India Changes FDI Policy To Block the Threat of Opportunistic Takeovers

To combat the negative effects of COVID-19 pandemic, particularly in form of hostile takeovers/acquisition of Indian entities, the Government of India has amended the Foreign Direct Investment (FDI) Policy and has imposed investment restrictions on non-resident entities based in countries that share a land border with India.  The countries that share a land border with India are – China, Pakistan, Bangladesh, Afghanistan, Nepal, Bhutan, and Myanmar. The highlights of the amendment are as below:

  • Non-resident entity based in-country sharing land border with India can invest in India only after taking prior approval of the Government of India.
  • Where the investor’s beneficial owner is situated in or is a citizen of a country that shares a land border with India, such investment will be subject to prior approval of the Government of India.
  • Any incident of ‘transfer of ownership’ of existing or future FDI in an entity in India, resulting in beneficial ownership falling under this new restriction, will also require prior approval of the Government of India.
  • A citizen of Pakistan or an entity incorporated in Pakistan can invest only under the Government route in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

Click below for the link to the notification dated 22nd April 2020.

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