Setting Up a Subsidiary Abroad from India: ODI Process & Approvals
Setting up a subsidiary abroad is a major milestone for any growing Indian company — a way to reach new markets, win global clients, and build an international brand. But the move must comply with India’s Overseas Direct Investment rules. This guide walks through the ODI process to set up a subsidiary abroad from India, including approvals, the AD bank’s role, funding, and post-investment compliance.
Why Set Up a Subsidiary Abroad?
- Access to foreign markets and local clients.
- Easier contracting and invoicing in the host country.
- Building a global corporate structure for scale or fund-raising.
- Holding intellectual property or operations closer to customers.
The investment is treated as Overseas Direct Investment (ODI) under FEMA.
Step 1: Confirm Eligibility and Route
Check that the Indian company is eligible, the proposed activity is permissible, and the investment fits within the financial commitment limit (a percentage of net worth). Within the limit, the investment is under the automatic route; beyond it, RBI approval is required. See how Indian companies can invest abroad.
Step 2: Choose the Structure
Decide whether the foreign entity will be a wholly owned subsidiary (WOS) or a joint venture (JV). A WOS gives full control; a JV brings in a local partner. The foreign entity must be engaged in bona fide business activity in the host country.
Step 3: Engage the AD Bank
All ODI flows through an authorised dealer (AD) bank, which is your channel to RBI. The AD bank reviews the documentation, processes the remittance, and files the reporting. Choosing a bank experienced in ODI smooths the process.
Step 4: Fund the Investment
Funding can come from the company’s own funds, eligible borrowings, or share swaps, within FEMA limits. The financial commitment includes equity, loans, and any guarantees given to the foreign subsidiary.
Step 5: File Form FC and Obtain UIN
At the time of investment, file Form FC through the AD bank. RBI allots a Unique Identification Number (UIN) for the foreign subsidiary — the reference for all future filings. See Form FC, UIN and APR reporting.
Step 6: Incorporate in the Host Country
In parallel, the subsidiary is incorporated under the host country’s company law — with its own registration, tax, and banking. Local advisors handle this leg while you manage the India-side compliance.
Step 7: Ongoing Compliance
After setup, file the Annual Performance Report (APR) by 31 December each year and report any further commitments or disinvestment. See APR filing. Non-compliance can trigger compounding under FEMA.
Process Summary
| Step | Action |
|---|---|
| 1 | Confirm eligibility, route, and limit |
| 2 | Choose WOS or JV structure |
| 3 | Engage AD bank |
| 4 | Fund the investment |
| 5 | File Form FC, get UIN |
| 6 | Incorporate in host country |
| 7 | File APR annually |
Frequently Asked Questions
Can an Indian company own 100% of a foreign subsidiary?
Yes — a wholly owned subsidiary abroad is permitted, subject to the financial commitment limit and rules.
Do I need RBI approval?
Not if the investment is within the limit under the automatic route; approval is needed beyond limits or for restricted cases.
What is the role of the AD bank?
The AD bank is the channel to RBI — it processes remittances and files the ODI reporting.
What is the main annual compliance?
Filing the Annual Performance Report (APR) for the foreign subsidiary by 31 December.
Set Up Your Overseas Subsidiary Seamlessly
S. Choudhary & Co. handles ODI structuring, AD bank coordination, Form FC, UIN, and APR for Indian companies expanding abroad. Explore our Overseas Direct Investment services or call +91 90248 28295 · sushil@sushilchoudhary.com.
