Inter-corporate investments - Filing of applications for simultaneous approval of inter-corporate investments and Foreign Exchange Regulation Act - Companies Law - Circular : No. 3/10/96-CL-VI,

Circular : No. 3/10/96-CL-VI, dated 15-7-1996. Subject:- Inter-corporate investments - Filing of applications for simultaneous approval of inter-corporate investments and Foreign Exchange Regulation Act Indian companies desirous of setting up joint ventures or wholly-owned subsi-diaries abroad are not only required to obtain the approval of the Reserve Bank of India under the Foreign Exchange Regulation Act but are also required to obtain approval under section 372 of the Companies Act, 1956, in case their investments in the joint ventures or wholly owned subsidiaries are beyond permissible limits. The provisions of the Companies Act provide that whenever Indian companies make investments in equity shares of other companies, whether in India or abroad, beyond 30 per cent of their net worth or beyond 30 per cent of the equity capital of the investee company, they have to take the prior permission of the Central Government. 2. The above two-stage approvals sometimes cause delays. Therefore, the Department of Company Affairs has asked Indian companies to make simultaneous applications to the Reserve Bank of India and to the Department of Company Affairs in cases where approval under section 372 of the Companies Act is also required. These applications will be processed simultaneously for being placed before the Special Committee by the Reserve Bank of India and from the inter-corporate investment point of view in the Department of Company Affairs. After the Reserve Bank of India accords approval to the proposal, the Department of Company Affairs would also accord its approval under section 372 of the Companies Act, 1956. This simultaneous consideration would save time and help the companies to set up joint ventures or wholly owned subsidiaries abroad expeditiously. 3. The Department of Company Affairs has also been included as a member of the Reserve Bank of India Committees which consider the proposals for direct investment abroad.