INDIA Law and Practice Contributed by: Raj Ramachandran and Krutamana Pisipati, JSA
ment Authority) whose approval may be required depending upon the nature and sector of the business operations of the entities involved. 7.3 Restrictions on Foreign Investments In India, 100% foreign direct investment is per- mitted under the automatic route in sectors other than inter alia the following: • gambling and betting businesses; • real estate business; • trading in transferable development rights; • manufacturing of tobacco, cigars, etc; • agriculture; and • atomic energy, etc. Investment in some of these sectors are prohib- ited while investment is only allowed through the government approval route in others. The necessary filings are required to be made in relation to all investments through the direct route. Furthermore, investments from countries sharing land borders with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, are only permis- sible through government approval. 7.4 National Security Review/Export Control As detailed in 7.3 Restrictions on Foreign Investments , certain inbound investments can only be made through the government approval route. Investment in sensitive sectors like tele- communication and defence would also require a confirmation from the relevant Ministry, eg, the Ministry of Home Affairs.
Outbound investments to most jurisdictions are permitted, except in the following businesses and activities: • real estate activity; • gambling in any form; and • dealing with financial products linked to the Indian rupee. In these businesses and activities government approval is required. 7.5 Antitrust Regulations In the event the transaction is within the permit- ted thresholds of the assets and turnover, no fil- ings are required to be made. Furthermore, there is a deal value threshold introduced of INR20 billion (approximately USD237 million), in which case notification to and approval by the Com- petition Commission of India (the “CCI”) would be required. In acquisitions or hostile takeovers, the acquirer is required to notify the CCI. For mergers or amalgamations, a joint notice by both parties involved will have to be issued to the CCI. 7.6 Labour Law Regulations There are multiple pieces of social security legis- lation that apply to Indian companies. IT or ITeS sectors have been provided certain exemptions from compliance with certain provisions in the social security legislation (subject to certain conditions). Before the acquisition of the target company, acquirers undertake due diligence and seek representations to verify compliance with the social security legislation and ensure no claims arise in the future in relation to these. Furthermore, new Labour Codes have been pro- posed that consolidate and introduce several amendments to the current labour legislation. However, these are yet to come into force.
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