Investment by a Foreign Venture
Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000
RBI/2016-17/89 October
20, 2016 To Madam/Sir, Investment
by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI)
Regulations, 2000 Attention of Authorised Dealers
Category – I (AD Category - I) banks is invited to the Foreign Exchange
Management (Transfer or 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
(Principal Regulations). 2. Investment in India by Foreign
Venture Capital Investors (FVCI), registered with SEBI, is governed by the
provisions of Schedule 6 of the Principal Regulations. In order to further
liberalise and rationalise the investment regime for FVCIs and to give a
fillip to foreign investment in the startups, the extant regulatory
provisions have been reviewed, in consultation with the Government of India
and accordingly amendments have been carried out in Schedule 6 of Foreign
Exchange Management (Transfer or Issue of security by a person resident
outside India) Regulations, 2000, through Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) (Third
Amendment) Regulations, 2016. 3. As per the Amendment
Notification referred to above, any FVCI which has obtained registration
under the Securities and Exchange Board of India (FVCI) Regulations, 2000,
will not require any approval from Reserve Bank of India and can invest in: a) Equity or equity linked
instrument or debt instrument issued by an Indian company whose shares are
not listed on a recognised stock exchange at the time of issue of the said
securities/instruments and engaged in any of the following sectors: i.
Biotechnology ii.
IT
related to hardware and software development iii.
Nanotechnology iv.
Seed
research and development v.
Research
and development of new chemical entities in pharmaceutical sector vi.
Dairy
industry vii.
Poultry
industry viii.
Production
of bio-fuels ix.
Hotel-cum-convention
centres with seating capacity of more than three thousand x.
Infrastructure
sector (This will include activities included within the scope of the
definition of infrastructure under the External Commercial Borrowing
guidelines / policies notified under the extant FEMA Regulations as amended
from time to time). b) Equity or equity linked
instrument or debt instrument issued by an Indian ‘startup’ irrespective of
the sector in which the startup is engaged. A startup will mean an entity
(private limited company or a registered partnership firm or a limited
liability partnership) incorporated or registered in India not prior to five
years, with an annual turnover not exceeding INR 25 Crores in any preceding
financial year, working towards innovation, development, deployment or
commercialization of new products, processes or services driven by technology
or intellectual property and satisfying certain conditions given in the
Regulations. c) Units of a Venture Capital Fund
(VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) (registered
under the SEBI (AIF) Regulations, 2012) or units of a Scheme or of a fund set
up by a VCF or by a Cat-I AIF. 4. It is clarified that downstream
investments by a Venture Capital Fund (VCF) or a Cat-I AIF, which has
received investment from FVCI, shall have to comply with the provisions for
downstream investment as laid down in Schedule 11 of the Principal
Regulations. 5. Other salient features of the
revised regulatory framework are as under: a) FVCI may open a foreign
currency account and/or a rupee account with a designated branch of an
Authorised Dealer for the purpose of making transactions only and exclusively
under this Schedule. b) The consideration for all
investment by an FVCI shall be paid out of inward remittance from abroad
through normal banking channels or out of sale / maturity proceeds of or
income generated from investment already made as per paragraph 3 above. c) There will be no restriction on
transfer of any security/instrument held by the FVCI to any person resident
in or outside India. 6. An entity receiving investment
directly from a registered Foreign Venture Capital Investor (FVCI) will be
required to report the investment, mutatis mutandis, in form FCGPR. The
necessary changes in the E-biz portal is being made and separate instructions
will be issued in due course. Till such time, reporting requirements, as
hitherto, shall continue. 7. AD Category – I banks may bring
the contents of this circular to the notice of their constituents and
customers concerned. 8. Reserve Bank has since amended
the Principal Regulations accordingly through the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) (Third
Amendment) Regulations, 2016 which have been notified vide Notification No. FEMA 363/2016-RB dated April 28, 2016,
vide G.S.R. No.465(E) dated April 28, 2016. 9. The directions contained in
this circular have been issued under section 10(4) and 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and are without prejudice to
permissions / approvals, if any, required under any other law. Yours
faithfully, (Shekhar
Bhatnagar) |
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