[ESTABLISHING A BUSINESS ENTITY IN INDIA]
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owner is situated in or is a citizen of such countries. However, the term "beneficial owner" is not explicitly defined in these regulations. Instead, it is generally interpreted based on definitions from other regulations, such as the Companies Act, 2013, and the Prevention of Money Laundering Act, 2002. These definitions typically consider a beneficial owner as someone who holds a significant interest or control over an entity, including through multi-layered structures. • FDI in LLPs is permitted, subject to certain conditions e.g., the FDI is allowed, under the automatic route, in LLPs operating in sectors/activities where 100% (hundred percent) FDI is permitted and there are no FDI linked performance conditions. Investment in LLPs either by Foreign Portfolio Investors (“ FPIs ”) or Foreign Venture Capital Investors (“ FVCI ”) is not permitted. • A foreign investor can, without prior government approval, invest in unlisted securities of an existing Indian company in Unregulated Sectors, in accordance with the pricing guidelines, and subject to overall compliance with the FDI policy, and accordingly such securities can also be issued/ transferred to it by Indian or foreign shareholders. • Earlier, aggregate investments by FPIs under the automatic route (i.e., without prior regulatory approval) was permitted up to 49% of the shareholding of the Indian company, or the sectoral cap, whichever was lower, provided that there was no transfer of
ownership and control of the Indian company from an Indian resident to the FPI. However, now the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024 have removed this 49% threshold, and now investments by FPIs are permitted up till the sectoral cap limits, provided that there is no transfer of ownership and/or control of the Indian company from an Indian resident to the FPI. This change will essentially allow FPIs to invest in sectors which had a sectoral cap higher than 49%, thus opening up the Indian economy for further FPI inflows. Furthermore, the FPIs can hold up to the sectoral cap in case of a transfer of shares of an Indian company from a non-resident to the FPI, even if such investment leads to the transfer of ownership and/or control of the Indian company. 4.2 Any capitalisation obligations: Presently, there is no requirement for incorporation of companies with any minimum paid up share capital under the Companies Act, 2013. However, from a foreign investment perspective, any foreign investment beyond prescribed percentages is not permitted without prior government approval in Regulated Sectors. Further, depending upon the sector of investment, there could be certain minimum capitalization norms applicable under the prevailing foreign direct investment policy. 4.3 Any special business or investment visa issues: Foreign nationals are allowed to come to India on business or employment visas, depending on the nature of their deployment and other similar factors.
ILN Corporate Group – Establishing a Business Entity Series
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