PROCEDURE FOR INVESTING IN WOS IN ABROAD

INITIAL COMPLIANCE'S -

1. Board Resolution under Section 292(1) (d) & S.372A for investment and incorporation of Wholly Owned Subsidiary.
   
   
2. Form ODI – Part I (i. e. details of JV/ WOS, Indian Parties and the financing pattern of the overseas entity) is required to be filed by Investing Indian Company with Designated Authorised Dealer Bank. Certificate by the Statutory Auditor for compliance of FEMA is also required to be submitted along with ODI form.
   
   
3. Under Automatic Route, in case of new proposals, immediately after effecting remittance, the Designated Authorised Dealer Bank will forward Form ODI – Part I along with Part II (i. e. Remittance Report) to RBI for obtaining Unique Identification Number.
   
   
4. On receipt of the Form from the AD bank, RBI will allot an Unique Identification Number to each JV/ WOS, which is required to be quoted in all the future correspondence by AD Bank/ Indian Company.

How Much Quantum can be Invested:

Under automatic route , up to 100% net worth of investing company in its foreign subsidiary or JV Company.

If your Indian Company net worth is say Rs 1 Crore , you can invest up to 1 Crore under automatic route in the WOS / JV company in foreign country.

How Much can be invested in WOS / JV by an Indian Listed Company  ?

As per RBI guidelines , if  there is no JV or WOS , Listed Indian companies can invest up to 50 % of their net worth as on the date of the last audited Balance Sheet in overseas companies, listed on a recognized stock exchange, or by way of rated debt securities issued by such companies by way of portfolio investment.

Prohibitions

Indian parties are prohibited from making investment in a foreign entity engaged in real estate (meaning buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges) or banking business, without the prior approval of the Reserve Bank.

POST INVESTMENT COMPLIANCE'S -

1. An Indian Company which has made direct investment abroad is under obligation to receive share certificate or any other document as an evidence of investment, and submit the documents / Annual Performance Report to the Reserve Bank, in accordance with the provisions specified in Regulation 15 of the Notification. The share certificate or any other document as evidence of investment has to be submitted to and retained by the designated AD Category - I bank, who is required to monitor the receipt of such documents and satisfy themselves about the bonafides of the documents. A certificate to this effect should be submitted by the designated AD category – I bank to the Reserve Bank along with the APR (Part III of Form ODI). 
   
   
2. Annual Performance Report (APR) should be submitted, through the designated AD Category-I bank, every year within 3 months of the closing of the annual accounts of the WOS i. e. on or before 30.06.2010
   
   
3. A JV / WOS set up by the Indian party as per the Regulations may diversify its activities / set up step down subsidiary / alter the shareholding pattern in the overseas entity . The Indian Company should report to the Reserve Bank through the AD Category - I bank, the details of such decisions within 30 days of the approval of those decisions by the competent authority of the JV / WOS concerned in terms of local laws of the host country and include the same in the Annual Performance Report (APR—Part III of form ODI) required to be forwarded to the AD Category-I bank.
   
   

   R.V.Seckar

    

   rvsekar2007@gmail.com

   
   

   919848915177

All About Investment by an Indian Company in its Foreign JV OR WOS

How much an Indian Company can invest in the shares of a foreign company? How much an Indian Resident can invest in shares of a foreign company?

As per RBI Master Circular No.05/2010-11 dated July 01, 2010, in terms of Regulation 6 of the Notification, an Indian party has been permitted to make investment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries (WOS), not exceeding 100 per cent of the net worth of the Indian party, i.e. a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act, 1932, making investment in a JV/WOS abroad and includes any other entity in India excluding individuals as may be notified by the Reserve Bank as on the date of the last audited balance sheet.

How much it can invest ?

Under automatic route , up-to 100% net worth of investing company in its foreign subsidiary or JV Company.
Financial commitment means the amount of direct investment outside India by way of contribution to equity and loans and 100% of the amount of guarantee issued by an Indian Party to or on behalf of its overseas Holding company.

Payment should be routed through your authorised dealer (banker).

No prior registration with the Reserve Bank is necessary for making direct investments under the automatic route. After the report of the first remittance/investment in form ODI is received by the Reserve Bank, from the designated Authorized Dealer, an Identification Number for that particular JV/WOS will be issued for the purpose of taking on record the overseas direct investment with the objective of maintaining a database for monitoring the outflows/inflows in respect of the overseas entities. Subsequent investments in the same project can be made only after allotment of the Identification Number.

Loans can be made by a subsidiary to foreign holding company and Form ODI has to be submitted to Authorised dealer. Under FEMA , investment in equity , lending loan and extending guarantee will all fall under ODI.

A subsidiary can make direct investment outside India by way of contribution to equity and loans and 100% of the amount of guarantee issued by an Indian Party to or on behalf of its overseas Holding company.
However , the holding company cannot make further investment in the subsidiary if it is making a loan to the holding company..

Can an Indian Company invest in shares of a Foreign Company where there is no JV or WOS?

Yes. As per RBI guidelines , if there is no JV or WOS , an Indian companies can invest up to 50 % of their net worth as on the date of the last audited Balance Sheet in overseas companies, listed on a recognized stock exchange, or by way of rated debt securities issued by such companies.

If the investing company is an Indian  company , then it can invest in any foreign listed company up to 50% of its net worth under automatic route else it has get the prior approval from RBI if it wants to invest in unlisted foreign company , or if the Indian company is not a listed company.

Can proceeds raised through ECB are allowed to invest in Equity shares of JV or WOS in abroad?


ECB proceeds can be utilised for overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad.