TaxTMI 
TaxTMI 
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.
Restructuring foreign entity under ODI rules
04 Apr 2024 
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Restructuring under ODI rules: capital reduction generally permitted only where foreign entity incurred losses, control determines investor's veto.
Rule 18 of the ODI Rules, 2022 permits balance-sheet restructuring of a foreign investee only where the investee has incurred losses for the previous two years as evidenced by audited balance sheets; capital reduction is not explicitly defined but would be conditioned on that loss history. An Indian investor's ability to prevent such a reduction depends on its control or contractual shareholder rights in the foreign entity. (AI Summary)
Rule 18 of the ODI Rules, 2022 permits balance-sheet restructuring of a foreign investee only where the investee has incurred losses for the previous two years as evidenced by audited balance sheets; capital reduction is not explicitly defined but would be conditioned on that loss history. An Indian investor's ability to prevent such a reduction depends on its control or contractual shareholder rights in the foreign entity. (AI Summary)