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Q.40: ARE THERE ANY RESTRICTIONS FOR SETTING UP OF A SECOND GENERATION COMPANY? CAN SUCH STEP DOWN SUBSIDIARIES BE SET UP UNDER THE AUTOMATIC ROUTE?


There are no restrictions on entities having JVs/WOSs abroad setting up second generation operating companies (step-down subsidiaries) within the overall limits applicable for investments under the Automatic Route. However, companies wishing to set up step-down operating subsidiaries to undertake financial sector activities will have to comply with the additional requirements for direct investment in the financial services sector as indicated in Q 32.

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