NEW DELHI: Foreign companies setting up holding companies here without prior approval from Foreign Investment Promotion Board (FIPB) would not be allowed to make investments till they pay a penalty. Investments by such companies would not be cleared even if they conform to the foreign direct investment (FDI) policy.
Joint ventures with foreign partners would also be subject to this regulation. Procedural changes to this effect are expected soon, according to government sources. The finance ministry has already discussed the issue with the department of industrial policy & promotion (Dipp) since there are a increasing number of instances of violation of norms governing downstream investments or setting up of holding companies. Compounding is recommended by FIPB in the case of policy violation and RBI levies the penalty. Holding companies are not to be set up by subsidiaries of foreign companies or their joint ventures without prior FIPB approval. Similar is the rule for downstream investments. The government is planning to make compounding by RBI within three months mandatory for all players that have violated the norms for downstream investments. The policy would apply in the cases where companies have made downstream investments in their Indian arms and sought post-facto FIPB approval for obtaining operating-cum-holding company status to make further downstream investments. A number of companies have been held guilty by the FIPB during recent months for violation of downstream investment norms. "Violation of Press Note 9 of 1999 by any company is ratified once the same stands compounded by the RBI and grant of ex-post facto approval by the government is only the first step towards the regularisation of the investment," Dipp said in a recent document. This implies, even an ex-post facto approval would not give a company the leeway to make downstream investments till compounding is done. According to the FDI policy laid out through Press Note 9 of 1999, companies with foreign investment have to obtain prior approval from FIPB for investment in other companies. Clearance from the board is necessary even if the company in which stake is being picked up is from a sector where 100% FDI is allowed through the automatic route. "Till the time RBI compounds the violation, companies cannot become holding companies for either making further downstream investments in the subsidiaries or investing in any other subsidiary for which approval has been granted," the document said. The Dipp recently consulted industry representatives on the measures that would be needed to contain violation of downstream investment norms. Announcements are expected soon on the measures that the department will be roll out, a senior official said. http://economictimes.indiatimes.com/News/Economy/Policy/Foreign_companies_setting_up_arms_sans_FIPB_nod_to_face_investment_bar/articleshow/3483296.cms Credit is a system whereby a person who can't pay gets another person who can't pay to guarantee that he can pay. - Charles Dickens --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
