India Startup - Entity Externalization

Start-up Entity Externalization – Often faced with foreign investors insistence to setup a offshore entity with Indian Subsidiary, it is important to take note of Overseas Direct Investment rules which prohibit individuals to establish overseas entity with step down subsidiary. If such subsidiary is in India, it has round tripping issues as well. Founders need to ensure this aspect is addressed before committing to fund raise. While some changes are being speculated (perhaps easing the limitation of step-down subsidiary for business expansion), round tripping will remain an areas of concern. Foreign Investors need to be convinced to make direct investment in Indian entity.