ODI

Overseas Direct Investment

Investment outside the boundaries of the Country in a joint venture or wholly owned subsidiaries by way of Contribution to capital, Subscription to Memorandum of foreign entity and Acquisition of shares by way of market purchase, private placement or through stock exchange is termed as Overseas Direct Investment (ODI).

Entities allowed to make ODI

Entities in which ODI can be made

• Joint Venture (JV) – a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country.
• Wholly Owned Subsidiary (WOS) – a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian Party.

Automatic and Approval Route

ODI can be made through Automatic as well as Approval Route. Most of the investments made fall under the purview of Automatic route barring investments in oil sector, energy and natural resource sector for which prior approval of RBI is needed.

Automatic Route:

Under the Automatic Route, an Indian Party does not require any prior consent from RBI. The Indian Party is required to approach the AD Category – 1 bank with the prescribed documents (Form ODI and its required enclosures) for effecting ODI.

Approval Route:

Under the Approval Route, the Indian Party is required to take prior approval of the Reserve Bank of India for which a specific application in Form ODI with the documents prescribed therein is required to be made through the Authorized Dealer Category – I banks.

Proposals requiring prior permission from RBI are as follows:

• Investments in energy and natural resource sector.
• Investments in the oil sector.
• Investments by proprietorship concerns and unregistered partnership firms require prior approval of RBI.
• Investments made by registered trusts / societies which are engaged in manufacturing, educational and hospital sector also require prior approval if the JV / WOS is also engaged in the same sector as the trusts / societies, etc.

Prohibited Sectors

Investment in following sectors has been debarred without prior approval from the RBI:

Real Estate Sector –

• It includes buying and selling of real estate or trading in Transferable Development Rights (TDRs).
• Real Estate Sector does not include development of townships, construction of residential/commercial premises, roads or bridges.

Banking Business

Limits of ODI

1. Criteria for investment under the Automatic Route is as under:
2. a) Indian Party can invest upto 400% of its net worth (as per latest audited balance sheet) in JV / WOS.
3. b) The Indian Party should not be on the RBI’s Exporters’ Caution List, list of defaulters to the banking system published by the Credit Information Bureau of India Limited (CIBIL).
4. c) The Indian Party shall route all of its investments through one AD Category – 1 Bank.
5. Individuals shall freely remit up to USD 2,50,000 per financial year (as per Master Directions dated January 1^st, 2016 issued by RBI). This limit was increased from USD 1,25,000 on May 26^th, 2015. The limit of USD 2,50,000 per FY under the Scheme also includes the following remittances such as private visit; gift / donation; going abroad on employment; emigration; maintenance of close relatives abroad; business trip; medical treatment abroad; studies abroad. Transactions in excess of USD 2,50,000 require prior approval of RBI.

Regulatory Compliances / Reporting Requirements

There are other regulatory compliances which needs to be done post investment are made in the foreign entity. The compliances are as follows:

Terms of Services

• Cases can be discussed via phone, skype or email.
• Post discussion of the case, fee for the project will be quoted.
• Please note that business operating in different sectors need to comply sector specific compliances along with the general compliances of corporate laws of the country.
• Upon agreed terms and conditions, the project will be handled by our team having specialized knowledge of the approval process.
• A brief on regulatory compliances, approvals required, requirement of documents from your side and timelines involved for each stage will be provided by our specialized team.