SEBI issues guidelines for investment in overseas companies by AIF/VCF: Overseas investee company no longer required to have an Indian connection

• Applicant and its scheme: Name of the AIF/VCF, category of AIF, registration number, name of scheme, name and address of branch of the bank through which the foreign currency transaction is proposed to be made
• Details of overseas investee company: Name, country, date of incorporation of the overseas investee company, whether any investor of the AIF is a connected person of the overseas investee company
• Details of investment: Type of instrument in which investment is proposed, nature of investment, amount proposed to be invested, amount invested in previous overseas investment, investible corpus of the scheme of the AIF/VCF
• Details of overseas investments made by the scheme in the past if any.
• Undertaking by Trustee/Board/Designated Partners of the AIFs/VCFs: Undertaking in respect of independent due diligence being carried out for the proposed investment, and satisfaction of (i) the bona fide nature of the proposed investment, (ii) its alignment with the investment objective of the scheme, and (iii) compliance with the regulatory framework.
• Undertaking by Manager of the AIF/VCF: Undertaking in respect of inter alia the following:

– Manager has exercised due diligence with respect to the investment decision

– Proposed investment is an equity/equity linked investment

– Overseas investee company is a foreign company whose shares are not listed on any recognized stock exchange in India or abroad.

– AIF/VCF will not invest in a joint venture/ wholly owned subsidiary while making overseas investments.

– Adherence with Foreign Exchange Management Act, 1999 (FEMA) and regulations issued thereunder, and other guidelines specified by RBI in respect of overseas direct investment.

• AIFs/VCFs to invest in an overseas investee company, which is incorporated in a country whose securities market regulator is:

– a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or

– a signatory to the bilateral Memorandum of Understanding with SEBI.

• AIFs/VCFs shall not invest in an overseas investee company, which is incorporated in a country identified in the public statement of Financial Action Task Force (FATF) as:

– a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or

– a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address the deficiencies.

All the overseas investments sold/divested by AIFs/VCFs till date, shall also be reported to SEBI in the prescribed format within 30 days from the date of the circular.