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ARTICLE · 21 MARCH 2024

Layering Of Subsidiaries – Ambiguities In Regulatory Framework

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The Companies (Restriction on number of layers) Rules, 2017 ....

IndiaCorporate/Commercial Law
Atreya Bhattacharya
Atreya Bhattacharya
Pranav Tolani
Pranav Tolani
Parisha Dhebar
Parisha Dhebar
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The Companies (Restriction on number of layers) Rules, 2017 ("Companies Layering Rules"), notified on September 20, 2017, along with the proviso to Section 2(87) of Companies Act, 2013 ("Companies Act"), imposed restrictions on Indian companies from setting up structures with more than two 'layers' of subsidiaries.

On the other hand, the Foreign Exchange Management (Overseas Investment) Rules, 2022 read with the Foreign Exchange Management (Overseas Investment) Regulations, 2022 (collectively, the "OI Framework"), notified on August 22, 2022 prescribes that a person resident in India is not permitted to invest in a foreign entity that has invested or invests into India, through a structure with more than two 'layers' of subsidiaries ("OI Layering Rules").

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