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Overseas investments in Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) have been recognized as an important opportunity for promoting global business[1] by Indian entrepreneurs.
Overseas Joint Venture means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian Party makes a direct investment.
Wholly Owned Subsidiary (WOS) means a foreign entity formed, incorporated or registered in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian Party.
Indian party with reference to investment means a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act, 1932[2] or a Limited Liability Partnership (LLP) incorporated under the Limited Liability Partnership Act, 2008 making investment in a Joint Venture or Wholly Owned Subsidiary abroad.
Through RBI notification below are the general permission is granted persons residents in India for purchase/acquisition of securities:
Also, Read: Sample Format of Joint Venture Agreement.
The Indian entity can make the direct foreign investment through two routes that are Automatic Route and Approval Route.
Automatic Route: Investment in the sectors allowed in automatic routes does not require prior approval of RBI. Indian party shall intimate after making the investment.
The Indian Party should approach an Authorized Dealer Category – I bank with an application in Form ODI and the prescribed enclosures/documents for effecting the remittances towards such investments. Nevertheless, in case of investment in the financial services sector, prior approval is required from the regulatory authority concerned, both in India and abroad.
Approval Route: Any activities or sectors fall under approval route requires prior approval of RBI before making the investment.
Recommanded Article: Mergers & Acquisitions and Joint Ventures.
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