[Opinion] Write-off of Overseas Investment – Liquidation vs Inbound Merger

Aditya Sriram R – [2024] 159 taxmann.com 309 (Article)

1. Setting Up Overseas

In the era of globalization, Indian entrepreneurs have expanded their horizons by establishing entities overseas, driven by factors such as market opportunities, technological advancements, competitive advantages, and access to capital. However, when faced with the need to wind up these overseas entities that are formed as wholly owned subsidiary, it is crucial to explore efficient options to do so.

2. Winding up/consolidation of the overseas subsidiary

Aside from the continued losses or non-feasibility, the following are some of the key reasons that warrants liquidation of the overseas entity:

(a) Overseas subsidiary or inter holding company structure becomes redundant.

(b) Acquisition by an Indian headquartered company resulting in consolidation of entities in the same jurisdiction.

(c) Acquisition of an Indian entity by an MNE having large global presence needing consolidation.

(d) Unfavourable economic or political environment.

Two major Options available for winding-up/consolidation

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