Key takeaways

The President of India recently promulgated an ordinance to increase the permissible foreign equity shareholding in Indian insurance firms from 26% to 49%. The 49% limit includes all forms of foreign investments including those held by foreign portfolio investors. For continued effectiveness, however, the ordinance is required to be ratified by parliament. The key highlights include:

• ‘Control’ of the investee company must still remain with Indian residents. Control includes the right to appoint majority of directors or to control management or policy decisions.
• Specific authorization to issue other forms of capital instruments such as preference shares, warrants and partly paid-up equity shares to foreign investors has been provided.
• Foreign re-insurers are now allowed to engage in re-insurance business in India directly through branch offices or through local presence in India, post registration with the Indian insurance regulator.