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SAMPLE FIPB APPROVAL
 

Note: This document shows explains briefly what an FIPB approval looks like – carefully go through the kinds of limitations prescribed by FIPB. These limitations will vary depending on the sector – they usually correspond to restrictions in the FDI Policy, sectoral regulations or other conditions that the FIPB may consider appropriate to impose. 

 
NO. FC. [●]
Government of India
Ministry of Finance
Department of Economic Affairs
FIPB Unit
New Delhi, [●]
To
        [Name and address of the company]
 
   SUBJECT : Application for Foreign Collaboration (SIA Regn. No. [●] dated [●])
 
Dear Sir,
 
I am directed to refer to the above mentioned application and to convey approval of Government of India to your proposal, subject to the following terms and conditions.
  1.  Name and address of foreign collaborator             [Name of the company]
  2. Item(s) of activity covered by the foreign              Engaged in [name of the business]
  3. Proposed Location                                              [Location name]
  4. Foreign Equity Participation (in Foreign Exchange) [●]% amounting to Rs. [●] by way of subscribing to [number of shares] fully paid up fresh issue of equity shares of [name of domestic company] by way of preferential allotment of equity shares of [name of domestic company].
It is noted that after this issue, the paid up capital would be Rs. [●] consisting of [number of shares] shares of Rs. [●] each.

The amount of consideration for the aforesaid investment will be paid out of the inward remittance of foreign exchange through normal banking channels.
  1. Issue / valuation / transfer of shares shall be as per SEBI/RBI guidelines.
  2. The approval is subject to the following conditions:

[Note: An approval will typically list down conditions in a format such as the one described below. These conditions may pertain to the sectoral restrictions under the Consolidated FDI Policy, in the relevant sectoral regulations or they may be additional terms prescribed by FIPB. It may list down the requirement to obtain specific permission of the sectoral regulator, where sectoral regulations require. In certain cases, FIPB may specify additional requirements to provide information or obtain its specific consent in case of certain changes pertaining to the company’s capital structure, loans or governance structure.]

  1. That the proposed FDI in [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment should not exceed the limit of [●]%. Matters regarding raising of limit beyond [●]% and upto the upper limit of [●]% will be regulated as per the clauses [●] of the guidelines dated [●] issued by [●] [name of regulator] on the subject. While calculating the percentage of FDI in the equity of the [name of domestic company] or the new entity formed, if any, after such FDI, the foreign holding component, if any, in the equity of the Indian shareholder companies of the [name of domestic company] will be duly reckoned on pro rata basis so as to arrive at the total foreign holding in [name of domestic company].
  1. That the shareholding of the largest Indian shareholder, as defined in the said Guidelines, should always be at least [●]% of the total paid up equity. In a case of combination of more than one entity constituting the largest Indian shareholder, each of the entities shall always remain entered into a legally binding agreement to act as a single unit in managing the matters of [name of domestic company] or the new entity formed, after such Foreign Direct Investment.
  2. At least [●]th of the Directors on the Board of Directors of [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment and all key executive and editorial staff must be resident Indians.
  3. It will be obligatory on the part of [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment to inform the [●] [name of sectoral regulator] about any alteration in the foreign shareholding pattern as on 31st March of every year and within 15 days of the end of Financial Year.
  4. It will be obligatory on the part of [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment to take prior permission from the Ministry of Information and Broadcasting before effecting any changes in the shareholding of the largest Indian shareholder.
  5. [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment shall inform [●] [name of sectoral regulator] within 15 days of effecting any change in the composition of the Board of Directors or Key executives and editorial staff. Such changes would be subject to post-facto approval of Ministry of Information and Broadcasting.
  6. [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment shall be liable to intimate the names and details of any foreigners/NRIs proposed to be employed/engaged either as Consultant or in any other capacity for more than 60 days in a year, or as regular employees. It shall be liable to dispense with the services of such persons if not found security cleared subsequently.
  7. Any change in the Shareholders’ Agreement and Loan Agreements shall be disclosed to the [●] [name of sectoral regulator] within 15 days of such changes.
  8. The Article/Memorandum of Association of [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment must ensure compliance with the prescribed eligibility criteria.
  9. [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment shall obtain prior clearance from the [●] [name of sectoral regulator] of all persons not being resident Indians who are proposed to be inducted in the Board of Directors.
  10. That [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment shall intimate current Foreign Direct Investment (FDI), if any, in the Company to Reserve Bank of India (RBI) so as to enable RBI to monitor FII purchase to ensure that FDI+FII does not exceed the cap of [●].
  11. Changes in Foreign Direct Investment (FDI), if any, approved by the Government shall be periodically be advised to Reserve Bank of India to enable RBI to monitor the composite cap.
  12. That [name of domestic company] or the new entity formed, if any, after such Foreign Direct Investment shall strictly adhere to the provisions contained in the Companies Act, 1956.
  13. That clearance as required under the [●] [name of any other sector-specific legislation] shall be obtained from the [●].
  14. That the conditions prescribed in the guidelines of the [●] [name of sectoral regulator] on the subject shall be followed in letter and spirit and any departure from the conditions stipulated in the guidelines would result in revocation of this “No-Objection”.
  15. The approval is subject to the conditions that the foreign collaborator has no existing joint venture or technology transfer/trademark agreement in the same field for which approval is granted. If this is not so, you shall not take steps to implement the project but submit the details to FIPB/Govt. in terms of Press Note-1 (2005 Series).
  16. The approval is further subject to the condition that this new venture would not in any way adversely affect the interest of any existing technology/trademark arrangement in the same field.
  17. The investee company will notify any increase in foreign equity without change in approved foreign equity percentage to the FIPB Unit within thirty days of receipt of funds as also allotment of shares to non-resident shareholders.
  18. In case the proposed activity is not exempted from the provisions of the Industrial (Development & Regulation) Act, 1951 and the Foreign Exchange Management Act, 2000 it will be your responsibility to obtain such clearances as may be required under the said Acts.
  19. The location of the industrial projects, will be subject to Central or State Environmental laws or regulations including local zoning and land use laws and regulations.
  20. Adequate steps shall be taken on the satisfaction of the Government to prevent air, water and soil pollution. Such snit-pollution measures to be installed should conform to the effluent and emission standards prescribed by the State Government in which the factory or the industrial undertaking is located.
  21. You shall not manufacture items reserved for Small Scale Sector without prior approval of the Government as per the prescribed policy and procedure.
  22. Import of capital equipments, components and raw materials will be allowed as per the import policy prevailing from time to time.
  23. This approval letter be made a part of the foreign collaboration agreement to be executed between the investee company and the foreign collaborator and only those provisions of the agreement which are covered by this letter or which are not in variance with the provisions of this letter shall be binding on the Government of India or Reserve Bank of India.
  24. You may now proceed to finalize the agreement and file the same with the Reserve Bank of India / Authorized Foreign Exchange Dealer.
  25. The agreement shall be subject to Indian Laws.
  26. You may file required documents of inward remittance with the Regional Office of the Reserve Bank of India within 30 days after issue of shares in terms of FEMA regulations notified by RBI.
  27. All remittances to the foreign collaborator shall be made as per the exchange rates prevailing on the day of remittance.
  28. The Administrative Ministry for this project are D/o Economic Affairs (FI Unit) and D/o Information Broadcasting.
  29. You are requested to acknowledge and confirm acceptance of the above terms and conditions to the FIPB Unit and the Administrative Ministry.
  30. A copy of the collaboration agreement, signed by both parties may be furnished to the following authorities : -
  31. Administrative Ministry/Department as mentioned above.
  32. FIPB Unit, New Delhi.
  33. Department of Scientific and Industrial Research, Technology Bhavan, New Mehrauli Road, New Delhi.
  34. All future correspondence for amendments/changes in terms and conditions of the approval letter or for extension of validity, if required, etc. , may be addressed to the FIPB Unit New Delhi.
  35. You are requested to furnish the information as per the questionnaire on 1st January & 1st July every year till the receipt of total approved foreign equity and commencement of commercial production to the Administrative Ministry concerned and the FIPB Unit, New Delhi.
  36. In case of any problem encountered during implementation of this foreign collaboration approval, you are advised to contact Foreign Investment Implementation Authority (FIIA) at email address [email protected] or write to Foreign Investment Implementation Authority, Department of Industrial Policy & Promotion, Ministry of Commerce and Industrial, Udyog Bhawan, New Delhi – 110011
 
Yours faithfully

SEAL OF MINISTRY
 




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