Investments in Foregin Subsidiaries

This query is : Resolved

I.V. Chandra Sekhar (Querist)
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08 April 2010 Company X (Company as per the Companies Act 1956), is planning to invest money by way of Equity in its Wholly owned Foreign Subsidiaries.

What are the Statuatory Compliances that Company X needs to fulfill while investing in its Foreign Subsidiary under the Companies Act 1956, FEMA and RBI Approvals if any required or not.

Is there any limit on such investments?

taxindiaconnect

taxindiaconnect (Expert)
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09 April 2010 Though I am not the right person for giving an opinion for this subject, however from my limited experience recently on these issues, I can guide you on from bird’s eye perspective.

You need to check the Oudside Direct investment ( ODI) Guidelines of RBI before investing. As per guidelines the investment up to US$ 5 million is covered under automatic route. For investment > then UD$ 5 Million RBI specific approval is required. Apart from this company X needs to file Annual Performance Report along with the audited account of the Sub Co's. A valuation from a category A merchant banker is required for investment > 5 Million USD and a valuation certificate of your company auditor is required for value less than that.

Please check ODI guidelines from RBI for further clarification.

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