Atul Mittal,Director

April, 2015

Director Deloitte Touche Tohmatsu India Pvt. Ltd

Contents

• FEMA • FDI Policy• ODI Regulations• ODI Regulations• ECB Policy• Contraventions and Compounding• DiscussionDiscussion

2

FEMA Legislation

Provisions with respect to foreign exchange and related transactions are

governed by:

• Foreign Exchange Management Act, 1999 (“FEMA”);

• Regulations made there under;

• Press notes issued by DIPP, Ministry of Commerce;

• Amendments in the law are carried out through;

Notifications/ AP Dir Circulars/Clarifications issued by RBI

Notifications/ Clarifications issued by DIPP

3

FDI Policy- An Overview

Entity Options

Foreign Company

Operates as a Establishes anEstablishes anOperates as a foreign company

Establishes an Indian company

Establishes an Indian LLP*SP/PF/AOP

BranchOffice

Project Office

Wholly Owned SubsidiaryJoint VentureLiaison

Office

* LLPs (after obtaining FIPB approval) are permitted to be engaged in activities that are currently eligible for 100% FDI under automatic route, without any FDI-linked performance

diticonditions.

FDI Policy – Overview (Illustrative list)

R t i t dP hibit d P itt dSome Sectors FDI Cap• Civil Aviation 49%

• Petroleum refining by PSU 49%

Restricted• Agriculture or plantation activity

(some exceptions)

• Betting, Gambling (including casinos)

Prohibited Permitted

• Telecom services 100%• Pharma 100%

(Brownfield) • Single brand retail trading 100%• Multi brand retail trading 51%

& Lottery

• Chit funds & Nidhi company

• Real estate (except construction

development)

100% FDI permitted under

Multi brand retail trading 51%• Teleports/DTH/Mobile TV/HITS 74%• Cable Networks (Other MSOs) 49%• FM Radio 26%• Up-linking of News & Current Affairs

development)

• Retail Trading except SBRT/MBRT

• Tobacco products

• Trading in Transferable Development

auto route in otherSectors

TV Channels 26%• Up-linking of Non-News & Current Affairs TV Channels 100% • Down-linking of TV Channels 100%• Defence 49%

Rights

• Atomic Energy (other than permitted

activities)

Defence 49%

6

Inbound Investments- FDI

Eligible Sector Prohibited,

Restricted or Automatic Route Eligible

Entities

Reporting30 days fund receipt,

30 days FC-GPR Entities Indian

Companies; andLLP

30 days FC-GPR, 180 days issue of

Shares or RefundsDividend/Interest

Winding

INBOUNDINVESTMENT Eligible

InstrumentPricing

up/Liquidation

InstrumentES/CMCPS/CMCD/Options/Warrants/

PPS FCCB/FCEB/ADR-

Bonus/Right/

PricingSEBI /ALP for

Issue n Transfer, Funding

FIRC/NRE/NRO/ Bonus/Right/ ESOP and M&AEligible Investors

PROI/Entity Incorporated o/s except Pakistan Bangladesh with

FIRC/NRE/NRO/FCNR(B)

Conversion of ECB/TKH/Royalty/LD

Bangladesh with permission of GOI, OCB by RBI/GOI

NRI/FVCI/FPI

Inbound Investment- Transfer

Gift or SaleCR, Buy Back

M&A and Restructuring Optionalityp y

ES/CCPS/CCDES- ROE

CCD/CCPS-ALP

ReportingFC-TRS 60

days by Resident

TRANSFER

No Assured Return

PricingSEBI/ALP

FIPB ApprovalRestricted

SectorBreaches

RBI ApprovalDeferred Payment;

NRI to NRGift t NR

Breaches Sectoral Caps

Gift to NR Price relaxation

ECB P liECB Policy

Foreign Currency Loan: ECB

Eligible Lenders

Eligible

Change inName, Lender,

Transfer of ECB, Currency R h d l Eligible

BorrowersReschedulement, Currency,

End Use

ECBPermitted

Reporting Form 83,

ECB2, FC- PermittedUseGPR

End Use Restriction

All i C t

ObtainingLRN

All in CostCeiling

O tb dOutbound Investment

Outbound Investment- JV/ WOS- ODI

Indian Party - ICos , PF,

LLPTrust and Society

EligibleInvestmentEquity-RPS-

Write off –Disinvestment

After lapse of 1 year, No Dues,

M i t i 90 Society Equity RPSCCPS

Loan/ Guarantee

Money receipt in 90 days

OUTBOUNDINVESTMENT

Eligible Sector

All Sectors except Banking,

Reporting ODI,

Investment proof, 30 days reporting,

APR p g,Real Estate, FSS

Sources of Funds

Financial Commitment

4 Times of Net-worthValuation

FundsFC/ADR/INR/Share Swap / ECB/FCCB

Capitalization of receivables worth

> U$ 5 Mm or < U$ 5 Mm

receivables

Situation so far….

I read all the sections and clarifications in detail but I can't make out if we are defaulting or compliant!or compliant!

Compounding of ContraventionsCompounding of Contraventions

Compounding of Contravention Compounding of Contraventions

Means..

Settle an offence committed by the contravener through imposition of aSettle an offence committed by the contravener through imposition of amonetary penalty without going in for litigation after the contraveneracknowledges having committed the contravention..

Objective..

To provide comfort by minimizing transaction costs, while taking severe view of willful, malafide and fraudulent transactions…….

But it is not equal to withdrawal of a charge or a complaint but anagreement not to pursue the legal battle and spare the accusedfrom further consequences.

Compounding – Salient Features

• VoluntaryVoluntary• No suo-motto investigation • Time Bound completion (Within 180 days)• No further proceedings for contravention so compoundedNo further proceedings for contravention so compounded• Payment of sum of contravention (within fifteen days)• Once the order is passed, no contravener seek to withdraw the order or to hold it

as void or request a review of the orderas void or request a review of the order• No appeal against the Order• Non payment shall be deemed as no application is made • No compounding before expiry of 3 years of previous order for similarNo compounding before expiry of 3 years of previous order for similar

contravention• No Compounding of cases where approval of any statutory authority/Govt. etc.

was required unless such approvals has been sought

Contraventions & Penalties at a glance

Contravention

Application for Condonation

A li ti f diApplication for compounding

Adjudication proceedings

Penalty/ ConfiscationQuantifiable offence - Upto 3 times

Non quantifiable offence - Upto Rs. 200,000Non quantifiable offence Upto Rs. 200,000Continuing penalty - Rs. 5000 per day

Imprisonment if penalty not paid ithi ib d tiwithin prescribed time

Discussion

Atul Mittal,

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Atul Mittal,Director Deloitte Touche Tohmatsu India Pvt. Ltd.9810065744