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Equity movement of a branch

V TEK's Profile

Hi all

How the capital movement should take place between branch and the parent entity? Here I am referring to best practices when it comes to excess cash blocked in the branch?

Thanks

Answers

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

If your question is about blocked funds that cannot be repatriated because of country Central Bank foreign exchange restrictions, this is an old problem that applies equally to a subsidiary or to a branch. Solutions can be divided into those where the asset remains in the sub/branch but is redeployed in a way that hedges/protects from devaluation (usually at high cost) vs. those that remove the asset from the sub/branch. Removal is a function of the exact legal restrictions imposed and the availability of parallel exchange rate asset swap transactions that typically fall into a grey area of local law (and also entail costs).

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