Private Placement to National Land Neighbours


Ministry of Corporate Affairs, with effect from 5 May 2022, amended the Companies (Prospectus and Allotment of Securities) Rules, 2014.

The newly inserted Fifth Proviso to Rule 14(1) states:

“No offer or invitation of any securities under this rule shall be made to a body corporate incorporated in, or a national of, a country which shares a land border with India, unless such body corporate or the national, as the case may be, have obtained Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and attached the same with the private placement offer cum application letter.”

According to Rule 6 of The Foreign Exchange Management (Non-debt Instruments) Rules, 2019, an entity of a country which shares a land border with India or a beneficial owner of an investment into India who is situated in or is a citizen of any such country, shall only with the Government Approval. A person who is a citizen of Pakistan or is an entity incorporated in Pakistan shall invest only with prior government approval. In a few sectors, there is an explicit prohibition.

India shares land borders with Bangladesh, Bhutan, China, Myanmar, Nepal, and Pakistan. However, these rules do not apply to Indonesia, Thailand, Maldives and Sri Lanka, as these are Maritime Neighbours not sharing a land border with India.

For this Purpose, A tick declaration is inserted into the Form PAS – 4, which is the private placement offer cum application letter.

Form PAS – 4, Part – B, serial Number (viii):

“Tick whichever is applicable

  • The transferee is not required to obtain the Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to the transfer of shares; or
  • The transferee is required to obtain the Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to the transfer of shares, and the same has been obtained and is enclosed herewith.”.

This will help the company to ascertain prior compliance with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

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