RBI/2010-11/584
A.P. (DIR Series) Circular No. 73
June 29, 2011
To
All Category-I Authorised Dealer Banks
Madam/Sir,
Overseas Direct Investment- Liberalisation/ Rationalisation
Attention of the Authorised Dealer (AD - Category I) banks is invited to the
Notification No. FEMA 120/RB-2004 dated July 7, 2004 [Foreign Exchange
Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations,
2004] (the Notification), as amended from time to time, and the following
circulars issued thereunder:
With a view to restating the various provisions relating to transfer by way of
sales of a joint venture or wholly owned subsidiary (JV or WOS) outside India
with and without write off, the existing guidelines are consolidated as
indicated below:
- Transfer by way of sale of shares of a JV / WOS
An Indian Party, without prior approval of the Reserve Bank, may transfer by way
of sale to another Indian Party which complies with the provisions of Regulation
6 of
FEMA Notification 120/RB-2004 dated July 7, 2004 or to a person resident
outside India, any share or security held by it in a JV or WOS outside India
subject to the following conditions:
- the sale does not result in any write off of the investment made.
- the sale is to be effected through a stock exchange where the shares of the
overseas JV/ WOS are listed;
- if the shares are not listed on the stock exchange and the shares are
disinvested by a private arrangement, the share price is not less than the value
certified by a Chartered Accountant / Certified Public Accountant as the fair
value of the shares based on the latest audited financial statements of the JV /
WOS;
- the Indian Party does not have any outstanding dues by way of dividend,
technical know-how fees, royalty, consultancy, commission or other entitlements
and / or export proceeds from the JV or WOS;
- the overseas concern has been in operation for at least one full year and the
Annual Performance Report together with the audited accounts for that year has
been submitted to the Reserve Bank;
- the Indian party is not under investigation by CBI / DoE/ SEBI / IRDA or any
other regulatory authority in India.
- Transfer by way of sale of shares of a JV / WOS involving write off of the
investment
- Indian Parties may disinvest without prior approval of the Reserve Bank, in
the under noted cases where the amount repatriated on disinvestment is less than
the amount of the original investment:
- in cases where the JV / WOS is listed in the overseas stock exchange;
- in cases where the Indian Party is listed on a stock exchange in India and has a
net worth of not less than Rs.100 crore;
- where the Indian Party is an unlisted company and the investment in the overseas
venture does not exceed USD 10 million and
- where the Indian Party is a listed company with net worth of less than Rs.100 crore but investment in an overseas JV/WOS does not exceed USD 10 million.
- Such disinvestments shall be subject to the conditions listed at items (ii)
to (vi) of paragraph 2 above.
- The Indian Party is required to submit details of such disinvestment through
its designated AD category-I bank within 30 days from the date of disinvestment.
- An Indian Party, which does not satisfy the conditions stated above for
undertaking any disinvestment in its JV/WOS abroad, shall have to apply to the
Reserve Bank for prior permission.
- Necessary amendments to the Foreign Exchange Management (Transfer or Issue of
Any Foreign Security), Regulations, 2004 are being issued separately.
- AD - Category I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- The directions contained in this circular have been issued under Sections
10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999)
and are without prejudice to permissions/approvals, if any, required under any
other law.
Yours faithfully,
(Dr. Sujatha Elizabeth Prasad)
Chief General Manager