Appendix 1 : FEMA Regulations for various scenarios
|Ways of Investment||FEMA Regulations||Mode of Investment (LRS/ODI)||Valuation|
|Buying Foreign listed Stocks||As per A.6 Master Direction on LRS, Resident Individual are permitted to acquire and hold shares of both listed and unlisted overseas company or debt instruments||Being portfolio investment, Resident Individuals can acquire through LRS. In case of Strategic Investments, it is to be routed through ODI||Not Required for LRS|
|Setting up a new Entity||As per 20A of FEMA 120, a resident individual either individually or along with another resident individual can set up Wholly owned Subsidiary/JV||Allowed only under ODI||Valuation is not required in case of newly set up entity. Applicable for other cases|
|Buying Shares of an unlisted entity||As per 20A of FEMA 120, read with A.6 Master Direction on LRS, Resident Individuals are allowed to buy shares of Unlisted Entity||In case of portfolio investment, Resident Individuals can acquire through LRS. In case of Strategic Investments, it is to be routed through ODI||Applicable in case of Strategic Investment. Cannot be less than FMV as determined by Valuer mentioned in the Notification|
|Gifting/Inheritance of Shares||As per Regulation 22(1)(i)/(iii), General permission is given to resident Individual to acquire share through gift from Person resident outside India and in case of Inheritance, it can be received from both resident and non-resident||General Permission under FEMA 120||Not Applicable|
|Shares acquired in lieu of Professional Services||As per A.6 Master Direction on LRS, Resident Individual are permitted to acquire shares of a foreign company towards professional services rendered or in lieu of Director’s remuneration||Allowed under LRS (Assuming it is not Strategic Investment)||Valuation is not applicable, if it is not a Strategic Investment|
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Eshank is a CA, CFA and Registered Valuer with a demonstrated history of working in the Financial Services and Startup Industry. He heads Startup and Transaction Advisory at BJAA and is skilled in VC/PE, Valuations, Corporate Finance, Transaction Structuring, M&A and Income Tax.
Sivasangari is a Chartered Accountant and Registered Valuer with 4 years of experience in the field of Finance, Analytics, Startup Advisory and Transaction Advisory.