New Cross Border Merger Regulations, 2018 Notified

Reserve Bank of India (“RBI”) has released the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (“Regulations”) vide notification dated March 20, 2018, in order to regulate mergers, amalgamations and arrangements between Indian companies and foreign companies.

The highlights of the Regulations are as follows:

  • Inbound Mergers
    The Regulations define an Inbound Merger as the merger of a ‘foreign company’ into an ‘Indian company’. The Regulations state that guarantees or outstanding borrowings of the foreign company which become the borrowings of the resultant Indian company shall conform, within a period of two years, to RBI norms in relation thereto.
  • Outbound Mergers
    The Regulations define Outbound Merger as the merger of an ‘Indian company’ into a ‘foreign company’. All guarantees or outstanding borrowings of the Indian company which become the liabilities of the resultant foreign company shall be repaid as per the Scheme sanctioned by the NCLT in terms of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016.
  • Reporting Requirements
    The companies involved in the cross-border merger shall be required to furnish reports as may be prescribed by RBI, in consultation with the Government of India, from time to time.