RBI approvals required for opening a subsidiary in the US.
5th May 1999 Narsee Monjee College of Commerce NMCCE1 Economics @giasbm01.vsnl.net.in
Hi Friends, I would like to know what formalities are to be completed with RBI & other govt. agencies for opening a wholly owned subsidiary or office in the United States of America for software export. I am also interested to know whether one should open a subsidiary or start a new company registered in the USA. Thanking you in Advance, Vikash
17th May 1999 Gopal Rangachary @graycell.com
Well, I assume that the company is an Indian one that desires to set up a subsidiary in the US. First, to establish a company in the USA requires no approval. Anyone can incorporate a company in the US , and become a director / employee in that company It is for any investments that would mean outflows of Dollars from India that would require RBI approval. There are 3 cases , which are treated separately. a) If the Indian company is already one which has existing revenue through exports and has an Export Earning in Foreign Currency Account (EEFC), and the investment in the new company is happening through this EEFC account .this will require no RBI approval, but merely an authorised dealers' approval. (Any major bank is an AD) This scheme is for a maximum investment of $15 Million. This process takes 1 week. b) If the Indian company does not have an EEFC account, but has a software track record, then investment upto 25% of the average exports in the preceeding 3 years us granted through a fast track route by RBI. This takes around 6-8 weeks c) If the company does not have a software exports track record, then the approval has to be obtained from RBI, in the normal course. This is a long drawn out process, which may take anywhere between 4-6 months, and is evaluated on a case to case basis. I work in a company which is doing exactly the reverse from what you are doing - Setting up a US Holding company and the Indian company to be a subsidiary of that. This process too has a lot of RBI approval stuff required. I hope that the reply was useful & I will be happy to answer any future queries on the above subject. Gopal Rangachary Chief Finance Officer Gray Cell Applied Technologies Pvt Ltd. www.graycell.com