DPIIT had issued revised SOP for processing FDI proposals

The Department for Promotion of Industry and Internal Trade has clarified that DoT can go ahead and issue a GMPCS licence to Starlink. DoT had sent a query to DPIIT that it clarify “if we are to seek full shareholding details from Starlink to verify that no investors with land border countries have a share in it, or if the current declaration is enough.”

DPIIT said, in accordance with new Standard Operating Procedure for processing of Foreign Direct Investment proposals, undertakings given by companies on foreign shareholding should be accepted.

The licence so far has not been granted as Starlink had refused to disclose full shareholding details of parent SpaceX, claiming that the latter being an unlisted entity, US privacy laws bar it from making a full disclosure on this score. SpaceX had given a declaration that none of its investors are from countries, that share a land border with India. ET. The company has requested that this declaration be accepted for granting approval for the licence.

Detailed notification
Issued on August 17, 2023, it supersedes the earlier SOP of November 9, 2020. These SOPs are regulatory guidelines governing the process and procedure of filing and processing of FDI proposals for investments in sectors requiring Government approval as per Foreign Exchange Management Act, 1999 and the rules, regulations, guidelines, policies and circulars issued thereunder. Some notable changes under the New SOP are as follows:

Paperless process: In an attempt to digitise the filing process, the New SOP mandates online filing of FDI proposals (along with scans of required supporting documents) as opposed to the Erstwhile SOP, which provided for an option to make physical or online applications. Except where authenticity of any scanned document may be questioned, submission of physical original documents is not required.

National Single Window System portal and FDI cell: With effect from August 5, 2022, FDI proposals are filed online via National Single Window System (“NSWS”), instead of Foreign Investment Facilitation Portal (“FIFP”). However, examination and administration of applications, communication of queries, and final decision on FDI proposal, will continue via FIFP. Further, a dedicated FDI cell must be constituted for each ministry/ department to timely monitor and review FDI proposals.

Investor to file FDI proposal: Unlike the Erstwhile SOP, the New SOP clarifies that onus of filing an FDI proposal is on the investor, as reflected under the affidavit format under the New SOP.

Approval timelines: Unlike the Erstwhile SOP with separate timelines for proposals with and without security clearance, under the New SOP, the relevant administrative ministry/ department (“Competent Authority”) must issue its final decision within 12 weeks from the referral, including any security clearance (but excluding time required for any clarifications sought from the applicant). Similarly, time limits for certain other actions have been revised, such as (i) 1 week previously available for initial security has increased to 12 days, and (ii) time for submission of comments by the Reserve Bank of India, Ministry of External Affairs and consulted ministries/departments has been increased from 4 weeks to 6 weeks. The previous position that no separate approval will be required where increase in foreign investment (up to INR 50 billion) does not increase the approved FDI %, continues under the New SOP (although an intimation must be made to the Competent Authority within 30 days of such investment).

Enhanced disclosures: The New SOP requires additional disclosures, e.g., (i) in relation to beneficial ownership from countries sharing land border with India – details of shareholder(s)/ investor(s)/ director(s)/ investment committee member(s)/ general partner(s)/ limited partner(s) and key managerial personnel of all upstream entities of the investor (till the ultimate beneficial owner), who are either from a land-bordering country or have beneficial ownership vested in a land-bordering country along with details of place of incorporation/ existing citizenship/ residency of all such entities/ individuals; (ii) undertaking from investor that the investee and investors or their respective promoter(s)/beneficial owner(s)/shareholder(s)/director(s)/key managerial personnel are not subject to any negative or caution or debarred or sanction list of any government, international organisation, and statutory and investigative/ enforcement authorities, etc.; and (iii) declaration from investor warranting that none of the investors/ shareholders of the investee company and the foreign investor (including beneficial owners) are situated in or are citizens of any land-bordering countries, if the FDI proposal is not made in respect of the Press Note 3 of 2020 dated April 17, 2020. Further, unlike the Erstwhile SOP, all supporting documents are mandatory under the New SOP.

Mandatory authentication of foreign documents: All documents relating to the investor and being submitted along with the FDI proposal must be authenticated under the Foreign Exchange (Authentication of Documents) Rules, 2000 (i.e., certified by a diplomatic and consular officer).

Rectification of mistakes: Unlike the Erstwhile SOP, the New SOP specifically allows an applicant to request Competent Authority for rectification of errors in the FDI approval letter. Per such request, Competent Authority may, upon Secretary’s approval, issue a corrigendum to rectify such mistakes. AZB Partners