Department for Promotion of Industry and Internal Trade (DPIIT) has reviewed the extent of FDI policy in India and announced various amendments. Among the key notable modifications is for startups, as the government extended the timeline to 10 years to convert debt investment in a company into equity shares, a decision which is likely to give a relief to entrepreneurs to deal with the impact of Covid-19 pandemic. Earlier the option of changing convertible notes into equity shares was allowed for up to five years from the day when initial convertible note was issued. Convertible notes have increasingly emerged as attractive financing instruments for early stage funding of startups since its inception in 2017 and usually opted by angel or seed investors who are looking to invest in an early-stage startup that has not been valued explicitly.
These amendments in FDI policy also aims to facilitate participation of foreign investors in upcoming IPO of LIC.
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