ODI Filing for Indian Companies with U.S. Subsidiaries

ODI filing is a crucial compliance step for any Indian private limited company setting up a U.S. subsidiary. While global expansion offers new opportunities, it also brings regulatory duties. One key requirement is following the Reserve Bank of India’s (RBI) guidelines for Overseas Direct Investment (ODI) in U.S. subsidiary transactions. From initial fund transfers to ongoing reporting, aligning with RBI rules ensures smooth cross-border operations.

What Is ODI Filing and Why Does It Matter?

ODI refers to any equity stake, loan, or guarantee an Indian company extends to a foreign entity. Investing in a U.S. subsidiary qualifies as ODI and requires reporting. Failure to comply may result in penalties under the Foreign Exchange Management Act (FEMA), including fines and restrictions on future remittances.

The RBI requires a complete and timely paper trail whenever funds are transferred out of India. Non-compliance may lead to delays, monetary penalties, and restrictions on future transactions.

When Is ODI Filing Required?

You must file ODI if your company:

• Sets up or invests in a foreign subsidiary
• Holds at least 10% ownership in a foreign entity
• Issues a corporate guarantee for an overseas entity
• Lends money to a U.S. subsidiary
• Buys shares in a non-Indian company

Even if your foreign business is not operational yet, you must file once any funds are transferred abroad.

What Is Form FC (Previously Form ODI – Part I) for Overseas Direct Investment

Form FC is the initial reporting document required under the Reserve Bank of India’s (RBI) current Overseas Direct Investment (ODI) framework (effective August 2022). Indian entities or individuals must submit Form FC through their Authorised Dealer (AD) Bank before making any outward investment or remittance to a foreign entity.

Form FC typically includes:

• Basic details of the Indian entity or individual and the foreign entity (JV/WOS)
• Type and amount of financial commitment (equity, loan, guarantee, etc.)
• Source of funds for the investment
• Nature of the foreign entity’s business
• Proposed shareholding structure and ownership details

No remittance for ODI is permitted until Form FC is duly filed and acknowledged by the AD Bank, and a Unique Identification Number (UIN) is allotted by the RBI. This process ensures compliance with the Foreign Exchange Management (Overseas Investment) Rules, 2022, and replaces the earlier Form ODI – Part I17.

Step-by-Step ODI Filing Process for U.S. Subsidiaries

1. Get Board Approval

Obtain a board resolution approving the proposed investment. For large investments, shareholder approval may also be necessary.

2. Obtain a Valuation Report

If investing in an existing U.S. company, you’ll need a valuation report. This must be prepared by a Chartered Accountant or a SEBI-registered Category I Merchant Banker.

3. Incorporate the Foreign Entity

Ensure the U.S. subsidiary is legally incorporated. You’ll need incorporation documents like the Articles of Incorporation, By laws, board minutes and the EIN (Employer Identification Number..

4. Select Your Authorised Dealer (AD) Bank

Choose a bank that is approved by the RBI to handle foreign exchange transactions. Typically, this is the bank where your Indian company maintains its primary account.

5. Submit Form FC with Required Documents

Documents typically include:

• Board resolution
• Form FC
• U.S. entity incorporation papers
• Shareholding structure
• MOA, PAN and CIN of the Indian company
• Declaration of funds, Subscription agreement etc
• Valuation report, if applicable
• Statutory auditor certificate confirming Net Worth of India company

 

6. RBI Reviews and Issues a UIN

Once verified by the AD Bank, documents are forwarded to the RBI. If everything is in order, the RBI issues a Unique Identification Number (UIN), which must be quoted in all future filings.

7. Transfer the Funds

Once you have the UIN, you can legally remit funds to the U.S. subsidiary. Maintain clear records of the transaction for compliance purposes.

Ongoing ODI Compliance Requirements

Filing Form FC is just the beginning. Continued RBI compliance is essential.

Annual Performance Report (APR)

Every Indian company with overseas investment must file an APR by December 31 each year, or as directed by your AD Bank. This report covers:

• Financial performance of the foreign entity
• Shareholding changes
• Operational status

Late or inaccurate filings can attract penalties.

Annual Return on Foreign Liabilities and Assets (FLA)

The FLA return is a mandatory filing required by the RBI for all Indian companies that have received foreign investment or made investments abroad during the financial year for For example: If your Indian company received funds from a U.S. investor (FDI) or invested in a UK-based subsidiary (ODI) during the year, you are required to file the FLA return with the RBI. It covers:

• Foreign Direct Investment (FDI) received
• Overseas Direct Investment (ODI) made
• Any other foreign liabilities or assets

Even if your company didn’t make new transactions during the year but had existing foreign liabilities or assets on the balance sheet, you’re still required to file.

The FLA return is due every year by July 15, based on your audited or provisional financials for the previous financial year ending March 31.

Reporting Any Changes

Any major change in ownership, structure, or business activity of the foreign entity must be promptly reported to the RBI through your Authorised Dealer Bank.

Filing for Disinvestment

If you exit the foreign investment, submit a disinvestment report and surrender the UIN.

Failing to do this may result in RBI scrutiny or future remittance restrictions.

Common Mistakes to Avoid

• Transferring funds before obtaining a UIN
• Submitting incomplete documentation
• Confusing ODI filings with FLA (Foreign Liabilities and Assets) returns
• Using incorrect valuation methodology
• Missing the APR filing deadline

Need Help with ODI Filing or U.S. Subsidiary Compliance? Schedule a free consultation today

At LedgersCFO, we support Indian founders who are expanding their businesses internationally, especially those setting up subsidiaries in the United States. Handling RBI compliance, like ODI filing, can be complex and time-consuming if you’re doing it for the first time.

Our team helps you get it right from the start. Whether you are just beginning the remittance process or trying to stay compliant with ongoing filings, we make sure everything is accurate and in place.

With LedgersCFO, you can stay fully compliant with RBI rules while focusing on building and growing your business abroad.

FAQ’S

1. Is ODI filing mandatory for setting up a U.S. subsidiary?

Yes. If your Indian company sets up or invests in a U.S. entity, it is mandatory to file for Overseas Direct Investment (ODI) under RBI regulations before sending any funds abroad.

2. When should Form FC be submitted?

Form FC must be submitted before any remittance takes place. Your Authorised Dealer (AD) Bank reviews the form and supporting documents and forwards them to the RBI. Remittance is not allowed without RBI’s approval and a valid Unique Identification Number (UIN).

3. What documents are needed for Form FC?

You will need the board resolution approving the investment, the U.S. company’s incorporation certificate, shareholding structure, PAN and CIN of the Indian company, Statutory auditor’s certificate etc if you’re investing in an existing foreign entity.

4. What is the deadline for filing the Annual Performance Report (APR)?

The Annual Performance Report must be filed by December 31 every year. It provides updates on the financial position and ownership structure of the foreign subsidiary. Missing this deadline may lead to RBI penalties.

5. How does LedgersCFO assist with ODI compliance?

LedgersCFO handles the complete ODI process, including drafting and filing Form FC, coordinating with your AD Bank, securing UIN approval, and managing APR and disinvestment filings. We ensure your filings are accurate and timely, helping you stay compliant while focusing on business growth.