Unlocking FDI Bonus Share Guidance for Prohibited Sectors

The Indian government has clarified that companies in sectors where foreign direct investment (FDI) is prohibited can issue bonus shares to existing foreign shareholders without changing shareholding patterns. This guidance is crucial for maintaining compliance within the sector-specific FDI framework, ensuring legal issuance of bonus shares.

The government has declared that Indian companies operating in sectors where foreign direct investment (FDI) is banned can issue bonus shares to their existing foreign shareholders. However, the shareholding pattern must remain unchanged, according to the Department for Promotion of Industry and Internal Trade (DPIIT).

This announcement comes as part of a clarification in the FDI policy, outlining that issuance of bonus shares is permissible under these conditions. The move is part of ensuring compliance with existing rules and regulations.

While FDI is generally allowed through the automatic route in most sectors, some areas require government approval, and certain sensitive sectors even ban foreign investments. This clarification serves as a guide for companies navigating the complex FDI landscape.

(With inputs from agencies.)