There were ongoing restrictions on the investors based in Pakistan and Bangladesh who wished to invest their funds in India but, ever, after the erupt of the Corona Virus from China which made the world suffer immensely, The Indian Ministry of Commerce was viewing this as an “ opportunistic takeovers of Indian Companies by the Chinese firms “ due to high volatility being experienced in the Indian Markets.

Accordingly, the Ministry had tightened the norms of foreign investment rules by making it mandatory for Countries sharing land borders with India to take prior approval from the Indian Government before making any subscriptions /acquisitions.

In the recent, Chinese presence in the Indian market had increased exponentially, which raised the brows of our Ministry. People’s Bank of China had increased its stake by 1% in Housing Development Finance Company, a blue-chip company. Chinese Companies have invested aggressively in about 2/3rd of Indian startups as Alibaba is a large investor in Paytm, a fintech Company, and Zomato, a food delivery company. Similarly, Tencent has backed Ola, a car app Company, and Byju’s, an ed-tech company.

Ever since the eruption of COVID 19, the Indian Companies had been vulnerable to predatory acquisitions eyeing the direct and indirect investments by Chinese firms in Indian Companies.

The Ministry of Corporate Affairs made a welcome move by issuing a notification on 05th May 2022 by inserting a new proviso after Rule 14(1) of The Companies ( Prospectus and Allotment of Securities ) Rules.

These new rules will be referred to as The Companies ( Prospectus and Allotment of Securities ) Amendment Rules, 2022 wherein no offer or invitation to subscribe for the securities shall henceforth be made to any National or Body Corporate who either resides or is incorporated in a Country which shares land borders with India, unless, a prior approval under the Foreign Exchange Management (Non-Debt Instrument ) Rules 2019 has been taken and has been attached with the Private Placement Offer cum Application Letter.

Accordingly, changes have been introduced in PAS4 Part B after serial no. (vii) by way of tick boxes for the declaration of the aforesaid applicability.

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