Expanding in the USA - Make sure you are compliant with Indian Laws.

Expanding your business into international markets like the USA or the UK is an exciting venture for Indian companies.

However, the process involves more than just registering your subsidiary in the desired country. Compliance with following Indian Regulations is important

• Overseas Direct Investment (ODI) compliances - When investing outside India
• Annual Performance Report (APR) filings - Annual Compliance
• Foreign Liabilities and Assets (FLA) - Annual Compliance

ODI Compliance: Reporting Outward Direct Investment (ODI) to the RBI

The Reserve Bank of India (RBI) regulates the flow of funds leaving the country for outward direct investments (ODI) by Indian companies. When you invest in shares of your foreign subsidiary, it triggers ODI reporting requirements.

• ODI Forms:?The RBI mandates filing Form ODI with them. This form is now a part of a single, online platform for outward foreign remittances.

Details Required in Form ODI:

• Indian Party (IP) Information:?Company name, address, PAN number, etc.
• Resident Investment (RI) Information:?Applicable for individuals making the investment (if not a company).
• Overseas Entity (OE) Information:?Name, location, nature of business, etc., of your subsidiary.
• Transaction Details:?Nature of investment (equity, loan, etc.), amount invested, currency used, purpose of investment.
• Financial Information:?Projected financials of the overseas entity (may be required for specific cases).

Documents Required for ODI Filing:

• Copy of Certificate of Incorporation of the Indian company.
• KYC documents of the Indian company directors/promoters.
• Board resolution authorizing the ODI.
• Feasibility report or business plan for the overseas venture (may be required for specific cases).
• Audited financial statements of the Indian company (for specific cases).

The requirement for a valuation report of the foreign entity for ODI filing in India depends on the?amount of investment?and whether the shares are?listed?on a recognized stock exchange. Here's a breakdown:

• Listed Shares:?If you're investing in?listed shares?of your foreign subsidiary, a valuation report is generally?not required?for ODI filing with the RBI. The market price on the stock exchange serves as a reference for the investment value.
• Unlisted Shares & Investment exceeding USD 5 Million:?For?unlisted shares?or investments exceeding?USD 5 million, a valuation report?becomes mandatory. This report must be prepared by a?Category I Merchant Banker?registered with SEBI (Securities and Exchange Board of India) or an Investment Banker/Merchant Banker registered with the appropriate authority in the foreign country.

Additional Notes:

• The valuation report should be based on internationally accepted valuation methodologies.
• Specific details regarding the valuation report format or methodology might be required depending on the nature of the investment. Consulting with a qualified financial professional is recommended to ensure your report meets RBI guidelines.

Importance of ODI Compliance:?Timely and accurate ODI filings are crucial. Not only do they ensure compliance with Indian regulations, but they also provide valuable data for the RBI to monitor India's foreign investment landscape. Delays or errors in filing can lead to penalties and hinder smooth operations for your subsidiary.

Annual Performance Report (APR) Filing with the RBI

While not specific to the US, Indian regulations mandate filing an Annual Performance Report (APR) with the RBI for all overseas ventures, including subsidiaries.

• APR Details:?This report captures the financial performance of your overseas subsidiary, including its audited financial statements.
• Filing Deadlines:?The deadline for filing the APR typically falls between July 15th and September 30th of each year, depending on whether unaudited or audited financial statements are submitted.

Foreign Liabilities and Assets (FLA) Filing with the RBI

• Who Needs to File:?The annual FLA return applies to all Indian companies with foreign assets or liabilities on their balance sheets at the end of the financial year. This includes any investment made in your overseas subsidiary.
• Filing Details:?The FLA return is an excel sheet submitted electronically to the RBI. It details all foreign assets and liabilities, including those related to your subsidiary.
• Filing Deadline:?The deadline for filing the FLA return typically falls on July 15th of each year.

Important Note:?Failure to file APR or FLA reports can lead to penalties from the RBI.