I DEFERMENT OF CONSIDERATION AND SELLER INDEMNITY PERMITTED
UNDER AUTOMATIC ROUTE
With a view to simplify business concerning share-purchase
transactions involving foreign investment, the Reserve Bank of
India (RBI) on May 20, 2016 notified amendments in the Foreign
Exchange Management (Transfer Or Issue Of Security By A Person
Resident Outside India), 2000 ('Principal
Regulations') by Foreign Exchange Management (Transfer
Or Issue Of Security By A Person Resident Outside India) (Seventh
Amendment) Regulations, 2016. This amendment allows, under the
automatic route, the deferment in payment consideration under an
escrow mechanism and permits seller to give indemnity in respect of
share-purchase transactions involving foreign investment. Under the
erstwhile regime of foreign investment under automatic route, the
deferment of purchase consideration was not permitted. Escrow
mechanism was for indemnity obligations was not provided for in the
Principal Regulations and
