Cross - Border Regulations - A Step Towards Global Integration

Recent developments such as notification of Section 234 of the Companies Act, 2013 and insertion of new sub-rule 25A in the Companies Rules, 2016 will go a long way in helping Indian companies have a presence in overseas jurisdictions

In the last few months, India has witnessed significant legal transformation in foreign exchange control norms and the merger/acquisition regime, which should enable Indian companies to gain from the world economy. The Government of India has abolished the Foreign Investment Promotion Board (“FIPB”) and handed over the government approval mechanism to respective administrative Ministries/Departments. This should simplify the approval mechanism and make it easier for foreign companies to invest in Indian companies covered by sectors wherein government approval was required. On April 13, 2017, the government issued the following announcements:

• notification of Section 234 of the Companies Act, 2013 (“Act”) (merger or amalgamation of a company with a foreign company in the specified jurisdictions), and

• insertion of new sub-rule 25A (merger or amalgamation of a foreign company with a company and vice-versa) in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“Compromise Rules”).

With these developments, Indian companies will have additional ways to have a presence in overseas jurisdictions. Outbound mergers will also allow Indian companies to get access to overseas listing of their business by merging with a foreign-listed company.

Cross-border mergers/acquisitions are also regulated by the Reserve Bank of India (“RBI”) under the Foreign Exchange Management Act, 1999 (“FEMA”) read along with regulations, guidelines, directions issued by RBI. On April 26, 2017, RBI published the draft Foreign Exchange Management (Cross-Border Merger) Regulations, 2017 (“Draft Regulations”).