INSIGHTS

FEMA’s latest offering

In its notifications dated 7th November 2017, the Reserve Bank of India (RBI) issued Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017.  This notification supersedes a previous notification dated 3rd May, 2000. The latest notification, which became effective from 8th November, 2017 is intended to bring some sweeping changes in the existing regulations.

The crux of the FEMA (Transfer or Issue of Security by a Person Resident outside India) Regulations

The above stated regulation came into being in June, 2000 with the objective of effectively governing transfers or issue of securities by Person Resident Outside India (“PROI”).

A Person resident outside India is not expressly defined in the FEMA regulations. It is indirectly defined to mean a person who is not person resident in India. “Person resident in India” is a person residing in India for more than 182 days in the Preceding financial Year.

FEMA to PROIs: Santa’s home… early!

The amendments that have been implemented effective 8th November, 2017:

A person resident outside India is generally classified under the Non Resident Indian (NRI) category. The definition of Non-resident Indian (which includes person resident outside India) is different in the Income Tax Act, 1961 and the Foreign exchange Management Act, 1999.

Generally speaking, any Indian abroad is considered as non-resident Indian (NRI). As per FEMA, NRI is defined as a person resident outside India who is either a citizen of India or is a Person of Indian Origin (PIO).

Key amendments that have been introduced apart from the definitions:

  • The Regulations, 2017 have for the first time introduced limits (such as 10% on the total paid up capital on fully diluted basis). Any investments lesser than 10% shall be considered as foreign portfolio investment (and not FDI). Any limits equal to or more than 10% shall be considered as FDI.
  • Fully diluted basis shall mean after giving effect to all possible conversions, eg. ESOPs, CCDs issued, Loan agreements having optionality clause etc.
  • Downstream investments should now get approval of Board of directors and shareholders agreement, if any.
  • Transfer of shares – can be effected in the following manner:
    Reporting in Form FC-TRS: The 2017 regulations states that the transferor / transferee PROI holding capital instruments on a non repairable basis shall be responsible to report such transfer to RBI in Form FC TRS.
  • In case of unlisted companies, valuation of capital instruments can also be done by practicing Cost Accountants.
  • Issue of capital instruments within 60 days

The Regulations, 2000 provided for issue of capital instruments within 180 days from receipt of foreign inward remittance. Companies to allot securities within 60 days of receipt of application money or advance for such securities. The Regulations, 2017 aligns the provisions of FEMA for capital instrument issuance with the provisions of the Companies Act, 2013. Further, prior approval of RBI will have to be obtained for payment of interest in case of delay in refunding the amount.

Conclusion

The RBI has been pro-actively regulating the foreign investment into and out of India. Towards this end, it introduced the FEMA (Transfer or issue of Security by a Person Resident outside India) Regulations in the year 2000. This law governs and regulates the issue and transfer of Indian company securities to or by PROIs. The amendments in November, 2017 have been introduced with a view to streamline such issue // transfer to PROI and also define with more clarity the kinds of instruments, the limits, the time period and the mode of such transfers. A welcome move.

WHAT’S BREWING

Drones-outlaw

Drone users are restricted from entering the air space of defence areas, airports, international borders; in fact they are required to maintain a 5km distance from such areas.   

The Austrians used balloons to drop bombs controlled by time fuses in 1849 to attack Venice, which is one of the earliest instances of using an unmanned aerial vehicle. Drones as we know them today were primarily used by various military forces. Their commercial use is a fairly recent development.  It has been estimated that around 2 Million recreational drones were sold last year alone and with their functionality increasing it is understood that those numbers are not going to be dropping any time soon. Drones can be used for an array of things on the domestic front, from taking photographs, delivering goods, surveys, mapping etc. The inclusion of this technology in daily lives of the public brings pertinent questions as to how to regulate them.

There are several countries which have come up with regulations to govern the commercial use of drones, such as USA, Australia, UK, and China etc. These regulations confront the various issues that arise with the use of drones. Most countries have adopted the method of using the size/weight of the drone in order to classify them. These classifications in turn are used to have more focused regulations. A smaller less powerful drone would not require as many restrictions on how they are to be operated as compared to a heavier vehicle.

The Director General of Civil Aviation (DGCA) has made public the draft rules on the use of drones in India for comments and it is estimated that these rules would mostly come into force by the end of 2017. The rules like other international regulations classify the drones according to their weight, as well as restricting the height at which they can fly which is also dependent on their weight. The draft rules also stipulate that certain types of drones would require air clearance and the persons remotely operating them should hold sufficient licenses and have the necessary training. Security measures are also laid down which prescribe the ideal conditions under which a drone can be flown especially relating to the  weather and visibility.

The draft regulations give us a fair idea as to how the uses of drones are going to be regulated from a procedural stand point. The various cases of use of drones, such as delivery of goods by ecommerce sites, transport of emergency equipment and blood, disaster management, surveying and general use by hobbyists show that drones are here to stay and there are several issues which arise with such multifaceted uses that they have.

Safety is a major concern as there are going to be many users. The consequence of what could  happen in the case of a mid air collision are concerning., Parts of a drone could fall on a person or property and could cause significant damages. In  case of such issues, establishing liability, jurisdiction etc. would become a major problem unless such questions are addressed earlier on in the developmental stages of the law. With e-commerce sites looking to tap into the ease of delivery aspect by using drones, we could have massive air traffic issues that will arise unless there are established routes, protocols and procedures laid down which are to be followed.

Privacy is a factor that has to be addressed. With large scale surveys possible now with the use of drones and aerial photography picking up pace, how the contours of the privacy of an individual will be affected is to be determined. A person may unintentionally capture a picture or information that they are not privy too.

The versatile nature of drones requires a law that can capture all the use cases of a drone in a single comprehensive legislature. Protocol and standards are helpful to lay a foundation and is a welcome move, however the legislature should have the ability to address the fast pace at which this technology is growing and leaving it open for interpretation could in fact deter the growth of use of drones in India, especially considering it is a growing global phenomenon with significant economic and commercial implications.

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AT THE HELM OF AFFAIRS

INFOGRAPHIC

Sexual harassment at work place

LEGAL-EASE

Abaction

A carrying away by violence.

Baby Act

A plea of infancy, interposed for the purpose of defeating an action upon a contract made while the person was a minor, is vulgarly called “pleading the baby act”. By extensions, the term is applied to a plea of the statute of limitations.

Cabalist

In French commercial law, a factor or broker.

Dictum

A remark or observation, as in the phrase “obiter dictum".

CIRCULARS & NOTIFICATIONS

Lawlipops

(P)REVIEW

Released in 2014, the movie is a legal and family drama rolled into one. Robert Downey Jr plays the role of Hank Palmer, a Chicago lawyer who lives by himself away from his family and native Indiana town. He has strained ties with his father (Robert Duvall), a Judge in the town. As a teenager his father convicts him as a juvenile delinquent for a drunken drive case and sends him to youth detention center. Scarred in his mind, Hank leaves town. Many years later, on learning about his mothers death, Hank heads back to his town and meets his estranged family and his particularly pensive and cold father. In a dramatic turn of events, the Judge, Hanks' father is arrested for a hit and run case that causes the death of an ex-convict. It is now upto Hank to defend his father and in the process head to rediscovering each other. Robert Duvall received nominations for almost all prestigious awards Downey and Duvall got critical acclaim for their performance.

One of the most watched series on America television, Boston Legal aired 8 seasons and more than 168 episodes from 2004-2008. A Legal comedy cum drama, the show begins with Bobby Donnell (played by Dylan Mc Dermott) a Lawyer, starting his practice with the noble intentions of protecting the innocent. The financials highs and lows quickly make him realize that it is the not so innocent clients that keep his practice and the Firm afloat. How he hires lawyers, grooms them and deals with interesting legal case unfold episode wise through 8 seasons.

To win without risk is to triumph without glory

Pierre Corneille

© Copyright 2017 - A K Mylsamy & Associates LLP

A person resident outside India is generally classified under the Non Resident Indian (NRI) category. The definition of Non-resident Indian (which includes person resident outside India) is different in the Income Tax Act, 1961 and the Foreign exchange Management Act, 1999.

Generally speaking, any Indian abroad is considered as non-resident Indian (NRI). As per FEMA, NRI is defined as a person resident outside India who is either a citizen of India or is a Person of Indian Origin (PIO).

Drone users are restricted from entering the air space of defence areas, airports, international borders; in fact they are required to maintain a 5km distance from such areas.   

The versatile nature of drones requires a law that can capture all the use cases of a drone in a single comprehensive legislature. Protocol and standards are helpful to lay a foundation and is a welcome move, however the legislature should have the ability to address the fast pace at which this technology is growing and leaving it open for interpretation could in fact deter the growth of use of drones in India, especially considering it is a growing global phenomenon with significant economic and commercial implications.

A person resident outside India is generally classified under the Non Resident Indian (NRI) category. The definition of Non-resident Indian (which includes person resident outside India) is different in the Income Tax Act, 1961 and the Foreign exchange Management Act, 1999.

Generally speaking, any Indian abroad is considered as non-resident Indian (NRI). As per FEMA, NRI is defined as a person resident outside India who is either a citizen of India or is a Person of Indian Origin (PIO).

Drone users are restricted from entering the air space of defence areas, airports, international borders; in fact they are required to maintain a 5km distance from such areas.   

The versatile nature of drones requires a law that can capture all the use cases of a drone in a single comprehensive legislature. Protocol and standards are helpful to lay a foundation and is a welcome move, however the legislature should have the ability to address the fast pace at which this technology is growing and leaving it open for interpretation could in fact deter the growth of use of drones in India, especially considering it is a growing global phenomenon with significant economic and commercial implications.

INFOGRAPHIC

Sexual harassment at work place

Abaction

A carrying away by violence.

Baby Act

A plea of infancy, interposed for the purpose of defeating an action upon a contract made while the person was a minor, is vulgarly called “pleading the baby act”. By extensions, the term is applied to a plea of the statute of limitations.

Cabalist

In French commercial law, a factor or broker.

Dictum

A remark or observation, as in the phrase “obiter dictum".

Released in 2014, the movie is a legal and family drama rolled into one. Robert Downey Jr plays the role of Hank Palmer, a Chicago lawyer who lives by himself away from his family and native Indiana town. He has strained ties with his father (Robert Duvall), a Judge in the town. As a teenager his father convicts him as a juvenile delinquent for a drunken drive case and sends him to youth detention center. Scarred in his mind, Hank leaves town. Many years later, on learning about his mothers death, Hank heads back to his town and meets his estranged family and his particularly pensive and cold father. In a dramatic turn of events, the Judge, Hanks' father is arrested for a hit and run case that causes the death of an ex-convict. It is now upto Hank to defend his father and in the process head to rediscovering each other. Robert Duvall received nominations for almost all prestigious awards Downey and Duvall got critical acclaim for their performance.

One of the most watched series on America television, Boston Legal aired 8 seasons and more than 168 episodes from 2004-2008. A Legal comedy cum drama, the show begins with Bobby Donnell (played by Dylan Mc Dermott) a Lawyer, starting his practice with the noble intentions of protecting the innocent. The financials highs and lows quickly make him realize that it is the not so innocent clients that keep his practice and the Firm afloat. How he hires lawyers, grooms them and deals with interesting legal case unfold episode wise through 8 seasons.

To win without risk is to triumph without glory

Pierre Corneille

A person resident outside India is generally classified under the Non Resident Indian (NRI) category. The definition of Non-resident Indian (which includes person resident outside India) is different in the Income Tax Act, 1961 and the Foreign exchange Management Act, 1999.

Generally speaking, any Indian abroad is considered as non-resident Indian (NRI). As per FEMA, NRI is defined as a person resident outside India who is either a citizen of India or is a Person of Indian Origin (PIO).

WHAT’S BREWING

Drone users are restricted from entering the air space of defence areas, airports, international borders; in fact they are required to maintain a 5km distance from such areas.   

The versatile nature of drones requires a law that can capture all the use cases of a drone in a single comprehensive legislature. Protocol and standards are helpful to lay a foundation and is a welcome move, however the legislature should have the ability to address the fast pace at which this technology is growing and leaving it open for interpretation could in fact deter the growth of use of drones in India, especially considering it is a growing global phenomenon with significant economic and commercial implications.

AT THE HELM OF AFFAIRS

Abaction

A carrying away by violence.

Baby Act

A plea of infancy, interposed for the purpose of defeating an action upon a contract made while the person was a minor, is vulgarly called “pleading the baby act”. By extensions, the term is applied to a plea of the statute of limitations.

Cabalist

In French commercial law, a factor or broker.

Dictum

A remark or observation, as in the phrase “obiter dictum".

CIRCULARS & NOTIFICATIONS

One of the most watched series on America television, Boston Legal aired 8 seasons and more than 168 episodes from 2004-2008. A Legal comedy cum drama, the show begins with Bobby Donnell (played by Dylan Mc Dermott) a Lawyer, starting his practice with the noble intentions of protecting the innocent. The financials highs and lows quickly make him realize that it is the not so innocent clients that keep his practice and the Firm afloat. How he hires lawyers, grooms them and deals with interesting legal case unfold episode wise through 8 seasons.