DUBAI-assets assignment agreement

Hi Jayanta,

Your question involves cross-border asset assignment involving Indian-owned Dubai and Congo companies, with concerns about RBI compliance.

Key points and considerations:

1. Nature of Transaction: Asset Assignment

• An Asset Assignment Agreement generally means transfer of ownership/rights over assets from one entity to another.

• Since Indian family-owned companies are involved via subsidiaries abroad, this is an external commercial transaction under FEMA.

2. RBI / FEMA Regulations Applicability

• Any cross-border transaction involving Indian residents or entities requires compliance with FEMA rules.

• Though the transaction is between foreign entities (Dubai Co and Congo Co), since ultimate ownership is Indian, RBI regulations can still apply if funds flow to/from India or Indian resident parties are involved.

• Direct asset transfer between foreign subsidiaries without involving Indian entities may not require RBI approval, provided no remittance or capital account transaction impacts India directly.

3. Key RBI/FEMA Rules to Check:

• Transfer Pricing: Even if asset assignment is between foreign group companies, the transaction should be at arm’s length.

• Capital Account Transactions: If assets are transferred against funds remitted to/from India, or capital contributions are affected, prior RBI approval or reporting may be required.

• Reporting: Such transactions may need to be reported in FEMA Annual Return (FLA Return) and via Foreign Liabilities and Assets (FLA) Return for Indian company.

• Indirect Control: Since Indian resident shareholders control Dubai companies, the Indian company should ensure compliance with Overseas Direct Investment (ODI) norms.

4. Bypassing RBI?

• If the Indian company or its residents are not involved directly in the asset assignment or related funds, and the transaction is strictly between foreign subsidiaries, RBI permission may not be required.

• However, if the transaction impacts Indian resident entities via capital flows or ownership changes, RBI permission/filing is necessary.

• Failure to comply with FEMA can attract penalties.

5. Recommended Procedure:

• Due Diligence: Assess if Indian resident entity is involved or if funds move in/out of India.

• Transfer Pricing Compliance: Ensure valuation of assets is at arm’s length.

• RBI Filings: If applicable, file necessary ODI/FEMA reports.

• Legal Documentation: Draft the Asset Assignment Agreement carefully, covering warranties, consideration, governing law, etc.

• Consult RBI/FEMA Advisor: For a complex cross-border transaction like this, professional consultation is advisable.

Summary: