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🚀 𝐁𝐢𝐠 𝐍𝐞𝐰𝐬 𝐟𝐨𝐫 𝐒𝐭𝐚𝐫𝐭𝐮𝐩 𝐅𝐨𝐮𝐧𝐝𝐞𝐫𝐬 𝐂𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐢𝐧𝐠 𝐚 𝐑𝐞𝐯𝐞𝐫𝐬𝐞 𝐅𝐥𝐢𝐩 𝐭𝐨 𝐈𝐧𝐝𝐢𝐚! If you're a founder looking to shift your overseas structure back to India—whether for IPO, India-focused operations, or regulatory reasons—there’s exciting news! Starting September 17th, 2024, startups can now execute a reverse flip through a fast-track merger with approvals from the RBI and Regional Director (ROC), Previously, NCLT approval was required, which was a more time-consuming process. This new framework aims to significantly reduce both the time and costs associated with the process. But before you jump in, here are some critical factors to consider: 1. 𝐈𝐧𝐯𝐞𝐫𝐬𝐢𝐨𝐧/𝐄𝐱𝐢𝐭 𝐓𝐚𝐱𝐞𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐔𝐒𝐀: If your parent entity is based in the US, beware of the inversion tax. A 21% tax on fair market value could apply when reorganizing outside the US. While India’s fast-track merger is tax-neutral, there are tax implications in the US. 2. 𝐒𝐢𝐧𝐠𝐚𝐩𝐨𝐫𝐞’𝐬 𝐋𝐞𝐠𝐚𝐥 𝐀𝐩𝐩𝐫𝐨𝐯𝐚𝐥𝐬: Startups with Singapore-based entities will need to seek approval from Singapore courts for the reorganization. 3. 𝐎𝐯𝐞𝐫𝐬𝐞𝐚𝐬 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐨𝐧𝐬: If your overseas parent entity has active operations, like employee hires, you might need to establish a new subsidiary before the reverse flip. This is crucial, as the US entity will dissolve post-reorganization, and securing work permits could be challenging. 4. 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐢𝐧𝐠 𝐢𝐧 𝐅𝐨𝐫𝐞𝐢𝐠𝐧 𝐄𝐧𝐭𝐢𝐭𝐲 𝐯𝐢𝐚 𝐆𝐢𝐟𝐭𝐢𝐧𝐠: If your foreign company’s shares were acquired through gifting, ensure these are regularized and a UIN is obtained, as the RBI won’t approve the reverse flip without it. 5. 𝐄𝐒𝐎𝐏 𝐀𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧𝐬: If your Foreign entity had allocated ESOPs to employees, it’s essential to plan for appropriate structuring to ensure that existing and past employees don’t lose out on the benefits from earlier allocations. 6. Fast track merger allowed only for holding Company with wholly owned subsidiaries in India, if the India subsidiary has third party shareholders fast track merger is not possible. Planning ahead can help founders navigate these complexities smoothly. 🌍💼 #reverseflip #gharwapsi #startup #India #mergers #IPO #regulations #ESOP #startupindia Ahuja Valecha & Associates LLP AVA Insights AVA Network Ankush Agrawal Ayush Gundesha Himanshu Katkar