Strategic Advisory on FDI policy
Policy Advisory

The Department of Industrial Policy and Promotion (DIPP) has released the Consolidated FDI Policy – 2017 on 28th Aug. 17, with an objective to attract and promote FDI in India, in order to supplement domestic capital, technology and skills for economic growth.

Brief highlights –

For the first time, FDI circular has included Start-ups which can raise up to 100% of funds from Foreign Venture Capital Investor (FVCI). Start-ups can issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance. Now provisions have also been included relating to the issue of equity/equity-linked instruments/debt instruments and convertible notes by Start-ups.

A person resident outside India (other than citizens/entities of Pakistan and Bangladesh) will be permitted to purchase convertible notes issued by an Indian Start-ups company for an amount of INR 25 lakh or more in a single tranche. NRIs can also acquire convertible notes on non-repatriation basis.

It is formally clarified that the restriction of 25% on sales from a single vendor/group company through an e-commerce marketplace will be computed on a financial year basis. Also, the sales will be calculated based on value (not volume) of items sold on a financial year basis. The DIPP had earlier through Press Note 3 of 2016 series mandated 25% maximum sales from a single vendor, but had not specified the period for computation of sales. This provision encourages e-market players to sell goods from different vendors.

It is clarified that conversion of an LLP into a company and vice-versa is permitted under automatic route for sectors where 100% FDI is allowed.

The policy simplifies the definition of ‘Venture Capital Fund’ and defined FDI-linked performance conditions without diluting substance. ‘Venture Capital Fund’ is now defined as a fund so registered under the SEBI (Venture Capital Funds) Regulations, 1996.

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DIPP had released the Consolidated FDI Policy 2017 on 28th Aug. 17 with an objective to attract and promote FDI in India and Invest India is facilitating it. Several policy details are available at IBEF of Ministry of Commerce.

Post creation of Foreign Investment Facilitation Portal (FIFP), a Press Note 1 dated January 23, 2018 [notified under FEMA on March 26, 2018], has been issued, further modifying/easing the Standard Operating Procedure (SOP).