News and developments
CROSS-BORDER SHARE SWAPS MADE EASIER THROUGH AMENDMENTS TO INDIA’S FOREIGN EXCHANGE REGULATIONS
The Indian government has recently notified the Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2024 (the “Amendment Rules”) to amend the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the “NDI Rules”). This update delves into some important changes on share swaps and clarifications introduced by the Amendment Rules.
Key changes
(i) Equity swaps by way of transfers: Rule 9A has been newly introduced in the NDI Rules to regulate equity swaps in the context of a transfer of shares. Under this Rule, the transfer of equity instruments of an Indian company between a resident and a non-resident (“NR”) may occur via a swap of either, equity instruments of an Indian company, or equity capital of a foreign company. Both types of swaps are subject to compliance with the rules and regulations prescribed by the Central Government and the Reserve Bank of India (the “RBI”) (“Appliable Law”). In simple terms, the NDI Rules now permit the following transfers:
Authors: Rukshad Davar, Rahul Datta and Bhavya Solanki, Majmudar & Partners, India
-
- A resident holding equity instruments in an Indian company can transfer such instruments to an NR in exchange for equity instruments held by the NR in another Indian company;
- An NR holding equity instruments in an Indian company can transfer such instruments to a resident in exchange for equity instruments held by the resident in another Indian company;
- A resident holding equity instruments in an Indian company can transfer such instruments to an NR in exchange for the equity capital held by the NR in a foreign company, subject to compliance with Applicable Law; and
- An NR holding equity instruments in an Indian company can transfer such instruments to a resident in exchange for the equity capital held by the resident in a foreign company, subject to compliance with Applicable Law.
Authors: Rukshad Davar, Rahul Datta and Bhavya Solanki, Majmudar & Partners, India