Circular 2 – clarity, concision and key changes

By Arun Madhu and Akanksha Midha, Phoenix Legal
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True to its word, the Department of Industrial Policy and Promotion ushered in the second half of the financial year with a new edition of the consolidated foreign direct investment (FDI) policy in India – Circular 2 of 2010. The document appears to be a concentrated effort at streamlining regulations and also providing clarity to foreign investors on the framework for investments.

Some key changes brought about by Circular 2 are worth highlighting.

Arun Madhu
Senior associate
Phoenix Legal

Warrant’ing change?

The issuance of warrants (i.e. instruments that are convertible into shares of a company at the option of its holder) to non-resident entities has been an issue which has long dogged the foreign investor community. Warrants as an instrument are highly beneficial to investors. They offer investors the ability to garner shares at a significant discount to the market price by merely making a part payment of the consideration upfront and in advance. This payment is not a premium for the option but is adjusted against the final purchase price.

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Arun Madhu is a senior associate and Akanksha Midha is an associate at Phoenix Legal in Mumbai. They can be reached at arun.madhu@phoenixlegal.in and akanksha.midha@phoenixlegal.in.

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