Indian Startups Are Looking At Reverse Flipping: Economic Survey
The Survey said many Indian companies have been getting headquartered overseas, especially in destinations with favourable environments and taxation policies
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The Economic Survey 2023 stated that Indian startups are exploring 'reverse flipping', or shifting their domicile back to India, with easy access to capital from private equity and venture capital, changes in rules regarding round-tripping, and the growing maturity of India's capital market. The Survey said many Indian companies have been getting headquartered overseas, especially in destinations with favourable environments and taxation policies, where it is technically denoted as 'flipping'.
The Survey also put forward measures like simplifying multiple tax layers, resolving uncertainty due to tax litigation, especially of employee stock ownership plans, exploring the incubation and funding landscape for startups in emerging fields like social innovation and impact investment, and facilitating mentorship programmes through partnerships with established private entities.
"Many investors/private equity (PE) funds are based in the US and other places. They also exert pressure on the Indian startup entrepreneurs to move out of India and house their IPRs overseas," quoted IANS citing an entrepreneur preferring anonymity.
As per the IANS report, the flipping phenomenon reflects startups venturing out for short-term gains in the dynamic, uncertain geopolitical world. However, the flip can be reversed with the collective action by the government related regulatory bodies and other stakeholders.
Flipping is the process of transferring the entire ownership of an Indian company to an overseas entity, accompanied by a transfer of intellectual property (IP) and all data hitherto owned by the Indian company. This effectively transforms an Indian company into a 100% subsidiary of a foreign entity, with the founders and investors retaining the same ownership via the foreign entity, having swapped all shares.