FEMA Consultant: Regulations on Direct Investment outside India

Permission for Direct Investment in FEMA Consultant

An Indian party may invest directly in a Joint Venture or Wholly Owned Subsidiary outside India. The total financial commitment of the Indian party in Joint Ventures/Wholly Owned Subsidiaries shall not exceed 100% of the net worth of the Indian Party as of the date of the last audited balance sheet. For the limit of 100% of the net worth, the following shall be reckoned:

• Cash remittances by market purchase and/or equivalent rupee investments in the case of Nepal and Bhutan.
• Capitalization of export proceeds and other dues and entitlements.
• Fifty percent of the value of guarantees issued by the Indian party to or on behalf of the joint venture company or wholly-owned subsidiary.
• Investment in agricultural operations through overseas offices or directly.
• External Commercial Borrowing in conformity with other parameters of the ECB guidelines. Read More: Startup Registration  

Loans and Guarantee

An Indian party must extend a loan or a guarantee to or on behalf of the Joint Venture/Wholly Owned Subsidiary abroad, within the permissible financial commitment, provided that the Indian Party has invested by way of contribution to the equity capital of the Joint Venture.

Depository Receipts

An Indian Party may make a direct investment without any limit in any foreign security out of the proceeds of its international offering of shares through the mechanism of ADR and/or GDR, provided that the ADR/GDR issue has been made in accordance with the Scheme for the issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993 and the guidelines issued thereunder from time to time by the Central Government. The Indian Party files with the designated authorized dealer in the form of ODA full details of the investment proposed.

Remittances

For the purposes of investment under the FEMA regulations by way of remittance from India in an existing company outside India, the valuation of shares of the company outside India shall be made –

• where the investment is more than USD 5 (Five) million, by a Category I Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker/Merchant Banker outside India registered with the appropriate regulatory authority in the host country, and
• In all other cases, by a Chartered Accountant or a Certified Public Accountant.

For the purposes of investment under this regulation by the acquisition of shares of an existing company outside India where the consideration is to be paid fully or partly by issue of the Indian party’s shares, the valuation of shares of the company outside India shall in all cases, be carried out by a Category I Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker/Merchant Banker outside India registered with the appropriate regulatory authority in the host country. Read More: Trust Registration

Permission for Investment in Agricultural Operations

A person, resident of India, being a company incorporated in India or a partnership firm, can undertake agricultural operations, including the purchase of land incidental to such activity either directly or through their overseas offices, provided that

• The Indian party is otherwise eligible to invest, and such investment is within the overall limits.
• Also, for investment under this regulation by acquiring land overseas, the land valuation must be certified by a certified valuer registered with the appropriate valuation authority in the host country.

Prohibition

If not covered under the FEMA act or otherwise permissioned for direct investment, No person or party, without the prior approval of the Reserve Bank of India,

• No person must make any direct investment outside India, and
• No party must make a direct investment in a foreign entity engaged in real estate or banking business.

SD: To know the set regulations issued by the Reserve Bank of India for a resident Indian or an Indian party to make Direct Investment(s) abroad, read the article.

Consult Registrationwala for FEMA expertise

Registrationwala provides active FEMA Experts and FEMA consultant services in the metropolitans, Delhi and Mumbai to help our clients with a plethora of services like the one mentioned below:

1. To provide FEMA consultations to foreigners and NRIs for investments in Indian businesses.
2. To help the clients understand the complex FEMA rules and regulations.
3. To assist in both inbound and outbound investments through our FEMA consultants.
4. To assist in legal matters that include litigation through our FEMA experts.
5. Representation in matters regarding foreign exchange management rules by our FEMA experts.
6. Conducting all the necessary legwork required to set up global business entities like joint ventures by FEMA experts.

What can you expect from us?

Experience, professionalism, and ethical conduct of services. This is all what our FEMA experts and FEMA consultants have to offer. Read More: RNI Registration