Reserve Bank of India

Foreign Exchange Department

Central Office
Mumbai - 400 001

Notification No. FEMA.389/2018-RB Dated: March 20, 2018

Foreign Exchange Management (Cross Border Merger) Regulations, 2018

In exercise of the powers conferred by sub-section (3) of section (6) read with section 47 of
the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the
following regulations relating to merger, amalgamation and arrangement between Indian
companies and foreign companies, namely:

1. Short title and commencement

(i) These Regulations may be called the Foreign Exchange Management (Cross
Border Merger) Regulations, 2018.
(ii) They shall come into force from the date of their publication in the Official
Gazette.

2. Definitions

In these Regulations unless the context requires otherwise, -

(i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

(ii) ‘Companies Act’ means The Companies Act, 2013;

(iii) ‘Cross border merger’ means any merger, amalgamation or arrangement

between an Indian company and foreign company in accordance with
Companies (Compromises, Arrangements and Amalgamation) Rules, 2016
notified under the Companies Act, 2013;

(iv) ‘Foreign company’ means any company or body corporate incorporated

outside India whether having a place of business in India or not;

Explanation: for the purpose of outbound mergers, the foreign company

should be incorporated in a jurisdiction specified in Annexure B to Companies
(Compromises, Arrangements and Amalgamation) Rules, 2016;

(v) ‘Inbound merger’ means a cross border merger where the resultant company is
an Indian company;

(vi) ‘Indian company’ means a company incorporated under the Companies Act,
2013 or under any previous company law;
 (vii) ‘NCLT’ means National Company Law Tribunal as defined under the
Companies Act, 2013 or rules framed thereunder;

(viii) ‘Outbound merger’ means a cross border merger where the resultant company
is a foreign company;

(ix) ‘Resultant company’ means an Indian company or a foreign company which

takes over the assets and liabilities of the companies involved in the cross
border merger;

(x) The words and expressions used but not defined in these Regulations shall
have the same meanings respectively assigned to them in the Act.

3. Save as otherwise provided in the Act or rules or regulations framed thereunder or with the
general or special permission of Reserve Bank, no person resident in India shall acquire or
transfer any security or debt or asset outside India and no person resident outside India shall
acquire or transfer any security or debt or asset in India on account of cross border mergers.

Explanation: Cross Border Mergers pending before the competent authority as on date of
commencement of these regulations shall be governed by these Regulations.

4. Inbound merger

In an inbound merger,

(1) the resultant company may issue or transfer any security and/or a foreign
security, as the case may be, to a person resident outside India in accordance
with the pricing guidelines, entry routes, sectoral caps, attendant conditions and
reporting requirements for foreign investment as laid down in Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside India)
Regulations, 2017.

Provided that
(i) where the foreign company is a joint venture (JV)/ wholly owned
subsidiary (WOS) of the Indian company, it shall comply with the
conditions prescribed for transfer of shares of such JV/ WOS by
the Indian party as laid down in Foreign Exchange Management
(Transfer or issue of any foreign security) Regulations, 2004;
(ii) where the inbound merger of the JV/WOS results into acquisition
of the Step down subsidiary of JV/ WOS of the Indian party by the
resultant company, then such acquisition should be in compliance
 with Regulation 6 and 7 of Foreign Exchange Management
(Transfer or issue of any foreign security) Regulations, 2004.

(2) An office outside India of the foreign company, pursuant to the sanction of the
Scheme of cross border merger shall be deemed to be the branch/office outside
India of the resultant company in accordance with the Foreign Exchange
Management (Foreign Currency Account by a person resident in India)
Regulations, 2015. Accordingly, the resultant company may undertake any
transaction as permitted to a branch/office under the aforesaid Regulations.

(3) The guarantees or outstanding borrowings of the foreign company from

overseas sources which become the borrowing of the resultant company or any
borrowing from overseas sources entering into the books of resultant company
shall conform, within a period of two years, to the External Commercial
Borrowing norms or Trade Credit norms or other foreign borrowing norms, as
laid down under Foreign Exchange Management (Borrowing or Lending in
Foreign Exchange) Regulations, 2000 or Foreign Exchange Management
(Borrowing or Lending in Rupees) Regulations, 2000 or Foreign Exchange
Management (Guarantee) Regulations, 2000, as applicable.

Provided that no remittance for repayment of such liability is made from India
within such period of two years;
Provided further that the conditions with respect to end use shall not apply.

(4) The resultant company may acquire and hold any asset outside India which an
Indian company is permitted to acquire under the provisions of the Act, rules or
regulations framed thereunder. Such assets can be transferred in any manner for
undertaking a transaction permissible under the Act or rules or regulations
framed thereunder.

(5) Where the asset or security outside India is not permitted to be acquired or held
by the resultant company under the Act, rules or regulations, the resultant
company shall sell such asset or security within a period of two years from the
date of sanction of the Scheme by NCLT and the sale proceeds shall be
repatriated to India immediately through banking channels. Where any liability
outside India is not permitted to be held by the resultant company, the same may
be extinguished from the sale proceeds of such overseas assets within the period
of two years.

(6) The resultant company may open a bank account in foreign currency in the
overseas jurisdiction for the purpose of putting through transactions incidental
to the cross border merger for a maximum period of two years from the date of
sanction of the Scheme by NCLT.
5. Outbound merger

In an outbound merger,

(1) a person resident in India may acquire or hold securities of the resultant
company in accordance with the Foreign Exchange Management (Transfer or
issue of any Foreign Security) Regulations, 2004.

(2) a resident individual may acquire securities outside India provided that the fair
market value of such securities is within the limits prescribed under the
Liberalized Remittance Scheme laid down in the Act or rules or regulations
framed thereunder.

(3) An office in India of the Indian company, pursuant to sanction of the Scheme
of cross border merger, may be deemed to be a branch office in India of the
resultant company in accordance with the Foreign Exchange Management
(Establishment in India of a branch office or a liaison office or a project office
or any other place of business) Regulations, 2016. Accordingly, the resultant
company may undertake any transaction as permitted to a branch office under
the aforesaid Regulations.

(4) The guarantees or outstanding borrowings of the Indian company which

become the liabilities of the resultant company shall be repaid as per the
Scheme sanctioned by the NCLT in terms of the Companies (Compromises,
Arrangement or Amalgamation) Rules, 2016.

Provided that the resultant company shall not acquire any liability payable
towards a lender in India in Rupees which is not in conformity with the Act or
rules or regulations framed thereunder.

Provided further that a no-objection certificate to this effect should be

obtained from the lenders in India of the Indian company.

(5) The resultant company may acquire and hold any asset in India which a
foreign company is permitted to acquire under the provisions of the Act, rules
or regulations framed thereunder. Such assets can be transferred in any manner
for undertaking a transaction permissible under the Act or rules or regulations
framed thereunder.

(6) Where the asset or security in India cannot be acquired or held by the resultant
company under the Act, rules or regulations, the resultant company shall sell
such asset or security within a period of two years from the date of sanction of
 the Scheme by NCLT and the sale proceeds shall be repatriated outside India
immediately through banking channels. Repayment of Indian liabilities from
sale proceeds of such assets or securities within the period of two years shall
be permissible.

(7) The resultant company may open a Special Non-Resident Rupee Account
(SNRR Account) in accordance with the Foreign Exchange Management
(Deposit) Regulations, 2016 for the purpose of putting through transactions
under these Regulations. The account shall run for a maximum period of two
years from the date of sanction of the Scheme by NCLT.

6. Valuation

(1) The valuation of the Indian company and the foreign company shall be done in
accordance with Rule 25A of the Companies (Compromises, Arrangement or
Amalgamation) Rules, 2016.

7. Miscellaneous

(1) Compensation by the resultant company, to a holder of a security of the Indian

company or the foreign company, as the case may be, may be paid, in accordance
with the Scheme sanctioned by the NCLT.

(2) The companies involved in the cross border merger shall ensure that regulatory
actions, if any, prior to merger, with respect to non-compliance, contravention,
violation, as the case may be, of the Act or the Rules or the Regulations framed
thereunder shall be completed.

8. Reporting

(1) The resultant company and/or the companies involved in the cross border merger shall
be required to furnish reports as may be prescribed by the Reserve Bank, in
consultation with the Government of India, from time to time.

9. Deemed approval

(1) Any transaction on account of a cross border merger undertaken in accordance with
these Regulations shall be deemed to have prior approval of the Reserve Bank as
required under Rule 25A of the Companies (Compromises, Arrangement and
Amalgamations) Rules, 2016.

(2) A certificate from the Managing Director/Whole Time Director and Company
Secretary, if available, of the company(ies) concerned ensuring compliance to these
 Regulations shall be furnished along with the application made to the NCLT under the
Companies (Compromises, Arrangement or Amalgamation) Rules, 2016.

(Jyoti Kumar Pandey)

Chief General Manager

Foot Note:-

Published in the Official Gazette of Government of India-Extraordinary – Part-II, Section 3, Sub-

Section (i) dated 20.3.2018- G.S.R.No. 244(E)