Overseas Direct Investment, Liberalization/Rationalization

The RBI vide a recent circular, dated May 27, 2011 has made certain changes to the prevailing ODI Regulations. The objective is to provide operational flexibility to Indian Corporates having investment abroad. Some of the changes brought about are with respect to:

(i)  Performance Guarantees issued by the Indian Party.

(ii) Restructuring of the balance sheet of the overseas entity involving write-off of capital and    receivables.

(iii) Disinvestment by the Indian Parties of their stake in an overseas JV/WOS involving write-off.

(iv) Issue of guarantee by an  Indian Party to step down subsidiary of JV /WOS under general  permission.

The Business Standard dated May 28, 2011 reports the reaction of Corporate India to the above mentioned changes.    

FDI and Issue of Shares For Consideration Other Than Cash: Discussion Paper

The DIPP has released a discussion paper on the subject of "Issue of shares For Consideration Other Than Cash" with specific reference to Foreign Direct Investment. The paper has considered the following issues:

• issue of shares against import of capital goods, machinery or equipment including second hand equipment
• issue of shares against services
• issue of shares against import of raw materials and trade payables.
• issue of shares against pre-operative or pre-incorporation expenses.
• share swaps
• issue of shares against intangible assets including franchisee agreements
• issue of shares against one time extraordinary payment including arbitral awards

The discussion paper has also outlined some specific issues that may arise in this regard.