Permission to write-off capital or receivables by Indian Companies in their foreign JV/WOS

The extant FEMA Regulations do not provide for the restructuring of the balance sheet of the overseas JV/WOS not involving winding up of the entity or divestment of the stake by the Indian Party. In order to provide more operational flexibility to the Indian corporates, it has been decided that Indian promoters who have set up WOS abroad or have at least 51 per cent stake in an overseas JV, may write off capital (equity / preference shares) or other receivables, such as, loans, royalty, technical know-how fees and management fees in respect of the JV /WOS, even while such JV /WOS continue to function as under:

1. Listed Indian companies are permitted to write off capital and other receivables up to 25 per cent of the equity investment in the JV /WOS under the Automatic Route; and
   
   
2. Unlisted companies are permitted to write off capital and other receivables up to 25 per cent of the equity investment in the JV /WOS under the Approval Route.

The write-off / restructuring have to be reported to the Reserve Bank through the designated AD bank within 30 days of write-off/ restructuring. The write-off / restructuring is subject to the condition that the Indian Party should submit the following documents for scrutiny along with the applications to the designated AD Category –I bank under the Automatic as well as the Approval Routes:

1. A certified copy of the balance sheet showing the loss in the overseas WOS/JV set up by the Indian Party; and
   
   
2. Projections for the next five years indicating benefit accruing to the Indian company consequent to such write off / restructuring.

Reference-  RBI/2010-11/548 -A.P. (DIR Series) Circular No. 69-May 27, 2011