Setting Up an International Holding Company

A clear-eyed look at where they stood.

A deep-tech hardware startup in Bengaluru was mid-raise when its overseas investors made a structural request rather than a commercial one: they wanted to invest into a holding company incorporated in a neutral jurisdiction, not directly into the Indian operating entity. For a hardware company built around India-based R&D incentives, that request touches almost everything: the holding company would sit above the existing Indian entity and become the instrument through which foreign capital, and eventually foreign shareholders, held their stake.

The founders had to get three things right at once. The structure had to satisfy FEMA, since money and shares would be moving both into and potentially back out of India across the new holdco layer. It had to route around India’s ODI and FDI rules correctly, given the entity now sat on both sides of that boundary. And it had to protect the IP and R&D incentives the Indian entity already relied on, without those benefits being disturbed by the reorganisation or read as having moved offshore. A structure that satisfied the investors but tripped any one of these would have been worse than no structure at all.

None of this is unusual for cross-border deep-tech rounds, but it is unforgiving. FEMA cross-border share swap rules, ODI reporting, and downstream FDI compliance all have to be read together, not solved one at a time, and a filing made in the wrong sequence is hard to unwind once investor money has moved.

CapEasy worked alongside the startup’s international counsel rather than in place of them, splitting the problem by jurisdiction. Counsel handled the holding-company side; CapEasy took ownership of everything the structure touched on the Indian side, and of keeping the two halves consistent with each other.

The first piece was designing the India–holdco relationship itself: the shareholding flow that would let overseas investors hold the new holding company while the Indian entity became its downstream subsidiary, structured to satisfy both the investors’ jurisdiction preference and India’s FEMA and ODI/FDI rules. This included working through the inter-company arrangements the new structure implied, and the IP arrangements needed so ownership and licensing of the startup’s technology stayed clean across the two entities rather than becoming ambiguous.

The second piece was the Indian regulatory filings the restructuring required, coordinated so that each filing reflected the shareholding and inter-company terms counsel had agreed on the holdco side, not a simplified or out-of-sync version of them. Getting this sequencing right was the main point of coordination between the two teams.

Throughout, the R&D incentives sitting with the Indian entity were treated as a constraint on the design, not an afterthought to check at the end. The structuring work was done to keep the operating entity, and the incentives attached to it, intact rather than disturbed by the new ownership layer above it.

The outcome

The startup established a compliant international holding structure that satisfied its overseas investors while keeping Indian operations and R&D incentives intact. The structure was built to support subsequent funding rounds without needing to be re-engineered each time.

What made it work

The split of responsibility mattered as much as the technical work: international counsel owned the holdco jurisdiction, CapEasy owned the India side and the handoff between the two, and neither team was left guessing what the other had agreed. For a cross-border structure, that coordination is usually where compliance gaps open up, not in either jurisdiction’s rules taken alone.