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What are the issues faced by foreign investors?

Warm-up exercise to put you into the shoes of a foreign investor

Imagine a 5 billion US dollar private equity fund which has investors from the US and Europe is looking to invest in high growth companies in the telecom and mobile technology startups. The fund managers, who want to ensure that their investments make stellar returns and keep their own investors happy, are contemplating the key issues that they will face with respect to India’s legal and regulatory regime. According to you, which are the issues that are going to be relevant for the managers?

We are listing down the questions you should cross your mind, when you imagine a foreigner investing in India. 

Entry-related issues relevant for foreign investors
  • What are the options available to a foreigner who wants to conduct business in India? What if he wants to invest in an existing business, or start a new one?
  • Does the regulatory framework prescribe a minimum amount that must be invested into the Indian venture? Will the transaction require a regulatory approval?
  • Is there a minimum price that must be paid for purchase of shares?
  • Whom does the foreigner typically pay at the time of investment – the company or the shareholders?
  • What kind of documentation is required to protect the foreigner’s interest?
  • How do foreign venture capitalists invest? How is investment by a financial investor different from that by a foreigner investing into a joint venture?
  • In which ways can the foreign investor bring contribute his share of capital? Can loans be converted into equity? Can shares owned by the foreign entity be exchanged for shares of the Indian company? Can goods or machinery be brought by the foreign investor into the Indian company instead of money?
​​Ways by which foreigners can invest in India or finance Indian businesses

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