Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) refer to the Joint Ventures are perceived as a medium of economic and business co-operation between India and other countries.
Overseas Investment can be made under two routes (i) Automatic Route and (ii) Approval(Government) Route.
General permission has been granted to a person resident in India:
- out of the funds held in RFC account;
- as bonus shares on existing holding of foreign currency shares; and
- when not permanently resident in India, out of their foreign currency resources outside India.
General permission has been granted to a person resident in India who is an individual:
- to acquire foreign securities as a gift from any person resident outside India
- to acquire shares by way of inheritance from a person
- to acquire shares under cash less Employees Stock Option Programme (ESOP)
- to purchase equity shares offered by a foreign company under its ESOP Schemes.
- to acquire and hold immovable property or shares or any other asset outside India without prior approval of the Reserve Bank. The limit of USD 250,000 under the Liberalized Remittance Scheme
- In all other cases, not covered above, approval of the Reserve Bank is required to be obtained before acquisition of a foreign security.
Investments can be made under Automatic Route in the following situations:
- A company incorporated in India or a registered partnership firm is permitted to make investment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries (WOS), not exceeding 400 per cent of the net worth as on the date of last audited balance sheet.
- With out such ceiling the investment can be made out of balances held in Exchange Earners’ Foreign Currency account of the Indian party or out of funds raised through ADRs / GDRs.
- The total financial commitment of the Indian party, in all the Joint Ventures / Wholly Owned Subsidiaries put together, shall not exceed 400% of the net worth of the Indian party as on the date of the last audited balance sheet.
The Indian party intending to invest in Overseas Direct Investment, should approach an Authorised Dealer with an application in Form ODI and prescribed enclosures / documents for effecting remittances towards such investments.
In case of acquisition by the Indian Party other than by way of remittance of funds, such acquisition is to be reported in form ODI to the AD Bank within a period of 30 days from the date of the transaction.
Based on the application under form ODI, a Unique Identification Number (UIN) is allotted to each JV or WOS abroad.
An Indian party which has made direct investment abroad is under obligation to
- receive share certificate or any other document as an evidence of investment,
- repatriate to India the dues receivable from foreign entity, and
- submit the documents / Annual Performance Report to the Reserve Bank
- The share certificate or any other document as evidence of investment has to be submitted to and retained by the designated AD bank
RMC provides services in terms of ensuring
RMC ensures compliance with ODI guidelines as to eligible security, remittance for the asset acquired, evidence for such investment, filing of ODI form.
RMC also ensures in compliance with filing Annual returns (Annual Performance Reports) with the RBI and getting the approvals for any changes in terms of ODI.