Startups often look to build business synergies through foreign collaborations. This is mainly done by Foreign Direct Investment (FDI) and Overseas Direct Investment (0D1). However, the government keeps updating its policies to keep up with the evolving business and security requirements. This makes it difficult for the founders to stay compliant with the changes. Any deviance results in numerous legal challenges which can lead to increased costs. We, at KSK, strive to structure the transactions in a precise mannerto ensure that they are legally compliant and cost-effective. Over a brief period of time, we have made a mark in the area of structuring foreign investment and assisting startups, multinational corporations, and investors with their aim of expansion or investment.
Foreign Direct Investment (FDI) is a term used to describe an investment made by a person (located in one nation) into a business/company headquartered in another one. It is essentially an investor's investment in a firm established in a foreign jurisdiction (based in another jurisdiction). From an Indian perspective, FDI is an investment made by a person headquartered outside of India into any organization established in India. It assists entities receiving investment in long-term ecosystem, infrastructure, and resource development, hence bringing long-term value and wealth creation to the overall expansion of the Indian economy and GDP growth.
The "automatic route" is when a foreign investor does not need the government's previous authorization to participate in any industry in India. These are the industries in which the government has allowed foreign investors broad authorization to invest without limits or bans. In this scenario, the involved business must report and notify the RBI about the transaction after it has been n completed.
The government route is used when an entity needs government clearance before investing in a sector in India. There are several industries where prior authorization is required for investment due to the nature of the industry.
Yes, there are certain sectors where foreign investment is prohibited by the Indian regulatory bodies. Some of them are Lottery business, Chit fund, Nidhi company, and Manufacturing of tobacco or tobacco substitutes.