Foreign Direct Investment – Reporting of issue / transfer of ‘participating interest/right’ in oil fields to a non resident as an Foreign Direct Investment transaction

Earlier the transfer of equity shares / fully and mandatorily convertible debentures/ fully and mandatorily convertible preference shares of an Indian company, from a person resident outside India (non-resident) to a person resident in India or vice versa, had to be reported to an Authorized Dealer bank within 60 days of transactions. Further, the receipt of consideration for issue of shares as well as the issue of shares of an Indian company, to a non-resident had to be reported to the Reserve Bank of India through an Authorized Dealer bank within 30 days of the transaction (receipt of consideration for issue of shares to a non resident or issue of shares to the non-resident) an accordance with the Regulations 9 and 10 and para 9 of Schedule I to the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident outside India) Regulations, 2000 (Click here to view) and Circular on Foreign Direct Investment in India -Transfer of Shares / Preference Shares / Convertible Debentures by way of Sale - Modified Reporting Mechanism (Click here to view)

The Reserve Bank of India on 16^th November 2011, vide a notification, has decided that to treat the issue / transfer of ‘participating interest/ rights’ in oil fields to a non- resident as Foreign Direct Investment (FDI) transaction under the extant FDI policy and the FEMA regulations. Accordingly, these transactions have to be reported as FDI transactions in terms of the provisions of Regulations 9 and 10 of the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time read with A.P. (DIR Series) Circular No.63 dated April 22, 2009 as well as paragraph 9 of Schedule I to the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. Accordingly, transfer of ‘participating interest/ rights’ will be reported as ‘other’ category under Para 7 of revised Form FC-TRS as given in the Annex and issuance of ‘participating interest/ rights’ will be reported as ‘other’ category of instruments under Para 4 of Form FC-GPR.

Click here to view the notification.

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