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Govt eases rules for share transfer between foreign players

Foreign investors will no longer have to seek the government's permission to transfer shares to another overseas player in sectors where FDI is allowed under automatic route.

New Delhi: Foreign investors will no longer have to seek the government's permission to transfer shares to another overseas player in sectors where FDI is allowed under automatic route.

This is aimed at improving ease of doing business and attracting foreign direct investment (FDI) into the country.

"Government approval is not required for transfer of shares in the investee company from one non-resident to another non-resident in sectors which are under automatic route," the new DIPP circular on FDI has said.

However, the government approval will be required for transfer of stake from one non-resident to another non-resident in sectors which are under government approval route, the circular added.

The measure is part of the initiatives taken by the Department of Industrial Policy and Promotion (DIPP) to clarify on certain grey areas of the FDI policy.

"Initially, it was a grey area, but (by inserting this paragraph in the new circular) the government has clarified its position on the matter," Head of Tax and expert on FDI with corporate law firm Shardul Amarchand & Mangaldas, Krishan Malhotra said.

The circular also stated that companies won't have to require fresh prior approval of the government to bring in additional foreign investment into the same entity within an approved foreign equity percentage or into a wholly-owned subsidiary.

Foreign investment is permitted either through automatic or government approval routes.

India ranks 142 out of 189 countries on the Ease of Doing Business list.

During April-February of 2014-15, FDI grew 39 percent year-on-year to USD 28.81 billion.

The government is taking several steps to bring down layers of approvals and clearances to make things easy to do business here and attract domestic and foreign investments.