Any business transaction that involves persons or firms of more than one country is described as overseas business. In economic reforms in India opened important avenues for promoting businesses by Indian entrepreneurs. Doing business abroad and growing internationally is an essential part of a 'business expansion policy'.

Besides other routes, the Indian companies can directly invest outside India by contributing capital to a foreign entity, thereby signifying a long term interest in the overseas entity. Such a long term investment would primarily involve setting up a Joint Venture ("JV") or a Wholly Owned Subsidiary ("WOS") abroad.

In order to make their investments abroad, Indian Companies need funds to meet their various capital requirements and make equity participation in overseas ventures as well as to acquire foreign Companies or Businesses. Under provisions of Foreign Exchange Management Act, 1999, ("FEMA") and the various notifications issued by the Reserve Bank of India, the investments in overseas JV/ WOS may be funded out of either one or more of the following sources i.e. drawing of foreign exchange from an authorized dealer; capitalization of exports and other dues; External Commercial Borrowings ("ECB") and Foreign Currency Convertible Bonds ("FCCB") raised abroad as well as through American Depository Receipts ("ADR") and Global Depository Receipts ("GDR").

An entrepreneur can successfully expand and grow his/her business abroad by taking into account the basic legal framework of the home country as well as of the particular foreign country. It is necessary for him/ her to abide by such laws and regulations in order to ensure efficient and healthy functioning of the organization and face the various challenges that he/ she may encounter abroad. In India, the most important law which regulates all foreign exchange transactions including investments abroad is the Foreign Exchange Management Act, 1999. It is an investor friendly legislation which aims to facilitate external trade and payments as well as promote an orderly development and maintenance of foreign exchange market. Under the Act, Reserve Bank of India ("RBI") has been authorized to frame various rules, regulations and norms pertaining to overseas investments in consultation with the Central Government.