Foreign Direct Investment

The responsibility of the CEO of The Loaded Group is to identify and enter agreements with high net worth individuals and entities that have large sums of money to create parent off-shore holding companies for Foreign Direct Investments (FDI) into projects. Then the remaining BDaaS team of legal, accounting and business management experts structures the parent and operating holding companies to limit tax liability by strategically basing certain parts of the business in jurisdictions with lower tax rates.  

About Foreign Investment

Foreign investment involves capital flow from one country to another, granting extensive ownership stakes in domestic companies and assets. Foreign investment denotes that foreigners have an active role in management as a part of their investment. A modern trend leans toward globalization, where multinational firms have investments in a variety of countries. Foreign investment is largely seen as a catalyst for economic growth in the future.

Foreign investments can be made by individuals, but are most often endeavors pursued by companies and corporations with substantial assets looking to expand their reach. As globalization increases, more and more companies have branches in countries around the world. For some companies, opening new manufacturing and production plants in a different country is attractive because of the opportunities for cheaper production, labor and lower or fewer taxes.

Ways To Structure Foreign Investment

Foreign direct investments can be made in a variety of ways, including the opening of a subsidiary or associate company in a foreign country, acquiring a controlling interest in an existing foreign company, or by means of a merger or joint venture with a foreign company. The threshold for a foreign direct investment that establishes a controlling interest, per guidelines established by the Organization of Economic Cooperation and Development (OECD), is a minimum 10% ownership stake in a foreign-based company, typically represented for the investor acquiring 10% or more of the ordinary shares or voting shares of a foreign company. However, that definition is flexible, as there are instances where effective controlling interest in a firm can be established with less than 10% of the company's voting shares. Foreign direct investments are commonly categorized as being horizontal, vertical or conglomerate in nature. A horizontal direct investment refers to the investor establishing the same type of business operation in a foreign country as it operates in its home country, for example, a cell phone provider based in the United States opening up stores in China. 

A vertical investment is one in which different but related business activities from the investor's main business are established or acquired in a foreign country, such as when a manufacturing company acquires an interest in a foreign company that supplies parts or raw materials required for the manufacturing company to make its products. A conglomerate type of foreign direct investment is one where a company or individual makes a foreign investment in a business that is unrelated to its existing business in its home country. Since this type of investment involves entering an industry the investor has no previous experience in, it often takes the form of a joint venture with a foreign company already operating in the industry. 

Direct investment, more commonly referred to as foreign direct investment, refers to an investment in a business enterprise in a country other than the investor's country designed to acquire a controlling interest in the foreign business enterprise. Direct investment provides capital funding in exchange for an equity interest without the purchase of regular shares of a company's stock. The purpose of a foreign direct investment is to gain an equity interest sufficient to provide control of a company. In some instances, it involves a company in one country opening its own business operations in another country, while in other cases it involves acquiring control of existing assets of a business already operating in the foreign country. A direct investment can involve gaining a majority interest in a company or a minority interest large enough to provide the investor with effective control of the company. Direct investment is primarily distinguished from portfolio investment, the purchase of common or preferred stock shares of a foreign company, and by the element of control that is sought.

Additional Information

This is a BDaaS expertise that creates parent holding company which conducts all of its operations through operating holding companies, in which the off-shore parent holding company makes Foreign Direct Investments (FDI) into its business interests in through the operating holding company, which means ownership of all assets in operating holding company belongs to the off-shore parent Holding Company structure, but all operations takes place under operating holding company, which is the entity that invests in start-up subsidiaries, including acquisition of ownership or controlling interest in publicly traded companies and not just portfolio investments in which investors merely purchases equities/stock of publicly traded companies. The end result is that parent holding company makes investment that establishes effective control and substantial influence over the decision making of subsidiaries that belong to the operating holding company. 

As a foreign investor, the parent holding company makes foreign direct investments (FDI) in the foreign markets through the operating holding company in markets where there are open economies, such as the US that enables foreign entities like parent holding companies to control assets in foreign markets, as opposed to the restriction of tightly regulated economies such as North Korea. The US in particular also offers a skilled workforce and above average growth prospects for an operating holding company to operate as a Private Equity Venture Capital company that exploits undervalued human capital opportunities of skilled workforces, such as human capital produced by non-ivy league universities/colleges, that don’t happen to be in the Ivy League, which needs foreign direct investments since US venture capital funds makes little, if any investments in high-risk/high-return opportunities in non-ivy league human capital.