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What is foreign entity & how it is regulated?

August 17, 2020

Any company, firm, LLP, branch, business formed or registered outside India by the Indian promoter or Indian entity in common parlance is known as foreign entity. India’s foreign trade policy & FEMA regulations allows Indian promoter & entities to setup foreign entity or business almost in all countries. They can also purchase shares, buy properties, make investment etc. in foreign countries.  Indian promoter or company is required to follow overseas direct investment regulations & may avail Liberalized Remittance Scheme (LRS) for such activities. Usual eligibility for business entity is 400% of net-worth of Indian investor entity & for individual as per prevailing LRS per financial year. 

There is a general permission for Indian nationals to acquire directorship in foreign entities. If the Indian investor is a company or LLP, then it needs some additional prior compliances like passing of resolutions etc. Detailed documentation is also required to be created between investor & foreign entity.

Your banker is expected to play a crucial role for swift remittance of funds outside India & for other foreign exchange & money transaction compliances. Hence selection of experienced banker is the keyBefore making such investments & creation of entity, valuation, KYC & other pre-requisites needs to be ensured. During & post transaction, documentation & compliances with your bankers, RBI & MCA needs to be observed.

For structuring & management or creation of a foreign entity, investment in it, acquisition of foreign entity or directorship & related FEMA, Co law,

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