First in a series on India’s amended Press Note 3 and the continuous condition it created.
India’s March 2026 amendment to Press Note 3 allows investments carrying non-controlling land-border beneficial ownership of up to 10 per cent to proceed through the automatic route. The Department for Promotion of Industry and Internal Trade clarified the following day that entities registered in China and Hong Kong, and Chinese citizens, continue to require approval without exception.
So the position is available only to non-land-border vehicles – most frequently pooling or intermediate holding structures domiciled in Singapore or Mauritius, carrying a minority of land-border beneficial ownership. Also, the position is available only while that ownership stays under the line and stays non-controlling.
This article is focussed on that conditional availability. A continuous compliance rule is fundamentally different from a one-time check at closing. To stay compliant, the fund’s internal mechanics actually need to detect ownership shifts over time.
Two events that look similar and are not
First is a direct transfer: an existing LP sells its stake to a secondary buyer. Standard fund agreements require the General Partner’s prior written consent, triggering a legal review of the incoming investor (including Press Note 3 checks for Indian exposure) before the LP register is updated. The process works as intended.
The second is a change in the ownership of the limited partner itself. Consider how this plays out across regional investment corridors:
- A corporate LP in Mauritius holding a fund stake sells its equity to a new parent company.
- A Singapore-domiciled feeder vehicle’s own investor base shifts when new investors are admitted.
- A Hong Kong family office restructures the private holding entity sitting directly above its fund commitment.
- A fund-of-funds sitting several layers up admits new institutional capital.
In none of those cases does any interest in the fund change hands. The LP is the same legal person, holding the same commitment, on the same register. No transfer occurs, so no consent is sought, so no review happens.
And yet the beneficial ownership position several layers above the investment has moved. It is the beneficial ownership position that the Indian test measures.
Whether the documents catch it is a question of drafting, not principle
I am not going to assert that standard fund documentation misses this, because I do not know that it does.
Limited partnership agreements frequently contain change-of-control provisions applying to investors, and side letters sometimes carry notification obligations covering ownership changes at the LP. Where those provisions exist and are drawn widely enough to capture indirect changes, such as, a shift occurring at a parent level or inside a Mauritius intermediate holding vehicle, the gap I have described may be substantially closed, and the consent process reaches the event after all.
What I have not been able to establish is how commonly those provisions are drafted to that width, whether they are framed as notification obligations or as consent triggers, and whether they reach changes two or three layers above the committed vehicle rather than only at it.
That is a question about market drafting practice, and the people who know the answer are offshore fund counsel in Hong Kong, Singapore, Mauritius and the Channel Islands, who negotiate these provisions continuously. I have begun asking them and I will publish what they say, including if the answer is that this problem is smaller than it appears.
The Relevance of the Response
If standard provisions do reach upstream changes, then the exposure under the amended Press Note 3 is a drafting and diligence question, handled by making sure the relevant clause is present and monitored. That is an example of bounded work with a known owner.
If they do not, a fund can unwittingly breach its automatic route eligibility through a transaction it never knew about, consented to, or participated in. No one made a mistake, the ownership percentage simply moved.
The asymmetry underneath is the same either way. The Indian investee company carries the reporting obligation under Indian foreign exchange law and has no visibility into its investor’s upstream ownership chain. What it sees is a clean, compliant remittance from a Singapore pooling vehicle or a Mauritius holding company. The people with actual visibility into the shifting percentages sit several layers up and outside Indian jurisdiction.
Because legal obligation and actual ownership data sit in completely different places, bridging that gap requires upfront contract drafting rather than a post-closing fix.
What I am not saying
Nothing here suggests that funds are in widespread breach or that the amendment was badly designed. It is a genuine easing that will let a class of investors into India who were previously excluded.
The key takeaway is simple: this policy easing requires ongoing compliance, but standard fund controls track direct LP transfers rather than upstream shifts. Whether this creates a real-world gap depends entirely on how agreements are drafted. That is a question best answered by the lawyers who write them.
Lawfinity Solutions advises international law firms on cross-border legal market positioning. If the India corridor is a live question for your firm, we would be interested in a conversation. Lawfinity works with one firm per jurisdiction. Engagements begin with a single conversation about your firm’s current position and where the corridor question is live for you. Write to Prachi Shrivastava
