Update on Foreign Exchange Management Act, 1999
RBI vide notification No. FEMA 389/2018-RB dated March 20, 2018 has notified Foreign Exchange Management (“Cross Border Merger”) Regulations, 2018 (“RBI Cross Border Merger Regulations”).
This new Regulation will allow Indian companies to merge their foreign businesses with domestic companies. Similarly foreign companies will no longer be required to maintain an Indian company after a merger and instead run the business in India into a single entity without creating indian subsidiary.
This will encourage cross border M&A activities. This will also have an impact on insolvency and bankruptcy proceedings as it will encourage foreign bidders to buy assets of indian companies