India’s amendment to Press Note 3 (PN3) in March 2026 marks a significant evolution in the country’s foreign direct investment (FDI) framework.
Originally introduced in 2020, PN3 required prior government approval for investments linked to countries sharing a land border with India. The 2026 amendment refines this framework-but more importantly, it changes how foreign companies must approach investment structuring, ownership transparency, and regulatory compliance.
For global businesses, this is no longer just a policy update-it is a strategic consideration impacting market entry, funding, and expansion in India.
What Was Press Note 3 (2020) and Why It Impacted Global Investors
Press Note 3 was introduced to prevent opportunistic takeovers during the COVID-19 period. It mandated that:
- Any investment from land-bordering countries. You can check the list here.
- Or investments where the beneficial owner belonged to these countries
- Required government approval before execution
The Challenge for Foreign Companies
While the intent was protective, the implementation created unintended friction:
- No threshold for beneficial ownership
- No clear definition of “beneficial owner”
- No fixed approval timelines
- Indirect exposure through global funds triggered approvals
As a result, European, US, and Asia-based investors were also impacted due to minor direct and indirect shareholding from restricted jurisdictions.
What Changed in the 2026 Press Note 3 Amendment
Introduction of a 10% Beneficial Ownership Threshold
Investments can now proceed under the automatic route if:
- Beneficial ownership from restricted countries is below 10%
- The investor has no controlling rights
Impact:
Foreign companies and funds with diversified investor bases can now invest with greater ease-provided ownership thresholds are met while planning their market entry in India.
Clear Definition of Ultimate Beneficial Ownership (UBO)
While you may already be successfully exporting to India, the next phase of your expansion like setting up a subsidiary- requires closer regulatory alignment. Recent amendments now bring the definition of Ultimate Beneficial Ownership (UBO) in line with the Prevention of Money Laundering (PMLA) Rules, making ownership transparency and compliance more critical than ever.
Impact:
- Greater clarity for compliance
- Easier evaluation across layered structures
- Reduced ambiguity in cross-border investment assessments
60-Day Approval Timeline for Key Manufacturing Sectors
If you already have a subsidiary in India or are in the process of setting one up – it is important to stay aligned with evolving regulatory developments.
For investments that continue to require government approval, a structured 60-day decision timeline has now been introduced in select sectors, including:
- Electronics (assess whether your product classification falls within this category)
- Capital goods
- Solar manufacturing (including polysilicon, wafers, and ingots)
It is critical to evaluate whether your product or business activity falls within these categories by mapping the relevant HSN codes, as this will determine the applicable approval pathway.
Impact:
This development brings greater predictability and faster decision-making for foreign investors. It is particularly beneficial for those undertaking post-merger integration or planning to establish a wholly owned subsidiary (as opposed to a liaison or branch office), reinforcing confidence in India’s manufacturing and investment ecosystem.
The Real Regulatory Shift: Focus on Ultimate Beneficial Ownership (UBO)
While the amendment appears liberal, the regulatory focus has intensified on who ultimately owns and controls the investing entity.
This means:
- Investment routing through countries like France, Germany, Singapore, UAE, or Netherlands does not automatically ensure compliance
- Authorities will evaluate the ultimate beneficial ownership (UBO) across all layers
Press Note 3 Impact on M&A Deals, Joint Ventures, and Funding Structures
The amendment significantly impacts key business transactions by shifting the focus from the immediate investor to the ultimate beneficial ownership (UBO). This means that even indirect or minority shareholding from restricted jurisdictions can trigger regulatory scrutiny and approval requirements.
Mergers & Acquisitions (M&A)
- Enhanced due diligence on shareholding structures
- Potential delays in deal closure due to approval requirements
- Increased importance of regulatory structuring in valuation discussions
Joint Ventures (JV Structures)
- Mandatory UBO checks for partners
- Hidden exposure via partner investors can trigger approval requirements
- Structuring flexibility becomes critical
Capital Infusion and Funding Rounds
- Parent-to-subsidiary funding may require approval
- Venture capital and private equity structures need deeper scrutiny
- Funding timelines must factor in regulatory approvals
Layered Investment Structures
- Multi-layered holding companies are under greater scrutiny
- Jurisdiction of investment is less important than ownership origin
When Foreign Investment Still Requires Approval Under Press Note 3
A European parent company in the electronics manufacturing sector (a key industry covered under Press Note 3-sensitive supply chains) owns an Indian subsidiary.
- The parent has 20% investment from a VC fund
- The VC fund has beneficial ownership from countries restricted under Press Note 3
Now:
The Indian subsidiary plans to raise €1.1 million (approx. ₹10 crore) from the European parent
Outcome
Even though the investment originates from a European country:
- It falls under Press Note 3 due to indirect ownership from restricted countries
- Government approval is required before the investment can be executed
Hidden Risk: Impact of Parent Company Shareholding on Indian Subsidiaries
Foreign companies often overlook one critical factor:
If your parent company has investors from restricted countries, your Indian operations are impacted
This affects:
- Equity infusion
- Internal funding structures
- Secondary share transfers
- Fundraising rounds
What any Foreign Companies Should Do Now
For Companies Already having 100% Subsidiary in India
- Conduct UBO and shareholding due diligence at the parent level
- Reassess funding strategies and timelines
- Identify exposure across all ownership layers
- Plan for potential approval requirements
For Companies Entering India
Carefully structure your market entry strategy:
- Wholly owned subsidiary
- Joint venture & Acquisition
- Conduct pre-entry UBO due diligence
- Avoid compliance risks during deal execution
Why Press Note 3 Now Impacts Your Go-To-Market Strategy
Under the amended framework, compliance is no longer a backend function. It has become a front-end strategic consideration, influencing how you structure investments, select partners, and plan market entry from the outset rather than being addressed post-decision.
It directly impacts:
- Speed of market entry (in terms of days)
- Capital deployment timelines
- Right Partner selection
- Expansion strategies
Your go-to-market strategy in India must now be aligned with FDI regulations from day one
How Maier+Vidorno Supports Foreign Companies in India
With over 25 years of experience, Maier+Vidorno has supported 1,500+ international companies across the entire investment lifecycle in India from entry planning to execution and scale. Our integrated approach ensures that regulatory complexity does not slow down your growth ambitions.
Our support spans across:
- M&A and financial due diligence
- UBO and shareholding structure analysis
- FDI advisory and regulatory representation
- Joint venture structuring
- Pre- and post-merger integration
- Capital structuring and funding strategy
By combining strategic insight with on-ground execution, we help businesses move seamlessly from planning through regulatory complexity to execution clarity—enabling faster, compliant, and sustainable growth in India.
Structuring Investments Right Is Now a Competitive Advantage
India remains one of the world’s most attractive investment destinations.
However, under Press Note 3:
The success of your investment depends not just on what you invest But how your ownership structure is designed
Foreign companies that proactively align their ownership, funding, and entry structures with regulatory expectations will gain a clear advantage in executing and scaling in
