Appendix 1 : FEMA Regulations for various scenarios

Ways of InvestmentFEMA RegulationsMode of Investment (LRS/ODI)Valuation
Buying Foreign listed StocksAs 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 instrumentsBeing portfolio investment, Resident Individuals can acquire through LRS. In case of Strategic Investments, it is to be routed through ODINot Required for LRS
Setting up a new EntityAs 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 ODIValuation is not required in case of newly set up entity. Applicable for other cases
Buying Shares of an unlisted entityAs per 20A of FEMA 120, read with A.6 Master Direction on LRS, Resident Individuals are allowed to buy shares of Unlisted EntityIn case of portfolio investment, Resident Individuals can acquire through LRS. In case of Strategic Investments, it is to be routed through ODIApplicable in case of Strategic Investment. Cannot be less than FMV as determined by Valuer mentioned in the Notification
Gifting/Inheritance of SharesAs 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-residentGeneral Permission under FEMA 120Not Applicable
Shares acquired in lieu of Professional ServicesAs 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 remunerationAllowed under LRS (Assuming it is not Strategic Investment)Valuation is not applicable, if it is not a Strategic Investment

For further queries, please contact

Eshank Shah

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 Chinnappa

Sivasangari is a Chartered Accountant and Registered Valuer with 4 years of experience in the field of Finance, Analytics, Startup Advisory and Transaction Advisory.

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