Zur Kategorie: Indien

Legal Know How for investments in Germany

From an Indian perspective, investments in Germany by Indian companies are allowed under a general permission granted by the Reserve Bank of India (“RBI”) in the form of Joint Ventures and Wholly Owned Subsidiaries on certain prescribed terms and conditions. These investments are categorized by the RBI as “Overseas Direct Investments” or “ODIs”. Such investments would also include acquisition of a capital stake in existing overseas companies. These investments are perceived by the RBI as a medium of co-operation between Indian companies and overseas entities for transfer of technology and skills including sharing of R & D results. This policy is also seen as an aid to Indian Companies for wider global market access. To promote and further the growth of Indian investments overseas, the RBI has permitted Indian companies to make investments not exceeding 400 % of their net worth as on the date of the last audited balance sheet.

The RBI also allows capitalization of loans given by the Indian companies to its Joint Ventures and Wholly Owned Subsidiaries abroad, provided the aforesaid limit (400% of its net worth) is not exceeded. Consequently the Indian companies can also offer corporate guarantees with specified limits for and on behalf of its Joint Venture or Wholly Owned Subsidiaries abroad.

The overseas investment can also be made by way of a swap of shares or in exchange of ADR/GDR’s (American Depository Receipts/Global Depository Receipts) on certain prescribed terms. Indian companies are also allowed to capitalize exports and utilize proceeds of External Commercial Borrowings or Foreign Currency Convertible Bonds and foreign exchange raised through ADR/GDR issues for the purpose of making such investments. If the investment is made out of the foreign exchange earned by the Indian company out of its normal business activity or foreign exchange raised through the issue of ADR/GDR’s, then the Indian company can make investments in excess of the limit (400 % of its net worth) as stated above.

The above mentioned investments do not require any specific or prior approval from the RBI. However, if these investments exceed the prescribed limit or is in a manner which is other than what is prescribed above, a specific approval is required from the RBI. In energy and natural resources sector e.g. oil, gas, coal and mineral ores the RBI will consider investments in excess of the limit of 400% of the Indian company’s net worth. Indian companies making such investments are required to notify the RBI in the prescribed format.

The law of Germany is very investor friendly and allows a variety of solutions for every Indian investor. From a German perspective, investments by Indian companies do not need any government approval. The legal structure for the investment depends on the form and aim of the investment. For Wholly Owned Subsidiaries the most preferred option is the German version of a private limited company (GmbH), for which the minimum equity amount is EUR 25,000.00. The German version of a public limited company (AG) can also be an option but it requires a minimum equity amount of EUR 50,000.00 For investments in product distribution or marketing activities a registered branch office is sufficient to fulfill this purpose. Marketing and distribution activities can be also done with German trade agents based under a distribution / marketing agreement. For Joint Ventures with German partners, a GmbH is the most preferred form but other company forms are also available. Mere technical collaboration or R & D activities do not require any approval and can be done on the basis of detailed agreements. To avoid legal conflicts these agreements should include precise terms and conditions related to the objective and content of the collaboration like use of results, IPR ownership etc.. Also Mergers and Acquisitions do not need a prior approval of the government.