Modes of Investment under the Foreign Direct Investment Scheme in India

Foreign Direct Investment in India can be made through the following modes:

FDI – Modes of Investment

A. Issuance of fresh shares by the company under FDI

An Indian company may issue fresh shares /convertible debentures under the FDI Scheme to a person resident outside India (who is eligible for investment in India) subject to compliance with the extant FDI policy and the FEMA Regulation.

B. Acquisition by way of transfer of existing shares by a person resident in or outside India under FDI

Foreign investors can also invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents / NRIs for the acquisition of shares by way of transfer in the following manner:

  • Transfer of shares by a person resident outside India: 
    • Non-Resident to Non-Resident (Sale / Gift): A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift, shares or convertible debentures to any person resident outside India (including NRIs but excluding OCBs). Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the Reserve Bank of India
    • NRI to NRI (Sale / Gift): NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI.
  • Transfer of shares/convertible debentures from Resident to Person Resident outside India

    A person resident in India can transfer by way of sale, shares / convertible debentures (including the transfer of subscriber’s shares), of an Indian company under the private arrangement to a person resident outside India, subject to the following along with pricing, reporting, and other guidelines

Fastlegal Team

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