Government to give permission for investment from China and its neighbours


Government to give permission for investment from China and its neighbours
The department for Promotion of Industry and Internal Trade issued a press note 3 (2020 series) stating that foreign investments from countries with which India shares land border shall be under approval route. Also, transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in beneficial ownership falling within this restriction will require government approval. The move comes close on the heels of market regulator Sebi asking custodian banks to disclose details of `ultimate beneficial owners’ of foreign portfolio investors (FPIs) based in China and Hong Kong.

The press note states that this review is for curbing opportunistic takeovers or acquisitions of Indian companies due to current Covid 19 pandemic.

The move is likely to have implications for future investments by venture capital funds and the startup segment that had seen rise in Chinese investments over last few years and may have deals inked for future infusion from their investors.

The DPIIT and the Ministry of Home Affairs have been in discussion over additional scrutiny for investments flowing in from some countries, but the latest trigger has been growing apprehensions over Chinese firms taking over Indian firms facing stress due to economic stress caused by Covid outbreak.

This implies that investment even in a single share of a company via the FDI route from seven countries that share land border with India will need prior approval of the government. This approval will be mandatory for all sectors irrespective of the quantum of FDI permitted in them via automatic route.

Government to give permission for investment from China and its neighbours:

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