FEMA REGULATIONS ON TRANSFER OF PROPERTY & CROSS BORDER MERGERS

For RBI Grade B 2018 and NABARD Grade A and Grade B 2018

www.edutap.co.in
 Relevance of this Topic

With Regard to NABARD (ESI):

• Reforms in Banking / Financial Sector
• Current Economic and Social Issues

With Regard to RBI (FM):

• Reserve Bank of India – Functions
• Recent Developments in Financial Sector

www.edutap.co.in
www.edutap.co.in
 Acquisition / Transfer of immovable Property An NRI or OCI may

acquire immovable property in India other than agricultural land/ farm house/ plantation property provided
consideration is through banking channels and other specified conditions are met.

acquire any immovable property in India other than agricultural land/ farm house/ plantation property by way of
gift from a person resident in India or from an NRI or from an OCI, who in any case is a relative.

acquire any immovable property in India by way of inheritance from a person resident outside India who had
acquired such property in accordance with the then prevailing foreign exchange laws or from a person resident in
India

transfer any immovable property in India to a person resident in India

transfer any immovable property other than agricultural land/ farm house/ plantation property to an NRI or an
OCI

www.edutap.co.in
 CONDITIONALITIES FOR TRANSACTIONS
Any transaction involving acquisition or transfer of immovable property under
these regulations shall be undertaken

Subject to payment of applicable

Through banking channels in India taxes and other duties/ levies in
India

www.edutap.co.in
 PROHIBITION ON TRANSFER OF IMMOVABLE PROPERTY
Save as otherwise provided in the Act or Regulations, no person
resident outside India shall transfer any immovable property in India

www.edutap.co.in
 Prohibition on Citizens of Certain Countries

• No person being a citizen of Pakistan, Bangladesh, Sri Lanka,

Afghanistan, China, Iran, Nepal, Bhutan, Hong Kong or Macau or
Democratic People’s Republic of Korea (DPRK)
• without prior permission of the Reserve Bank
• shall acquire or transfer immovable property in India,
• other than lease, not exceeding five years.
• Provided this prohibition shall not apply to an OCI.

‘Overseas Citizen of India (OCI)’ means a person resident outside India who is registered as an
Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955

www.edutap.co.in
 Other Key Features

Any existing holding of immovable property in India by a person resident

What about Existing outside India made in accordance with the policy in existence at the time of
Properties ? such acquisition would not require any modifications to confirm to these
regulations.

A person or his successor shall not, except with the general or specific
Repatriation of Sale
permission of the Reserve Bank, repatriate outside India the sale proceeds of
Proceeds
any immovable property.

A person resident outside India who has established in India in accordance

Acquiring Property for with the regulations, a branch, office or other place of business for carrying
Permitted Activities on in India any activity may acquire / transfer by way of mortgage any
immovable property in India, which is necessary for or incidental to carrying
on such activity

www.edutap.co.in
www.edutap.co.in
What are Cross Border Mergers ?

‘Cross border merger’ means any merger, amalgamation or

arrangement between an Indian company and foreign company in
accordance with rules framed under Companies Act.

INDIAN FOREIGN
COMPANY COMPANY

www.edutap.co.in
 What are the regulations about ?

• The Reserve Bank of India (RBI) has framed the regulations for
mergers, amalgamation and arrangement between Indian and
foreign companies.

• The ministry of corporate affairs had already notified Section 234 of

the Companies Act, 2013, paving the way for merger and
amalgamation of a foreign company with an Indian company and
vice-versa.

• With the RBI framing the regulations under FEMA, the regulations
can now take effect.

www.edutap.co.in
 INBOUND AND OUTBOUND MERGERS

The Foreign Exchange Management (Cross Border Merger) Regulations,

2018, will cover both inbound and outbound investments.

INDIAN FOREIGN RESULTING

COMPANY COMPANY COMPANY

INDIAN OR FOREIGN

www.edutap.co.in
 Inbound Merger

‘Inbound merger’ means a cross border merger where the

Meaning resultant company is an Indian company;

In the case of inbound merger, the rules allow the resultant

Regulations company to issue or transfer any security to a person resident
outside India subject to pricing and sectoral foreign
investment conditions and FEMA rules.

www.edutap.co.in
 Outbound Merger

‘Outbound merger’ means a cross border merger where the

Meaning resultant company is a foreign company

In a case of outbound merger, the rules allow resident Indian

Regulations entities to acquire or hold securities of the resultant company
in accordance with FEMA regulations.

www.edutap.co.in
 MISC POINTS

• The central bank has stated that any transaction done in compliance
with its regulations will be deemed to have its prior approval

• This will hugely impact the timeliness of cross border M&As.

• Any borrowing of the foreign company which due to the merger

becomes the borrowing of an Indian company must confirm the
External Commercial Borrowing Regulations within a period of two
years.

www.edutap.co.in
 IMPACT OF THE REGULATIONS

• The real beneficiaries of these regulations would be MNCs which in

many cases want to consolidate the business of a region and require
mergers involving an Indian company with other companies in foreign
jurisdictions.
• The clarity of law also makes corporate planning possible for all
Indian business houses having overseas business.
• The rules are expected to encourage cross-border M&A activity.
• The move is likely to have an impact on insolvency and bankruptcy
proceedings as well, since it will encourage foreign bidders to
consider buying Indian assets.

www.edutap.co.in
 MCQ’s

www.edutap.co.in
1. An NRI or OCI may acquire immovable property in India through which of following means?
a) by way of gift from a person resident in India or from an NRI or from an OCI, who in any case is a relative
b) inheritance from a person resident outside India who had acquired such property in accordance with
the then prevailing foreign exchange laws
c) Both a and b
d) None of the above
2. Citizens of which of the following country cannot without prior permission of RBI acquire or transfer
immovable property in India?
a) Pakistan
b) Bangladesh
c) China
d) All of the above

www.edutap.co.in
3. ‘Inbound merger’ means a cross border merger where the resultant company is:
a) Indian Company
b) Foreign Company
c) Either a or b
d) None of the above
4. __________ means any merger, amalgamation or arrangement between an Indian company and
foreign company.
a) Internal Reconstruction
b) Cross Border Merger
c) Foreign Portfolio Investment
d) Round-Tripping

www.edutap.co.in
 ANSWERS
1. C
2. D
3. A
4. B

www.edutap.co.in
FEMA REGULATIONS

www.edutap.co.in
Thank You! Happy Learning!

www.edutap.co.in