Foreign direct investment norms for Indians relaxed

The Reserve Bank of India (RBI) on Wednesday announced a slew of revisions aimed at liberalising the norms for direct investment abroad by Indian residents. These include liberalisation in regulations on qualification shares, professional services rendered and Esop (employee stock option plan) schemes.

The central bank has removed the cap of one per cent on resident individuals acquiring qualification shares for holding the post of a director in a foreign company. “Accordingly, remittance shall be allowed from resident individuals for acquiring the qualification shares for holding the post of a director in a foreign company to the extent prescribed in the law of the host country where it is located,” said the RBI notification.

It has also decided to grant general permission to resident individuals to acquire shares of a foreign entity in part or full consideration for professional services rendered to the foreign company or in lieu of a director’s remuneration.

And, Indian resident employees or directors have been permitted to accept shares offered under an Esop scheme globally, on a uniform basis, in a foreign company irrespective of the percentage of the direct or indirect equity stake. Earlier, the facility was subject to equity holding of not less than 51 per cent.

However, shares under the Esop scheme should be offered by the issuing company globally on a uniform basis and the annual return filed by the Indian company to RBI through the authorised dealer category- I bank, giving details of remittances and beneficiaries.

RBI also announced several modifications to ease the process of direct investments abroad. “It has been decided that issuance of personal guarantee by the promoters of the Indian party as presently allowed under the general permission shall also be extended to the indirect resident individual promoters of the Indian party, with the same stipulations as in the case of personal guarantee by the direct promoters,” it said.