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shreya shrivastava (company secretary) (25 Points)

04 March 2016

Hi,

There is a private co. ( in a SEZ area) which is a wholly owned subsidiary of a listed company.Both the companies are involved in export business. Since the subsidiary co. cannot export to a certain party due to some issues and the company is not willing to leave the deal as well, it wants to export the same involving the parent holding co. and thereafter export the same in the name of the holding co. Can the subsidiary co. do that? and if can, what would be the procedure and what will be the flaws reagrding several other acts such as FEMA etc. Kindly reply as soon as possible.

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3 Replies

JOJY THOMAS (CHARTERED ACCOUNTANT) (305 Points)
Replied 05 March 2016

I understand that both the companies are in india and sez company is the manufacturer and the parent company is the consignor/exporter and overseas company is the consignee/ buyer. This is a case of third party exports in that case either the sez company or their parent company can file the export documents before customs. It would be ideal if the documents are filed by sez company before the sez customs and the shipment is sent as SEZ CARGO by showing the sez company as manufacturer and parent company as exporter. On the contrary the parent company can also do the customs filing and in that case goods have to be PHYSICALLY removed from the SEZ UNIT . Third party exports are permitted by RBI

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shreya shrivastava (company secretary) (25 Points)
Replied 07 March 2016

Thank you so much sir for your prompt response. But I have a further query, as sez co. is a wholly owned subsidiary then such a transaction will be counted as a material related party transaction u/s 188 of the companies act, 2013, and several listing compliances have to be followed and do we have to intimate the BSE as well about the transaction? Further, if we go through the procedure you have mentioned, are there any other acts & provisions apart from FEMA that needs to be taken care of or any other additional documents that needs to be filed.

Kindly provide me the documents, if you can.

Thanx

JOJY THOMAS (CHARTERED ACCOUNTANT) (305 Points)
Replied 09 March 2016

Please note that the transactions should be at arms length basis and the same can be done on a prospective basis and the compliances under section 188 will also be applicable. Third party exports are mentioned in Foregin Trade Policy and can contact your CHA for further advice as it is a regular business as far as they are concerned