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The Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, vide its Press Note No. 1 (2022 series) has amended the FDI policy to allow investment in Life Insurance Corporation of India (LIC) and provide clarifications on various . The highlights of the major amendments introduced through the Press Note to the provisions of the FDI policy are as follows:
1. Convertible Note
The amendment has increased the maximum period for conversion of convertible note into equity shares issued by startups. Earlier, convertible notes were repayable at the option of the holder or could be converted into equity shares of startup companies, within a not longer period. 5 years from the date of issue of convertible note. Now, the maximum conversion period has been extended up to 10 years.
2. Amendment in definition of Indian company
The meaning of Indian company has been amended to include A body corporate established or constituted by or under any Central or State Act, Earlier, it only covered companies incorporated under the Companies Act, 2013.
3. Introduction of the concept of “Share Based Employee Benefit”
The press note introduced the concept of share based employee benefits In the FDI policy which allows issuance of capital instruments, which are share based employees by a corporate body to its employees/ or directors or employees/ or directors of its holding company or joint venture or wholly owned foreign subsidiaries/ subsidiaries Allows issuance as per benefit plans. who are resident outside India subject to the conditions provided under the Press Note. Earlier, the FDI policy only covered Employee Stock Options (ESOPs) and sweat equity shares.
4. Reporting of Issue of ESOPs or Sweat Equity Shares or Shares Issued on Exercise of ESOPs
Indian company will be required to fill the form”ESOP reportingWith the Foreign Exchange Department or Reserve Bank of India (RBI) within 30 days from the date of issue of ESOP or Sweat Equity Shares or shares issued on the exercise of ESOP.
Form “ESOP Reporting” is a physical form which will be submitted to RBI whereas earlier reporting form was required to be ensured by ESOP which was an online form available for filing on FIRM portal.
5. Allowing FDI in Life Insurance Corporation of India
FDI policy allows FDI in Life Insurance Corporation of India (LIC): 20% under automatic route subject to the prescribed.
conclusion
Changes made in FDI policy through Press Note 1 (2022 series) Mainly to streamline and iron-out some of the interlinked provisions in the existing FDI policy and introduced sectoral limit on FDI in Life Insurance Corporation of India. For more details or clarifications, please refer to the press note here: https://dpiit.gov.in/sites/default/files/Press_Note_1_2022_14March2022.pdf
PDF version attached: https://www.dpncindia.com/blog/wp-content/uploads/2022/03/amendment-in-existing-FDI-policy.pdf
Disclaimer:
The information contained herein is based on information released by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry. While the information is believed to be accurate to the best of our knowledge, we make no representations or warranties, express or implied, as to the accuracy or completeness of this information. Recipients should conduct and trust their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any error contained herein, whether due to negligence or otherwise or for any damages, whether caused or sustained by a person dependent on it.
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