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The FEMA regulations on Direct Investment outside India

Permission for Direct Investment

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 its net worth.  Party must update its net worth by the date of the last audited balance sheet. The Party or the individual must reckon with the following:

  • 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.

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. Related Services: Surveyor In Insurance

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.

The ADR/GDR issue must be according to the Scheme. This 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. Related Service: Dot Consultant

Remittances

To invest, as per the FEMA regulations, by remitting from India in an existing company outside India, the shares of the company outside India must valuate at –

  • 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). 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. 

Permission for Investment in Agricultural Operations

The party, who wants to undertake algirultural operations, needs to be an incorporated as a company in India or a partnership firm. But the undertaking can include 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. 
  • To invest in the agricultural sector by acquiring land overseas, a certified valuer. That are registered with the appropriate valuation authority in the host country, must certify the land valuation. Related Service: Insurance Broker License

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. Related Service: ISNP

Consult Registrationwala for FEMA expertise

Registrationwala provides active FEMA Experts and FEMA consultant services in Delhi and Mumbai. The  Registrationwala help their clients with a plethora of services like the one mentioned below:

  1. We provide FEMA consultations to foreigners and NRIs for investments in Indian businesses.
  2. Aid our clients to understand the complex FEMA rules and regulations.
  3. We also assist in both inbound and outbound investments through our Fema Consultants.
  4. Provide services 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.

Related Article: What are the benefits of getting Prepaid Wallet license in India?

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