Regulation for foreign investments in startups amended!

Q.  RBI on 20th Oct 2016 notified the amended norms for foreign investment in startups. Which act has been amended as part of this move?
- Published on 25 Oct 16

a. Foreign Exchange Management (Issue of Security by Person Resident Outside India) Regulations 2000
b. Foreign Exchange Management (Transfer of Security by a Person Resident Outside India) Regulations 2000
c. Foreign Exchange Management (Issue and Transfer of Security by a Person Resident Outside India ) Regulations 2000
d. Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations 2000

ANSWER: Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations 2000
 
Regulation for foreign investments in startups amended! RBI has made changes to the Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations 2000 to notify amended norms for foreign investment in startups
  • The notification states any FVCI/ Foreign Venture Capital Investors registered with SEBI will not acquire approval from the RBI and can invest in unlisted companies
  • FVCI can invest in sectors such as infrastructure, biotechnology and seed research
  • They can also invest in equity or equity linked instrument or debt instrument issued by an Indian startup regardless of the sector in which the startup is engaged
  • They can invest in VCV registered with SEBI or units of scheme of a fund set up by VCF or Category 1 Alternative Investment Fund
  • Downstream investments by a VCF or Cat-1 AIF which has received investment from FVCI will have to comply with provisions for downstream investment laid down in schedule 11 of the Principal Regulations

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