INDIA Trends and Developments Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
promises, Arrangements, and Amalgamations) Amendment Rules, 2024, (the “Amendment” ). The Amendment establishes new compliance framework for mergers, where the transferor foreign company, incorporated outside India, is a holding company, and the transferee com - pany, incorporated in India, is its wholly owned subsidiary. While the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, (the “Principal Rules” ) allowed overseas compa - nies to merge with Indian companies, the merger required prior approval from the RBI, India’s fed - eral bank, and the National Company Law Tribu - nal (NCLT). However, with the Amendment intro - ducing Rule 25A(5), prior approval of the NCLT is no longer required and the merger can be under - taken under the existing fast-track merger pro - cess prescribed in the Companies Act, 2013 (the “CA 2013” ). Accordingly, the Amendment allows for a more seamless and expeditious merger or amalgamation of a foreign holding company with its wholly-owned Indian subsidiary. By removing the need for NCLT approval, the new framework provides clarity on compliance, while ensuring necessary oversight through approvals from the RBI and the central govern - ment. This move not only alleviates the burden of lengthy approvals but also signals a commit - ment from the GoI to bring fundraising back to India. Cross-border share swaps In August 2024, the GoI introduced key amend - ments to the FEMA Regulations through a noti - fication issued by the Department of Economic Affairs of the Ministry of Finance (the “Notifica - tion” ). The amendments follow from the union budget announcement to simplify rules and regulations governing FDI and overseas direct investment (ODI).
The Notification has introduced a set of two amendments with the aim of simplifying cross- border share swaps and providing for the trans - fer or issue of equity instruments of an Indian company in exchange for foreign company equity instruments. The accompanying press release notes that the amendment made by the Notification will facilitate the global expansion of Indian companies through mergers, acquisitions and other strategic initiatives, enabling them to reach new markets and grow their presence worldwide. The amendments made pursuant to the Notification are set out below. • Swaps involving the transfer of equity instru - ments of an Indian company: a new rule which now permits a swap involving the transfer of equity instruments of an Indian company between a resident and non- resident. The Notification states that such transfer may be effected by way of any of the following two swaps: (i) a swap of equity instruments of another Indian company, and (ii) a swap of equity capital of a foreign company in compliance with the Overseas Investments Rules (the “OI Rules” ). • Swaps involving the issuance of equity instru - ments of an Indian company: previously, the FEMA Regulations allowed for a limited swap structure, ie, where an Indian company issued equity instruments to a non-resident against the swap of equity instruments of another Indian company. The Notification now explic - itly permits such issuance to also be affected against the swap of equity capital of a foreign company in compliance with the OI Rules. The Notification also clarifies that if govern - ment approval is applicable for the aforesaid transfer or issuance, then such approval is still required to be obtained.
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