Clearer policy needed on cross-border share swaps

One of the less discussed aspects of liberalization under the foreign direct investment (FDI) policy is in relation to share swaps. Apart from traditional means of cash payment for acquiring capital instruments, the extant FDI policy (effective 28 August 2017) also permits non-cash consideration.

Under the automatic route, this includes conversion of external commercial borrowings, technical know-how fee, royalty due, pre-incorporation/pre-operative expenses (subject to prescribed caps and conditions), amounts due which do not require prior permission of the government or the Reserve Bank of India (RBI) for remittance, and share swaps. The government approval route is available against import of capital goods, etc., and pre-incorporation/pre-operative expenses (where not covered under a general permission).

Vikrant Kumar is a partner and Naren BS is a senior associate at Luthra & Luthra Law Offices. The views expressed here are personal. They are intended for general information purposes and are not a substitute for legal advice.