{"id":13206,"date":"2021-07-02T00:03:03","date_gmt":"2021-07-01T18:33:03","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=13206"},"modified":"2022-02-08T19:19:28","modified_gmt":"2022-02-08T13:49:28","slug":"setting-up-subsidiary-outside-india","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/","title":{"rendered":"Setting up Subsidiary Outside India"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e7bab823346\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e7bab823346\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#BRIEF_INTRODUCTION\" title=\"BRIEF INTRODUCTION\">BRIEF INTRODUCTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#MEANING_OF_WHOLLY-OWNED_SUBSIDIARY\" title=\"MEANING OF WHOLLY-OWNED SUBSIDIARY\">MEANING OF WHOLLY-OWNED SUBSIDIARY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#PURPOSE\" title=\"PURPOSE \">PURPOSE <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#ADVANTAGES\" title=\"ADVANTAGES \">ADVANTAGES <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#DIFFERENCE_BETWEEN_JOINT_VENTURES_AND_WHOLLY_OWNED_SUBSIDIARIES\" title=\"DIFFERENCE BETWEEN JOINT VENTURES AND WHOLLY OWNED SUBSIDIARIES\">DIFFERENCE BETWEEN JOINT VENTURES AND WHOLLY OWNED SUBSIDIARIES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#CONDITIONS_FOR_OPENING_BRANCH_OFFICE_REPRESENTATIVE_ABROAD\" title=\"CONDITIONS FOR OPENING BRANCH OFFICE\/ REPRESENTATIVE ABROAD\">CONDITIONS FOR OPENING BRANCH OFFICE\/ REPRESENTATIVE ABROAD<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#METHODS_OF_FUNDING_A_WHOLLY-OWNED_SUBSIDIARY\" title=\"METHODS OF FUNDING A WHOLLY-OWNED SUBSIDIARY\">METHODS OF FUNDING A WHOLLY-OWNED SUBSIDIARY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#PROCEDURE_OF_CONSTRUCTING_FOREIGN_INVESTMENTS_IN_WHOLLY-OWNED_SUBSIDIARY\" title=\"PROCEDURE OF CONSTRUCTING FOREIGN INVESTMENTS IN WHOLLY-OWNED SUBSIDIARY\">PROCEDURE OF CONSTRUCTING FOREIGN INVESTMENTS IN WHOLLY-OWNED SUBSIDIARY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#PLEDGING_OF_SHARES_OF_AN_ENTIRELY_OWNED_SUBSIDIARY\" title=\"PLEDGING OF SHARES OF\u00a0AN ENTIRELY\u00a0OWNED SUBSIDIARY\">PLEDGING OF SHARES OF\u00a0AN ENTIRELY\u00a0OWNED SUBSIDIARY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#CONDITIONS_FOR_AN_INDIAN_COMPANY_TO_FORM_WOS_ABROAD\" title=\"CONDITIONS FOR AN INDIAN COMPANY\u00a0TO FORM\u00a0WOS ABROAD\">CONDITIONS FOR AN INDIAN COMPANY\u00a0TO FORM\u00a0WOS ABROAD<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#TRANSFER_OF_SHARE_OR_SECURITY_HELD_DURING_A_WHOLLY-OWNED_SUBSIDIARY\" title=\"TRANSFER OF SHARE OR SECURITY HELD DURING A WHOLLY-OWNED SUBSIDIARY\">TRANSFER OF SHARE OR SECURITY HELD DURING A WHOLLY-OWNED SUBSIDIARY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#ROUTES_TO_LINE_UP_WHOLLY-OWNED_SUBSIDIARIES_OUTSIDE_INDIA\" title=\"ROUTES\u00a0TO LINE\u00a0UP WHOLLY-OWNED SUBSIDIARIES OUTSIDE INDIA\">ROUTES\u00a0TO LINE\u00a0UP WHOLLY-OWNED SUBSIDIARIES OUTSIDE INDIA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#SOURCES_OF_INVESTMENT_AND_FUNDING_TO_SET_UP_WOS_OUTSIDE_INDIA\" title=\"SOURCES OF INVESTMENT AND FUNDING TO SET UP WOS OUTSIDE INDIA\">SOURCES OF INVESTMENT AND FUNDING TO SET UP WOS OUTSIDE INDIA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#PERMISSIBLE_OPERATIONS_FOR_INVESTMENT_IN_WOS_OUTSIDE_INDIA\" title=\"PERMISSIBLE OPERATIONS FOR INVESTMENT IN WOS OUTSIDE INDIA\">PERMISSIBLE OPERATIONS FOR INVESTMENT IN WOS OUTSIDE INDIA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#PROCEDURE_FOR_INVESTMENT_IN_WOS_OUTSIDE_INDIA_UNDER_AUTOMATIC_ROUTE\" title=\"PROCEDURE FOR INVESTMENT IN WOS OUTSIDE INDIA UNDER AUTOMATIC ROUTE\">PROCEDURE FOR INVESTMENT IN WOS OUTSIDE INDIA UNDER AUTOMATIC ROUTE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#RBI_APPROVAL_ROUTE_FOR_INVESTMENT_IN_WOS_OUTSIDE_INDIA\" title=\"RBI APPROVAL ROUTE FOR INVESTMENT IN WOS OUTSIDE INDIA\">RBI APPROVAL ROUTE FOR INVESTMENT IN WOS OUTSIDE INDIA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/#COMPLIANCES_REQUIRED_BY_INDIAN_COMPANY_FOR_OPENING_WOS_OUTSIDE_INDIA\" title=\"COMPLIANCES REQUIRED BY INDIAN COMPANY FOR OPENING WOS OUTSIDE INDIA\">COMPLIANCES REQUIRED BY INDIAN COMPANY FOR OPENING WOS OUTSIDE INDIA<\/a><\/li><\/ul><\/nav><\/div>\n<figure id=\"attachment_13207\" aria-describedby=\"caption-attachment-13207\" style=\"width: 952px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/07\/SETTING-UP-SUBSIDIARY-OUTSIDE-INDIA..jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-13207\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/07\/SETTING-UP-SUBSIDIARY-OUTSIDE-INDIA..jpg\" alt=\"SETTING UP SUBSIDIARY OUTSIDE INDIA\" width=\"952\" height=\"464\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/07\/SETTING-UP-SUBSIDIARY-OUTSIDE-INDIA..jpg 640w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/07\/SETTING-UP-SUBSIDIARY-OUTSIDE-INDIA.-300x146.jpg 300w\" sizes=\"(max-width: 952px) 100vw, 952px\" \/><\/a><figcaption id=\"caption-attachment-13207\" class=\"wp-caption-text\"><span style=\"color: #ffffff;\">SETTING UP SUBSIDIARY OUTSIDE INDIA<\/span><\/figcaption><\/figure>\n<h3><span class=\"ez-toc-section\" id=\"BRIEF_INTRODUCTION\"><\/span><span style=\"color: #000080;\">BRIEF INTRODUCTION<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>With the arrival of Globalization, more and more Indian companies have an interest in doing business outside India. they require to set up a branch office or a subsidiary abroad. There are multiple benefits of doing so like cost reduction because they save on duty, simple doing business, building a global brand, etc.<\/p>\n<p>Overseas investment in wholly-owned subsidiaries or joint ventures has been recognized as an important avenue for promoting global business by Indian entrepreneurs. Broadly there are two routes under which one can find a WOS abroad, namely automatic route and approval route. Under the automated route, a corporation doesn&#8217;t require any prior approval from the administrative unit for putting in place a WOS abroad.<\/p>\n<p>While other proposals\/activities not covered by conditions under automatic route would require prior approval of the banking company. Overseas <a href=\"https:\/\/carajput.com\/blog\/know-about-foreign-direct-investment-in-india\/\">investments<\/a> in Joint ventures and Wholly Owned Subsidiaries are recognized as a vital avenue for promoting global business by Indian entrepreneurs. There are some significant benefits related to such overseas investments, like transfer of technology and skill, access to a wider global market, promotion of brand name image, employment generation, etc. Such investments are essential drivers of foreign trade. It means investments under the automated route or the approval route through contribution to the capital or subscription to the memorandum of a remote entity or through the acquisition of existing shares of an overseas entity, thus showing an extended term interest within the foreign entity i.e., Joint Ventures or Wholly Owned Subsidiary.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"MEANING_OF_WHOLLY-OWNED_SUBSIDIARY\"><\/span><span style=\"color: #000080;\"><strong>MEANING OF WHOLLY-OWNED SUBSIDIARY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A wholly Owned Subsidiary means a far-off entity formed, registered or incorporated in step with the laws and regulations of the host country whose entire capital is held by the Indian party. it&#8217;s a separate legal company where the common stocks are owned and controlled by the holding or the parent company. The parent company has 100% control over the entity, and such company functions in accordance with the guidance of the parent company. it should be noted that the selections for wholly-owned subsidiaries (WOS) are taken by the parent company; however, it does have its own senior management that appears after the business operations.<\/p>\n<p>The common stocks aren&#8217;t publicly traded for a WOS; therefore, there aren&#8217;t any individual shareholders. The parent company appoints its Board of Directors, but it&#8217;s still treated as a separate legal entity. It means the provisions applying on the WOS shall not necessarily be applicable to the parent company.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"PURPOSE\"><\/span><span style=\"color: #000080;\"><strong>PURPOSE <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The main purpose for establishing a Wholly Owned Subsidiaries is as follows &#8211;<\/p>\n<ul>\n<li>It diversifies the business operations of\u00a0a corporation\u00a0and creates\u00a0a unique\u00a0channel to run it.<\/li>\n<li>It enables its parent company\u00a0to control\u00a0within the\u00a0foreign companies and markets.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"ADVANTAGES\"><\/span><span style=\"color: #000080;\"><strong>ADVANTAGES <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>the first\u00a0advantage of WOS is that the parent company can exert full control over its operations\u00a0in an exceedingly\u00a0foreign country.<\/li>\n<li>Since the parent company has all\u00a0the desired\u00a0permissions, there are fewer administrative difficulties encountered by\u00a0the corporate,\u00a0and thus\u00a0it can easily acquire the WOS.<\/li>\n<li>Every aspect of the WOS is sorted by the parent company; therefore, it doesn&#8217;t have to reveal its technology or competitive advantages to others.<\/li>\n<\/ol>\n<p>for related are blogs:<\/p>\n<ul>\n<li><em><a href=\"https:\/\/carajput.com\/blog\/conversion-of-llp-into-company-limited-by-shares\/\">Conversion of LLP into Company Limited by Shares<\/a><\/em><\/li>\n<li><em><a href=\"https:\/\/carajput.com\/blog\/everything-that-you-need-to-know-about-limited-liability-partnership\/\">Everything that you need to know about LLP<\/a><\/em><\/li>\n<\/ul>\n<ol>\n<li>The parent company\u00a0has to\u00a0make 100% equity investment in its subsidiary. Such investments\u00a0don&#8217;t seem to be\u00a0reasonable\u00a0for tiny\u00a0scale and medium organizations.<\/li>\n<li>The parent organization additionally\u00a0has to\u00a0tolerate entire misfortunes accruing\u00a0thanks to\u00a0the losses on its own because it owns 100% equity.<\/li>\n<li>Few countries are reluctant to line up entirely owned subsidiaries by outsiders in their land.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"DIFFERENCE_BETWEEN_JOINT_VENTURES_AND_WHOLLY_OWNED_SUBSIDIARIES\"><\/span><span style=\"color: #000080;\"><strong>DIFFERENCE BETWEEN JOINT VENTURES AND WHOLLY OWNED SUBSIDIARIES<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The two business forms, Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS), are quite distinct in terms of their ownership structure, risks benefit and uses. These differences\u00a0are\u00a0specified below.<\/p>\n<ol>\n<li>one in all the numerous differences between the JV and WOS is their ownership structure. A JV may be a firm that&#8217;s founded managed and owned by two or more companies, whereas WOS is owned by one company that has control over it.\\<\/li>\n<li>WOS tends to be riskier than a JV because in JV,\u00a0the chance\u00a0is spread to\u00a0quite\u00a0one company, and if the business fails, then the losses\u00a0is\u00a0divided between\u00a0the businesses, but in WOS, the parent firm shall absorb all losses by itself. Such an entity therefore reduces the risk by providing access to unused resources, including human and capital resource.<\/li>\n<li>similar to\u00a0these two differ in risks, they also differ in their potential benefits.\u00a0the advantages\u00a0tend to be greater\u00a0in an exceedingly\u00a0WOS\u00a0just because\u00a0the profit doesn\u2019t\u00a0must\u00a0be shared with anyone.<\/li>\n<li>WOS is mostly employed in situations where the business is taken into account low risk, or it might be used if the corporate possesses required skills and knowledge, whereas JV shall be used where the corporate needs access to skills, knowledge, etc.<\/li>\n<\/ol>\n<p><strong><a href=\"https:\/\/carajput.com\/blog\/setting-up-subsidiary-outside-india\/\">OVERSEAS DIRECT INVESTMENT WITHOUT REMITTANCE OF FUNDS FROM INDIA<\/a><\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"CONDITIONS_FOR_OPENING_BRANCH_OFFICE_REPRESENTATIVE_ABROAD\"><\/span><span style=\"color: #000080;\"><strong>CONDITIONS FOR OPENING BRANCH OFFICE\/ REPRESENTATIVE ABROAD<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>The overseas branch\/office has been\u00a0founded\u00a0or representative is posted overseas for conducting normal business activities of the Indian entity.<\/li>\n<li>The overseas branch\/office\/representative is not allowed to enter into any contract or agreement that are in contravention of the Act, Rules or Regulations made thereunder;<\/li>\n<li>The overseas office (trading \/ non-trading) \/ branch\/representative mustn&#8217;t create any financial liabilities, contingent or otherwise, for the top office in India and also not invest surplus funds abroad without prior approval of the bank. Any funds rendered surplus should be repatriated to India.<\/li>\n<li>Exchange released by the authorized dealer should be strictly utilized for the purpose(s)\u00a0that\u00a0it&#8217;s\u00a0released. The unused exchange\u00a0could also be\u00a0repatriated to India under advice to the authorized dealer.<\/li>\n<li>the main points\u00a0of bank accounts opened\u00a0within the\u00a0overseas country should be promptly reported to the AD Bank.<\/li>\n<li>The account so opened, held or maintained shall be closed,<\/li>\n<li>if the overseas branch\/ office\u00a0isn&#8217;t\u00a0founded\u00a0within six months of opening the account, or<\/li>\n<li>within one month of closure of the overseas branch\/ office, or<\/li>\n<li>in case, no representative is provided for 6 months, the balance held in the account shall be repatriated to India;<\/li>\n<li>The renewal of the remittance facility after two years is also granted, provided proper accounts of the utilization of interchange released are furnished to the authorized dealer.<\/li>\n<li>the subsequent\u00a0statements should be submitted by the applicant to the authorized dealer:<\/li>\n<li>A statement showing details of initial expenses incurred\u00a0along with\u00a0suitable documentary evidence, wherever possible, within three months from the date of release of exchange for that purpose.<\/li>\n<li>Annual account of trading\/non-trading office abroad duly certified by statutory Auditors\/Chartered Accountants.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"METHODS_OF_FUNDING_A_WHOLLY-OWNED_SUBSIDIARY\"><\/span><span style=\"color: #000080;\"><strong>METHODS OF FUNDING A WHOLLY-OWNED SUBSIDIARY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Investment\u00a0within the\u00a0Wholly Owned Subsidiaries outside India\u00a0is also\u00a0funded out\u00a0of 1\u00a0or more of the following:<\/p>\n<ol>\n<li>Drawal of interchange from an Authorized Dealer bank in India;<\/li>\n<li>Capitalization of exports;<\/li>\n<li>Swap of shares;<\/li>\n<li>Proceeds of External Commercial Borrowings (ECB) or Foreign Currency Convertible Bonds;<\/li>\n<li>In exchange of ADRs\/GDRs issued\u00a0in step with\u00a0the Scheme for issue of Foreign Currency Convertible Bonds and\u00a0common shares\u00a0Scheme, 1993,\u00a0and therefore the\u00a0guidelines issued by\u00a0the govt.\u00a0of India thereunder from time to time;<\/li>\n<li>Balances standing in the EEFC account of the said Indian party;<\/li>\n<li>And the proceeds of foreign currency funds raised through issuance of ADRs\/GDRs.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"PROCEDURE_OF_CONSTRUCTING_FOREIGN_INVESTMENTS_IN_WHOLLY-OWNED_SUBSIDIARY\"><\/span><span style=\"color: #000080;\"><strong>PROCEDURE OF CONSTRUCTING FOREIGN INVESTMENTS IN WHOLLY-OWNED SUBSIDIARY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Indian party looking\u00a0to create\u00a0an overseas\u00a0investment in under\u00a0the automated\u00a0route must-<\/p>\n<ul>\n<li>Fill ODI form duly supported by documents\u00a0sort of a\u00a0certified copy of the Board Resolution, statutory auditors\u2019 certificate, and valuation report.<\/li>\n<li>Approach an Authorized dealer for creating the investment\/remittance.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"PLEDGING_OF_SHARES_OF_AN_ENTIRELY_OWNED_SUBSIDIARY\"><\/span><span style=\"color: #000080;\"><strong>PLEDGING OF SHARES OF\u00a0AN ENTIRELY\u00a0OWNED SUBSIDIARY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The shares of WOS\u00a0are also\u00a0pledged by an Indian party as security for availing either fund based or non-fund-based facility for itself or for the WOS from\u00a0a certified\u00a0dealer\/public\u00a0financial organization\u00a0in India or from\u00a0a far-off\u00a0lender\u00a0providing\u00a0the overseas lender is regulated and supervised as a bank plus the Indian party\u2019s total financial commitments stay within the prescribed limit by the RBI for overseas investment from time to time.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"CONDITIONS_FOR_AN_INDIAN_COMPANY_TO_FORM_WOS_ABROAD\"><\/span><span style=\"color: #000080;\"><strong>CONDITIONS FOR AN INDIAN COMPANY\u00a0TO FORM\u00a0WOS ABROAD<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Only an Indian company engaged\u00a0within the\u00a0financial services sector activities may make an investment\u00a0in a very\u00a0venture\u00a0or WOS outside India\u00a0within the\u00a0financial service sector provided it satisfies\u00a0the subsequent\u00a0conditions:<\/p>\n<ul>\n<li>It has earned\u00a0lucre\u00a0within the\u00a0preceding three financial years from the financial service activities;<\/li>\n<li>It is registered with the relevant\u00a0administrative unit\u00a0of India for conducting financial service activities<\/li>\n<li>It has taken the approval for undertaking such activities form the concerned\u00a0administrative body\u00a0in India and abroad before such financial activity;<\/li>\n<li>And it&#8217;s fulfilled the prudential norms with relation to capital adequacy prescribed by the concerned administrative unit in India.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"TRANSFER_OF_SHARE_OR_SECURITY_HELD_DURING_A_WHOLLY-OWNED_SUBSIDIARY\"><\/span><span style=\"color: #000080;\"><strong>TRANSFER OF SHARE OR SECURITY HELD DURING A WHOLLY-OWNED SUBSIDIARY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>An Indian party can transfer by way of sale without the approval of a banking company to a different Indian party or to someone residing abroad any share or security held by it within the WOS or JV outside India provided the subsequent conditions are fulfilled.<\/p>\n<ul>\n<li>Such a sale must not end in the write-off of the investment made.<\/li>\n<li>The sale must be effected through a stock market where the shares of the foreign WOS\/JV are listed.<\/li>\n<li>Just in case\u00a0the shares\u00a0aren&#8217;t\u00a0listed on the\u00a0exchange,\u00a0which\u00a0the shares are disinvested by\u00a0a personal\u00a0arrangement, the share price\u00a0shouldn&#8217;t\u00a0be\u00a0but\u00a0the worth\u00a0certified by a CA or\u00a0a licensed\u00a0Public Accountant\u00a0because the\u00a0fair value of the shares based upon\u00a0the most recent\u00a0audited financial statements of a JV\/WOS.<\/li>\n<li>The Indian party\u00a0shouldn&#8217;t\u00a0have any outstanding dues by way of dividend, royalty, consultancy, or export proceeds from the JV\/WOS.<\/li>\n<li>The annual performance report with the audited accounts for that year must be submitted to the\u00a0Federal Reserve Bank.<\/li>\n<li>The Indian party must not be under investigation by CBI\/DoE\/IRDA\/SEBI or the other administrative unit in India.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"ROUTES_TO_LINE_UP_WHOLLY-OWNED_SUBSIDIARIES_OUTSIDE_INDIA\"><\/span><span style=\"color: #000080;\"><strong>ROUTES\u00a0TO LINE\u00a0UP <a href=\"https:\/\/www.caindelhiindia.com\/service\/international-tax-advisory-services\">WHOLLY-OWNED SUBSIDIARIES<\/a> OUTSIDE INDIA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A company registered in India can find WOS outside India through one of the 2 available routes. These routes are-<\/p>\n<ol>\n<li>Approval Route: In some business operations and proposals,\u00a0a corporation\u00a0before opening a WOS outside India requires prior approval from the\u00a0Federal Reserve Bank\u00a0of India i.e., the regulating authority.<\/li>\n<li>Automatic Route: Under this route one\u00a0doesn&#8217;t\u00a0require any prior approval from\u00a0the govt\u00a0authority\u00a0and therefore the\u00a0Federal Reserve Bank\u00a0of India, before\u00a0fitting\u00a0a WOS outside India.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"SOURCES_OF_INVESTMENT_AND_FUNDING_TO_SET_UP_WOS_OUTSIDE_INDIA\"><\/span><span style=\"color: #000080;\"><strong>SOURCES OF INVESTMENT AND FUNDING TO SET UP WOS OUTSIDE INDIA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As discussed above under the automated route, any Indian company doesn&#8217;t require prior approval to open a WOS outside India from the administrative unit, bank of India. The Overseas Direct Investments (ODI) will be made by the Indian party without approval. However, for creating any remittances towards such investments, the Indian company must approach a bank that is in Authorized Dealer Category-I. Here, Indian Company means the following-<\/p>\n<ol>\n<li>Any company registration in India.<\/li>\n<li>an organization\u00a0formulated under\u00a0the businesses\u00a0Act, 2013.<\/li>\n<li>A\u00a0liability\u00a0Partnership firm registered under the\u00a0financial obligation\u00a0Partnership (LLP) Act, 2008.<\/li>\n<li>A partnership firm set up under the Indian Partnership Act, of 1932.<\/li>\n<li>Any organization incorporated under the Act of parliament.<\/li>\n<li>Any organization or institution in India as per the notification of the bank of India (RBI).<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"PERMISSIBLE_OPERATIONS_FOR_INVESTMENT_IN_WOS_OUTSIDE_INDIA\"><\/span><span style=\"color: #000080;\"><strong>PERMISSIBLE OPERATIONS FOR INVESTMENT IN WOS OUTSIDE INDIA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Most of the sectors and activities are permissible to be carried on by Indian companies abroad under\u00a0the automated\u00a0route.\u00a0and therefore, they\u00a0can make overseas investments in these sectors without a hassle and open a WOS outside India\u00a0to hold\u00a0them on. However, some sectors where overseas investments\u00a0aren&#8217;t\u00a0permitted or prohibited are-<\/p>\n<ul>\n<li>Banking sector<\/li>\n<li>Asset\u2019s\u00a0sector<\/li>\n<\/ul>\n<p>It must be noted that any bank operating in India can found WOS outside India or a venture, only after a clearance under the Banking Regulation Act, 1949.<\/p>\n<p>The Indian companies that are engaged\u00a0within the\u00a0financial sector can make overseas investments in financial activities abroad. For\u00a0the aim\u00a0of constructing\u00a0such investments,\u00a0they&#8217;re\u00a0required to follow certain norms are criteria, which are-<\/p>\n<ul>\n<li>It must be registered under the\u00a0administrative body\u00a0in India that regulates the financial services and operations.<\/li>\n<li>It must fulfill all the norms and conditions\u00a0associated with\u00a0the adequacy of capital that has been prescribed by the\u00a0regulatory agency\u00a0in India.<\/li>\n<li>It must have accrued a\u00a0net\u00a0within the\u00a0past three fiscal years from operating\u00a0within the\u00a0financial sector.<\/li>\n<li>It must have obtained prior approval from the concerned regulatory authorities in both India and abroad for creating the venture within the financial services.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"PROCEDURE_FOR_INVESTMENT_IN_WOS_OUTSIDE_INDIA_UNDER_AUTOMATIC_ROUTE\"><\/span><span style=\"color: #000080;\"><strong>PROCEDURE FOR INVESTMENT IN WOS OUTSIDE INDIA UNDER AUTOMATIC ROUTE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The following process must be fulfilled by the Indian company\u00a0that wishes\u00a0to open a WOS outside India through\u00a0the automated\u00a0route of investment-<\/p>\n<ol>\n<li>Form ODI is to be filed through online mode with the Authorized Dealer Category-I bank.<\/li>\n<li>The prescribed documents must be duly attached with\u00a0the shape. These documents are-<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Certified copy of Board Resolution<\/li>\n<li>Valuation report as per norms of valuation<\/li>\n<li>Certificate from Statutory Auditors.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"3\">\n<li>The corporate then, within the final step must approach the authorized bank for creating the remittances against the investment in WOS outside India.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"RBI_APPROVAL_ROUTE_FOR_INVESTMENT_IN_WOS_OUTSIDE_INDIA\"><\/span><span style=\"color: #000080;\"><strong>RBI APPROVAL ROUTE FOR INVESTMENT IN WOS OUTSIDE INDIA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The other route\u00a0for creating\u00a0investments abroad\u00a0is that the\u00a0approval of the\u00a0Federal Reserve Bank\u00a0of India.\u00a0this is often\u00a0called the approval route and\u00a0is employed\u00a0by those Indian companies that\u00a0don&#8217;t seem to be\u00a0allowed\u00a0to take a position\u00a0through\u00a0the automated\u00a0route. For\u00a0the aim\u00a0of approval from RBI to open WOS outside India or other branches, one must follow\u00a0the subsequent\u00a0process-<\/p>\n<ol>\n<li>Filing the ODI form online with specific applications for approval.<\/li>\n<li>The prescribed documents must be attached with\u00a0the shape\u00a0through the authorized dealer category-I bank to the RBI.<\/li>\n<li>An application must be made to the interchange Department within the Overseas Investment Division.<\/li>\n<\/ol>\n<p>While approving such proposals the RBI considers\u00a0the subsequent\u00a0points and factors-<\/p>\n<ol>\n<li>Contribution of such investments to the external trade sector of India and other related benefits.<\/li>\n<li>Viability of\u00a0clear\u00a0of the WOS outside India.<\/li>\n<li>Experience and sector\u00a0of experience\u00a0of the Indian company for operating the wholly-owned subsidiary.<\/li>\n<li>Track records of business and its financial stability of both the Indian company and foreign organization.<\/li>\n<\/ol>\n<p>It is to be noted that any trusts and societies that operate within the manufacturing, health or educational sector and are registered in India are allowed to open WOS outside India and make investments with RBIs prior approval.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"COMPLIANCES_REQUIRED_BY_INDIAN_COMPANY_FOR_OPENING_WOS_OUTSIDE_INDIA\"><\/span><span style=\"color: #000080;\"><strong>COMPLIANCES REQUIRED BY INDIAN COMPANY FOR OPENING WOS OUTSIDE INDIA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The following compliance checklist must be fulfilled by the Indian company making\u00a0a far-off\u00a0investment or opening a WOS outside India:<\/p>\n<ol>\n<li>For creating\u00a0investments &#8211; Filing Form Overseas Direct Investment (ODI)<\/li>\n<li>Obtaining Unique\u00a0number\u00a0(UIN) from the Authorized Dealer Category-I bank.<\/li>\n<li>Reporting any changes in details: Any decisions taken regarding the WOS outside India must be reported to the concerned authorities within 30 days of approval of investment with respect to-<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Activities diversification<\/li>\n<li>Alterations made\u00a0within the\u00a0shareholding patterns<\/li>\n<li>Opening any sub- subsidiaries under the WOS<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">All such changes as per the local laws must\u00a0even be\u00a0reported to the host country where the WOS outside India has been\u00a0founded.<\/p>\n<ol start=\"4\">\n<li>Post making the investments, the Indian company must ensure submitting the share certificates to the authorized dealer bank within sixty days.<\/li>\n<li>Annual filing:\u00a0the subsequent\u00a0forms and documents must be filed by the WOS outside India on annual basis-<\/li>\n<\/ol>\n<ul>\n<li>Annual Performance Report in Form ODI, Part II on or before 31st December of every year.<\/li>\n<li>Annual Returns on Foreign Assets and Liabilities (FLA) on or before 15th July every year.<\/li>\n<\/ul>\n<p>Popular blog:-<\/p>\n<ul>\n<li><a href=\"https:\/\/carajput.com\/blog\/basic-document-filing-fc-gpr-form-with-rbi\/\" target=\"_top\" rel=\"noopener\">Basic Document -filing FC-TRS form with RBI<\/a><\/li>\n<li><em><a href=\"https:\/\/carajput.com\/blog\/procedures-for-conversion-of-partnership-firm-to-private-company\/\">Procedures for the conversion of partnership firm into Private limited company<\/a><\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>BRIEF INTRODUCTION With the arrival of Globalization, more and more Indian companies have an interest in doing business outside India. they require to set up a branch office or a subsidiary abroad. There are multiple benefits of doing so like cost reduction because they save on duty, simple doing business, building a global brand, etc. &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[9970],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/13206"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=13206"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/13206\/revisions"}],"predecessor-version":[{"id":21924,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/13206\/revisions\/21924"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=13206"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=13206"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=13206"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}