IBC -Principle of taking over Corporate Debtor under Resolution Plan, will also apply to taking over by way of acquisition plan as per 'clean slate' principle of IBC: HC (See 'Legal Desk') FEMA -Every Adjudicating Authority shall have same powers of Civil Court which are conferred on Appellate Tribunal under Section 28 (2): TRIBUNAL (See 'Legal Desk') Ministry of Health celebrates two years of Tele MANAS (See 'Corp Brief') Arbitration -Court has limited jurisdiction under section 34 of 1996 Act and cannot scrutinize decision of Arbitrator: HC (See 'Legal Desk') MoS calls for synergy in Science Ministries to maximize impact (See 'Corp Brief') Competition Act-Intervention of High Court at stage of order under Section 26(1) is pre-mature and ought to have waited for CCI to come to conclusion: HC (See 'Legal Desk') CCI approves acquisition of 43% of JM Financial Credit Solutions' shares by JM Financial Ltd (See 'Corp Brief') Trademarks Act- Tribunal can cancel registration of trade mark on ground of contravention, or failure to observe condition under Act: HC (See 'Legal Desk') TCIL pays dividend to Govt (See 'Corp Brief') IBC, 2016- Non- cooperation with board and becoming non-responsive to communications made by board without any plausible reasons is held as contravention of provisions of IBC: IBBI (See 'Legal Desk') CCI okays acquisition of Personal Care division of Patanjali by Patanjali Foods (See 'Corp Brief') IBC- Presence of arbitration clause in contract does not bar an operational creditor from filing application under Section 9: NCLT (See 'Legal Desk') PMLA- Attaching movable and immovable property not part of proceeds of crime or of equal value is illegal: TRIBUNAL (See 'Legal Desk') 'Accord and satisfaction' & Arbitration (See 'CORP EINSICHT') BHP, SAIL sign MOU to accelerate potential pathways to steel decarbonisation (See 'Corp Brief') FSSAI convenes meeting of Rice Millers and Fortified Rice Kernel manufacturers (See 'Corp Brief') IBC - Disciplinary committee can be comprised and equated with one whole time member: HC (See 'Legal Desk') CCI conducts Workshop on Competition Law in Collaboration with NALSAR (See 'Corp Brief') Minister lays foundation stone of two projects of CCL (See 'Corp Brief') IBC - Failure to include specific agenda of withdrawal of Corporate Insolvency Resolution Process in Committee of Creditors meetings attracts penalization u/s 208 of Code: IBBI (See 'Legal Desk') RM to inaugurate DefConnect 4.0 (See 'Corp Brief') Arbitration - Referral court should limit its enquiry to examining whether Sec 11(6) application has been filed within period of limitation of three years or not: SC LB (See 'Legal Desk') IIPA should work in sync with Karmayogi program for training officers: Minister (See 'Corp Brief') PMLA - Stringent bail provisions and delay in trial can't go together: SC (See 'Legal Desk') Milk production is up by 57.62% in last 9 years: Union Minister (See 'Corp Brief') Cr P C-Precedent of another case alone shall not be basis for either grant or refusal of bail irrespective of nature and gravity of charge, though it may have bearing on principle: HC (See 'Legal Desk') Minister inaugurates HCL's Surda Mine Operations (See 'Corp Brief') PMLA, 2002 - Sezied documents which are relied upon documents in police case cannot be released by Court: Tribunal (See 'Legal Desk')

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Family Offices in GIFT City - The new innovative way for Indian HNIs to invest globally

Published: Oct 06, 2023

By Salil Arora, Advocate and Founding Partner (AviLeague Partners LLP)

WITH the recent announcement from the family offices of Narayana Murthy and Azim Premji that they are looking to establish a Family Investment Fund in the Gujarat International Financial Tec-City (GIFT City), a lot of high-networth individuals (HNIs) are exploring the option of setting up family offices in GIFT City.

As a background, family office is a privately held entity that manages investments and wealth for a family. The primary reason for establishing a family office is to establish a mechanism for succession planning and the equitable distribution of wealth among families, thereby minimising potential disputes .

Although the origin of family officecan be traced back to the  maiordoms  in ancient Rome (Latin for "principal of the house"), the highest-ranking servant entrusted with the household's most important affairs, the modern concept of a family office emerged in the 19th century with  J.P. Morgan founding the House of Morgan in the mid-1800s to manage his family assets.

While the United States and Europe make up the majority of family offices today, there is a fast growing number of Asian family offices, and India is no exception. A number of Indians have been looking to set up their family office in popular global financial centres like Singapore, Dubai and Hong Kong due to their business incentives, lower taxes, progressive regulations, and easier access to global markets.

In order to provide similar incentives in India and to attract HNIs from India and abroad, the International Financial Services Centres Authority (IFSCA) has allowed setting up of self-managed funds pooling money from a single family known as Family Investment Funds (FIFs) in GIFT City, the sole operational International Financial Services Centre (IFSC) in India. The framework and requirements for establishing a FIF are contained in IFSCA (Fund Management) Regulations, 2022.

A FIFcan be set up asa company, contributory trust, limited liability partnership, or in any other form as permitted by IFSCA and must maintain a minimum corpus of USD 10 million within three years of its registration. It can invest in a wide range of assets, both in India and foreign jurisdictions, including unlisted securities, listed securities in IFSC, India, or abroad, debt securities, derivatives including commodity derivatives, mutual funds, Limited Liability Partnerships, physical assets such as real estate, bullion, art, etc. Each family member can contribute up to US$250,000, and qualifying Indian entities can contribute up to 50% of their net worth to FIFs. Further, a FIF may share economic interest with its employees, directors, FME or other persons providing services to the FIF, as per its internal policy to reward the persons providing services to the FIF or to align the interest of such persons with those of the FIF. In this regard, wherever required, the FIF may accept contributions from the aforementioned persons for the limited purpose of granting economic interest to them, which in no case shall exceed an aggregate of twenty percent (20%) of FIF's profits.

Some of the advantages of setting up FIFs in GIFT City are that foreign residents and their family-owned entities can establish family offices without needing to comply with India's FDI policy and foreign exchange rules. Further, repatriation of funds does not require regulatory approval.

As regards Indian residents, setting up FIF in GIFT City allows them to manage overseas investments subject to compliance with the liberalised remittance scheme (LRS) limit of USD 2,50,000 per financial year and restrictions provided under the Foreign Exchange Management (Overseas Investment) Rules, 2022 (OI Rules).

The OI Rules provide a more favourable regime for remittance into GIFT City. Specifically, the OI Rules provide that any investment in a fund or vehicle set up in GIFT City should be treated as Overseas Portfolio Investment (OPI). This makes it possible for families to either individually, or through their listed or unlisted group entities, remit funds to an FIF in GIFT by way of OPI.

In terms of tax benefits, GIFT City, operating offers 100% income tax exemption for FIFs for ten years within a fifteen-year period, along with GST exemptions. FIFs are treated as Indian residents for taxation and foreign residents for exchange control, subject to fund management entity regulations.

FIFs can further establish additional investment vehicles as companies, LLPs, trusts, or other forms.This allows different entity types for various investments, taxation treatments, and regulatory compliance levels.

It is pertinent to note that GIFT City offers convenience, efficiency, and lower costs for HNIs, eliminating the need for overseas transactions. Further, GIFT City's regulatory framework is considered progressive and investor-friendly, with the IFSCA overseeing operations.

With overall ranking of GIFT City improving continuously in global financial centres index and the Indian Prime Minister's vision of making GIFT City a premier global financial hub, the time is ripe for families to move towards GIFT City providing diversified investment opportunities with the best-in-class infrastructure and favourable regulatory regime.

(The views expressed are personal views of the author. No AI tool has been used for authorship)

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