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insurance companies – foreign investment

Insurance Regulatory Development Authority (IRDA) has made few changes to the Indian Insurance Companies (Foreign Investment) Rules, 2015. Some of the salient features are enumerated below.

Rule 4 has been amended: Rule 4 hitherto said “

An Indian Insurance Company shall ensure that its ownership and control shall remain at all
times in the hands of resident Indian entities

Now the amended version reads as follows:

“4. (1) In an Indian Insurance Company having foreign investment,—
(a) a majority of its directors,
(b) a majority of its Key Management Persons, and
(c) at least one among the chairperson of its Board, its managing director and its Chief Executive Officer, shall be Resident Indian Citizens.
Explanation.—For the purposes of this rule and rule 9, the expression “Key Management Person” shall have the same meaning as assigned to it in guidelines made by the Authority on corporate governance for insurers in India.
(2) Every Indian Insurance Company having foreign investment, existing on or before the date of commencement of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021, shall within one year from such commencement, comply with the requirements of the provisions of sub-rule (1).
4A. In an Indian Insurance Company having foreign investment exceeding forty-nine per cent.,—
(a) for a financial year for which dividend is paid on equity shares and for which at any time the solvency margin is less than 1.2 times the control level of solvency, not less than fifty per cent. of the net profit for the financial year shall be retained in general reserve; and
(b) not less than fifty per cent. of its directors shall be independent directors, unless the chairperson of its Board is an independent director, in which case at least one-third of its Board shall comprise of independent directors

Rule 5 which presently allowed FDI proposals in the insurance sector under automatic route upto 49% has been amended to provide for automatic approvals upto 74%.

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FDI in defence sector

Revised Press Note no. 4 dated 17th September, 2020 issued by Department for Promotion of Industry and Internal Trade.

  1. Present Position
  2. 5.2.6.1 Defence Industry subject to Industrial license under the Industries
    (Development & Regulation) Act, 1951 and Manufacturing of small
    arms and ammunition under the Arms Act, 1959
    100% Automatic up to 49% Government route beyond 49% wherever it is likely to result in access to modern technology or for other reasons to be recorded
    5.2.6.2 Other Conditions
    i. Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.
    ii. Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
    iii. Foreign investment in the sector is subject to security clearance and guidelines of the M/ o Defence.
    iv. Investee company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.
  3. Revised Position
    The Government of India has reviewed the extant FDI policy in Defence sector and the policy will now be read as under:
    5.2.6 Defence Industry subject to Industrial license under the
    Industries (Development & Regulation) Act, 1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959
    100% Automatic up to 74% Government route beyond 74% wherever it is likely to result in access to modern technology or for other reasons to be
    recorded
    5.2.6.2 Other Conditions
    i. FDI up to 74% under automatic route shall be permitted for companies seeking new industrial licenses.
    ii. Infusion of fresh foreign investment up to 49%, in a company not seeking industrial license or which already has Government approval for FDI in Defence, shall require mandatory submission of a declaration with the Ministry of Defence in case change in equity/shareholding pattern or transfer of stake by existing investor to new foreign investor for FDI up to 49%, within 30 days of such change. Proposals for raising FDI beyond 49% from such companies will require Government approval.
    iii. Licence applications will be considered by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
    iv. Foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs and as per guidelines of the Ministry of Defence.
    v. Investee company should be structured to be self-sufficient in the areas of product design and development. The investee/joint venture company along with the manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.
    vi. Foreign Investments in the Defence Sector shall be subject to scrutiny on grounds of National Security and Government reserves the right to review any foreign investment in the Defence Sector that affects or may affect national security.
  4. The above decision will take effect from the date of FEMA notification.

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