non-repatriation basis would not be counted as indirect foreign investment, as per the changes, which were announced late on Friday.
The amendments in the Foreign Exchange Management (Non-debt Instruments) Rules follow the budget pledge by finance minister Nirmala Sitharaman to simplify overseas investment rules.
The latest changes have aligned the provisions governing downstream investments by overseas citizens of India with those for non-residents. This, experts said, would encourage greater participation of NRIs in the country's economy. Easier share swap rules will «facilitate global expansion of Indian companies through mergers, acquisitions, and other strategic initiatives», the finance ministry said. The government also clarified that transfer of all shares in companies having foreign direct investment (FDI) from countries sharing land borders with India would require prior nod irrespective of the sector.
‘Move may Help Startups Garner Funds’
An explicit clause dealing with the swap of equity shares has been incorporated in the rules to allow such exchanges even in cases where government approval is required for the underlying entity. In such instances, however, swaps will be executed only with prior government approval. The latest changes also align the definitions of ‘control’ and ‘startup’ as specified under the Foreign
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