Proposed FEMA Amendments Could Bring Greater Certainty to Foreign Investment Structures, Says Abhishek Paliwal

The Central Government’s proposed amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, introducing a quantitative 10% threshold for determining foreign ownership and control, could significantly improve regulatory certainty for businesses and investors, according to Abhishek Paliwal.

Commenting in a recent Financial Express article titled “FEMA draft puts 10% rule at centre of foreign investment,” Abhishek observed that the proposed threshold has the potential to reduce ambiguity in transactions involving layered ownership structures and governance arrangements.

“The introduction of a quantitative threshold could make legal due diligence more predictable by reducing uncertainty in assessing foreign ownership across complex investment structures,” he noted.

At the same time, Abhishek cautioned that the proposed changes would require businesses to carefully revisit their existing investment frameworks. Shareholder agreements, downstream investment structures and governance rights may need to be reassessed to ensure compliance with the revised regulatory framework once it comes into effect.

He further emphasized that the practical implications of the amendment will ultimately depend on how the proposed 10% threshold interacts with the existing concept of “control” under India’s Foreign Direct Investment (FDI) Policy and other applicable laws. The relationship between these frameworks will be critical in determining the extent of regulatory certainty that the amendment is intended to achieve.

Read the full article here: https://www.financialexpress.com/market/fema-draft-puts-10-rule-at-centre-of-foreign-investment-4299625/ 

Last Updated on 27 July, 2026