Chinese Investments Now Require Government Approval

The Department for Promotion of Industry and Internal Trade under the Ministry of Commerce & Industry has reviewed the Foreign Direct Investment (“FDI”) Policy, and made an amendment therein to curb the opportunistic takeovers/ acquisitions of Indian companies due to the COVID-19 pandemic.

The position prior to the amendment stated that a non-resident entity could invest in India, subject to the FDI Policy except in those sectors/ activities which are prohibited. However, citizens and/ or entities registered in Bangladesh and Pakistan were allowed to only invest under the Government route, other than the prohibited sectors.

Pursuant to the amendment, all countries which share a land border with India (collectively the “Neighbouring Countries”) including China will now be permitted to invest in India only under the Government route. This will also apply to any ‘beneficial owner’ of an investment into India, who is incorporated or is a citizen of any of the Neighbouring Countries. Further, if there is any transfer of ownership of any existing or future FDI in an Indian entity, which directly or indirectly, results in the ‘ownership’ or ‘beneficial ownership’  to change where the resulting transferee is an entity/ citizen of the Neighbouring Countries, then such subsequent change in ownership/ beneficial ownership will also require Government approval.