NRI Investment - Status of Organisation

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This query is : Resolved

Sathish Karunakaran (Querist)

19 February 2008 My friend has got a NRI investor who is ready to invest in IT industry in India. Now, Confused on which form of legal organisation they both have to tie-up. Firstly they decided to go for partnership form of status.

since FOREX inflows from NRI investor attracts FEMA and other RBI guidelines. In addition to that provisions regarding registration under partnership act also apply on them. This seem to be enormous formalities.

I suggested both the resident and NRI can enter in to joint venture agreement (JCO-as per AS27) without creating any new organisation but having same share of management participation and profits intact.

My doubts are -

a) which form (i.e partnership or joint-venture) has got more formalities under FEMA
b) can joint-venture be on-going basis? (i.e life time agreement possible)
c) the ceiling limit, which a NRI can invest in business in India as per FEMA
d) impact of transfer pricing as per sec.92 of IT Act,1961
e) any act regulating joint ventures and rules regarding registration of instruments of joint venture?

Awaiting eagerly of responses

Thanks a lot.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

07 March 2008 1.Both have considerable formalities under FEMA
2. How can an individual have JV? what is your thinking on the form of JV?

Your clarifications needed for further answers

Sathish Karunakaran

Sathish Karunakaran (Querist)

05 April 2008 Thanks Mr. Srinivas for resolving the query.

My interpretation in respect of joint venture is if a resident proprietory concern and a non-resident proprietary concern join hands in their individual capacity after having consensus-ad-idem by entering in to a contract, without forming a separate company. (similar to Jointly Controlled operations - JCO - AS 27)

This is in harmony with a transaction where an individual having plot join in building promotion venture with promoters by providing them plot and in turn he gets consideration in the form of 2 or 3 flats from apartments built thereon.

Kindly let me know whether still I'm wrong.

Thanks a lot.