Dear Sir/Madam
A joint venture Company was formed in India ( JV Pvt. Ltd.,) by a Foreign Company ( FC) and an Indian Company ( IC). The FC and IC were holding Equal shares in the JV Pvt. Ltd.,
FC has also extended unsecured loan in the form of External Commercial Borrowing (ECB) to the tune of EURO 400,0000 to the JV pvt. Ltd., after complying with FEMA.
Due to business restructuring FC wants to sell all its shares held in JV Pvt.,Lltd., to one more Foreign Company (FC-1). FC-1 also intends to purchase the ECB extended to JV Pvt. Ltd. by FC to tune of EURO 400,000 only for EURO 100,000. Whether such arrangement would be allowed under the Foreign Exchange Management Act and rules and regulations made thereunder as this arrangement is likely to benefit the JV Pvt.,ltd., or any specific approval need to be obtained from Reserve Bank of India.
Please clarify.
CAclubindia
