Whilst the growth of India as an emerging market for foreign
investment is nothing new, we are seeing some new trends in the way
in which offshore Cayman vehicles are being used as an avenue for
investing in that market – specifically, voluntarily
registering master funds as regulated master funds under the Cayman
Islands Monetary Authority ("CIMA"), for
the reasons set out in more detail below.
The Indian Securities market regulator, the Securities and
Exchange Board of India ("SEBI")
released a circular late last year aligning the conditions for
subscription of offshore derivative instruments
("ODIs") to those applicable to Foreign
Portfolio Investors ("FPIs") under the
Securities and Exchange Board of India (Foreign Portfolio
Investors) Regulations, 2014 ("FPI
The circular states that an FPI can issue ODIs only to those
subscribers who meet certain eligibility criteria mentioned under
regulation 4 of the FPI Regulations (which deals with eligibility
criteria for an applicant to obtain registration as an FPI) in
addition to meeting the eligibility criteria mentioned under
regulation 22 of the FPI Regulations.
The eligibility criteria includes, amongst other things, that
the relevant entity must be "regulated by an appropriate
foreign regulatory authority".
Our experience is that SEBI accepts master fund entities that
are registered with, and regulated by, CIMA as such being
"regulated by an appropriate foreign regulatory
Furthermore, it is important that the entity does not have an
"opaque" structure, which is defined by SEBI to include
protected cell companies, segregated portfolio companies or
equivalent structural alternatives.
However, SEBI has now clarified that a Foreign Institutional
Investor ("FII") requiring ring-fencing
of its assets and liabilities from their funds or sub funds, under
any law or by its regulator, shall not be regarded as having an
opaque structure subject to the following conditions:
The applicant is regulated in its home jurisdiction
Each fund/sub fund of the applicant satisfies broad based
The applicant undertakes to provide information regarding its
beneficial owners as and when SEBI seeks such information.
If your client is considering using a Cayman vehicle to ease
their "passage to India", it still very much advisable to
obtain local advice from Indian fund counsel, as well as Walkers
Cayman advice. Walkers has good relationships with a variety
of Indian law firms and is placed well to deal with any questions
or issues on this particular subject.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On the 9 September 2016 the MFSA issued feedback to its consultation of the 1 April 2016 in relation to intra-group loans.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).