Since the rise of globalisation, Indian companies are increasingly involved in doing business outside India. We would like to set up a regional office or an overseas franchise. There are many advantages in doing so, such as reducing prices as they save on import duties, making business simpler, creating an international brand etc.
Foreign investment in wholly owned companies or joint - venture has been regarded by Indian businessmen as significant avenues for promoting global business.
There are essentially two pathways in which one can set up a WOS worldwide, namely automatic route and path approval. Under the automatic path, no prior approval from the regulatory authority is needed of a company to set up a WOS abroad.
While other plans / operations not covered by automatic route conditions would require prior Reserve Bank approval.
Under the Automatic Route an Indian Group does not need the Reserve Bank’s prior approval to make direct overseas investments in a wholly owned subsidiary (WOS) abroad. The Indian Party should reach a category of Authorized Dealer – I bank for making the transfer payments to such investments.
"Indian Group" means either of the following or hybrid of:
(this should be remembered that under the Automatic Route, individuals are not permitted to invest)
An Indian business can create investments overseas in any operation in which it has experience and expertise (except those that are expressly banned). Even so, specific extra requirements set out in Regulation 7 may be conformed to for the arrangement of operations in the financial sector.
Real estate and banking are the banned sectors for investing overseas. Indian banks operating in India can therefore set up JV / WOS abroad as long as they receive permission under the 1949 Banking Regulation Act.
Just an Indian company involved in activities in the finance market may make investments in the financial services industry unless it meets the following requirements:
Under the Automatic Route the conditions for overseas direct investment / financial commitment are as follows:
"Financial commitment" means an Indian Party's made direct investment outside India, and includes
The Indian Party planning to make direct investment abroad under the automatic route is required to fill out the ODI online form via AD bankduly assisted by the documentation specified therein, i.e. certified copy of the Board Resolution, statutory auditors certificate and valuation report (if an established company is acquired) as per the valuation standards and approach an Authorized Dealer (desdealer)
Abroad Investment under RBI approval route
Initiatives not provided by automatic route requirements require prior approval by the Reserve Bank for which a detailed application in Form ODI with the specified documents is required to be made via the Approved Dealer Category-I banks.
The following considerations shall be taken into account by Reserve Bank when considering these requests:
With a vision to allowing recognized star export industries with an excellent track record and consistently strong export performance to realise the rewards of globalization and liberalization, proprietorship considerations and unregistered partnership firms are permitted to set up WOS outside India with the Reserve Bank's prior approval subject to fulfilling some eligibility requirements.
An application in form ODI may be apply to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Overseas Investment Division, Central Office, Amar Building, 5th Floor, Fort, Mumbai 400 001, through their bank.
Registered trusts and societies working in the manufacturing / educational / hospital sector are permitted to invest in same sector(s) in a WOS outside India, with prior permission from the Reserve Bank.
Compliances by Indian Party
Where host nation legislation does not compulsory conducting an audit of WOS accounting records, the Indian Party may obtain the Annual Performance Report (APR) on the basis of the unaudited audited reports provided by the WOS:
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