FAQs on Circular titled “Additional requirements for carrying out the permissible activities by Finance Company as a Lessor under ‘Framework for Ship Leasing

**Executive Summary** This document presents Frequently Asked Questions (FAQs) related to the IFSCA circular titled “Additional requirements for carrying out the permissible activities by Finance Company as a Lessor under 'Framework for Ship Leasing'” (the "SL Circular") dated May 8, 2024. It clarifies permissible transactions a ship lessor can undertake in the IFSC, the meaning of "providing services solely to person resident in India," and whether existing ship leasing businesses can be shifted to GIFT IFSC. The FAQs are not an interpretation of the law, but provide clarity on the "SL Circular". **Key Points / Main Content** * **Permissible Transactions for Ship Lessors in IFSC:** * **Not Permitted:** An asset (ship/ocean vessel) owned or leased by an Indian entity, deployed for shipping business for Indian clients, and transferred/leased by an IFSC entity solely to serve Indian clients in a single financial year. * **Permitted:** * An Indian entity seeking to expand its shipping business by undertaking global operations or bidding for foreign contracts and intending to incorporate or set up in the IFSC as a ship lessor. * An asset (ship/ocean vessel) acquired on leasehold or ownership basis by an IFSCA registered ship lessor from a person resident outside India/foreign market solely to serve Indian clients. * An applicant or an IFSCA registered ship lessor purchases a newly built ship/ocean vessel from any ship building yard (including Indian ship building yards) and caters to either Indian or foreign clients. * **Definition of "Providing Services Solely to Person Resident in India":** * If a ship lessor in IFSC leases-in, charters-in, or acquires ownership/leasehold rights of a ship/ocean vessel from an Indian entity (excluding newly owned ships purchased from Indian ship building yards), the vessel cannot be used solely to cater to an Indian entity in any single financial year. It is permitted if the vessel caters to both Foreign and Indian residents. * **Shifting Existing Business to GIFT IFSC:** * Existing ship leasing businesses or contracts cannot be shifted to GIFT IFSC. New contracts compliant with Q1 requirements can be catered through IFSCA registered ship lessor post conclusion of existing contract. **Impact Analysis** **Finance Companies as Lessors/Ship Lessors** * **Impact:** Clarification on which transactions are permissible and not permissible within the IFSC based on the origin of the asset and the clientele served. * **Action Required:** Ensure all new transactions comply with the requirements outlined in the FAQs and the "SL Circular". **Indian Entities Seeking to Expand Shipping Business** * **Impact:** The ability to set up as ship lessors in IFSC for global operations and foreign contracts is clarified and permitted. * **Action Required:** Adhere to IFSCA regulations and ensure new contracts adhere to "SL Circular". **IFSCA Registered Ship Lessors** * **Impact:** Guidance on restrictions related to leasing or chartering vessels acquired from Indian entities for serving Indian clients. * **Action Required:** Ensure compliance with restrictions on serving solely Indian clients with certain assets. **Existing Ship Lessors in India** * **Impact:** Existing business cannot be shifted to IFSC; only new contracts complying with requirements can be catered through an IFSCA-registered ship lessor. * **Action Required:** Conclusion of existing contract before new contracts are catered to through IFSC registered ship lessor.

Key Entities Referenced