Restructuring foreign entity under ODI rules

[g srikanth]

Rule 18 of the ODI Rules, 2022 states that ' A person resident in India who has made ODI in a foreign entity may permit restructuring of the balance sheet by such foreign entity, which has been incurring losses for the previous two years as evidenced by its last audited balance sheets, subject to...'. What is restructuring is not defined; however assuming capital reduction is restructuring, my doubt is whether such a capital reduction is permitted even when the foreign entity does not incur losses in the last 2 years? What happens when the Indian entity does not have 'control'? If a capital reduction happens even without losses, can the Indian entity prevent the reduction? Any thoughts will be appreciated.

AI Summary

Rule 18 ODI Rules 2022: Foreign Entity Balance Sheet Restructuring Permitted After Two Years of Losses. Rule 18 of the ODI Rules, 2022 allows restructuring of a foreign entity's balance sheet if it has incurred losses for the past two years, as shown in audited financial statements. Capital reduction without such losses may not be permitted under these rules. If the Indian entity lacks control over the foreign entity, its ability to influence decisions like capital reduction is limited. The capacity to prevent capital reduction depends on control and any specific agreements. For precise guidance on control and restructuring under Rule 18, consulting a legal expert in international investments is advisable.