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CS Pooja (Company Secretary)     25 May 2009

Step Subsidiary Offshore

Dear All

Is there any bar/restriction on number of step subsidiaries that can be incorporated by an indian public (unlisted) company offshore by RBI/ FEMA..if yes, under what section/ circular...pl guide..



Learning

 1 Replies

CS Pooja (Company Secretary)     27 May 2009

Excerpts from Master Circular - Indian Direct Investment in JVs/WOSs abroad, as on July 1, 2003:

 

a)       This general permission does not include investment proposals, which envisage setting up a holding company, or a special purpose vehicle abroad, which would in turn, set up one or more step down subsidiaries as operating units. Such investment proposals through a two-tier structure as also investments by way of swap of a Indian company’s shares would require prior approval of the Reserve Bank.

 

 

Excerpts from FAQs from RBI site:

Q.33. Are there any restrictions for setting up of a second generation company? Can such step down subsidiaries be set up under the Automatic Route?

A. There are no restrictions on entities having JVs/WOSs abroad setting up second generation companies (step-down subsidiaries) within the overall limits applicable for investments under the Automatic Route. However, companies wishing to set up step-down subsidiaries to undertake financial sector activities will have to comply with the additional requirements for direct investment in the financial sector.

 

May I request you to provide your expert opinions on the same now...

Does it in any way mean that one can have only one step down subsidiary of a company offshore...under automatic route...??


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