MCA and FEMA Changes August 2025: Streamlining Corporate Governance for Cross-Border IP Technology Transfers

Introduction: Regulatory Catalysts in Global IP ecosystem in India

The corporate structure of India, which has been driven by the 15% increase in the inflow of foreign direct investment known as FDI to USD 25 billion during the first half of 2025, is increasingly relying on transfers of intellectual property (IP) technology across borders in order to be innovative. Through the entertainment technology industry which includes AI-based content personalization, virtual reality (VR) production, the transfers facilitate joint ventures (JVs) in which local creative resources are mixed with global technology to drive INR 18,000 crore in revenues with a 28% CAGR in digital media exports. Nevertheless, the siloes between regulatory agencies between the Ministry of Corporate Affairs (MCA) and Foreign Exchange Management Act (FEMA), 1999, frequently stalled ensure guarantee-backed tech transfers by 90-120 days. The August 2025 reforms, with the RBI's Draft Foreign Exchange Management (Guarantees) Regulations, 2025 (effective August 14), and in amendments to disclosure norms by the Companies (Accounts) Second Amendment Rules, 2025 (effective July 14 with clarifications in August) are a significant step of enacting simplified governance. They ease the tension in licensing IP and enable the alliances through the tech of entertainment by automating the process of granting guarantees and enhancing JV reporting.

The 2025 Reforms: Finding Synergy between FEMA and MCA

The new draft of the RBI Draft Guarantees Regulations as of 2011, which is a repeat of the 2000 version, takes a principle-based approach where automatic issuance of cross-border guarantees allowed in transactions in compliance with FEMA eliminating prior approvals that had earlier held up 35% of the JVs. The new model broadens the review process of an automatic slot of performance and financial assurances of foreign investments and requires the post-facto submission in Forms I- III within seven days with the maximum fine of three years. Letters of Comfort and Undertaking are not allowed to be used improperly, but the exemptions apply to custodian-guaranteed FPIs. At the same time, MCA clarifications made in August to the Second Amendment Rules, increase corporate transparency under Section 134 (3) where companies must provide information on how they comply with POSH Act and Maternity Benefit Act and some digitally signed annexures must be included on an AOC-4 XBRL filing to guarantee audit integrity. MCA and FEMA firms are interoperable portals that will allow real time JV updates to be made, thereby avoiding duplication (by 40%). These alterations address pre-reform opaqueness, 22% of interface-dividing IP cases were based on untraceable guarantees and offer consistency to the complete liberalization of the technology sector in the 2025 FDI Policy. All these measures can hasten technology transfers and maximise regulatory coordination of international relationships.

Reshaping Joint Ventures: Operational Efficiency in IP Transfers

In the case of entertainment tech JVs like an Indo-U.S. pairing in AI dubbing or VR animation, the reforms raise the efficiency, as JV formation timelines go down to 90 days, as opposed to 180days. The Draft Regulations allow Indian JV entities now to gain performance guarantees up to USD 10 million upon VR IP deployment without the RBI prior approval, on the condition of action under the Non-Debt Instruments (NDI) Rules, 2019 of FEMA. The disclosure requirements of MCA provide the accountability in that Board Reports must indicate the IP valuation procedures, such as discounted cash flow under Ind AS 38, which safeguards the minority shareholders in 51:49 ventures. The JV partners have begun reporting Form FC-GPR on FDI inflows related to technology equity swaps, and simultaneously guarantee reporting removes the case-by-case approach that has delayed almost 28% of entertainment JVs of 2024. Addressing a Bengaluru based animation JV of a Korean company, say the automatic route was utilized to conclude a $500 crore AR content transfer inside quarter 3 2025 reducing the rollout time by half. These simplifications will reduce capital flight and direct more inflows into IP-driven businesses as global entertainment tech FDI hits INR 8,500 crore in early 2025.

[Image Sources: Shutterstock]

Critique: Balancing Compliance and Innovation

Although the reforms are aimed at facilitating it, they have a two-sided effect of increasing the resistance of JVs and piling reporting obligations that could hinder smaller innovators. Although 80% of guarantees qualify to the automatic route now, the 7-day post-facto filing requirement on Forms I-III makes administrative pressure more expense subjecting SMEs to some 18% higher compliance costs. In the case of an Indo-Hollywood JV licensing neural network IP, the cost of the legal process would increase to INR 2 crore to INR 2.4 crore per annum, and late fee risks could affect an annual cash flow-based project. Equally, the better disclosures by MCA under Rule 8(5) such as POSH, maternity and IP transfer information create transparency but adds up to 15-20 days to board approvals in 30% of the companies. These propositions are based on past experiences like the 2023 PNB LoU fraud which support the rationale of preventing us. However, in rapidly changing entertainment technology industries this can be counterproductive to the innovation process, and FICCI 2025 Media Report attributes sluggish filing to postponed R&D investment and a 12%-point innovation drag. Inequality also manifests at the big companies and startups: where, unlike in the case of smaller companies such as Disney India which can automate their files, large corporations are associated with a higher rate of 25% invocation risk and a 18% dissolution rate of the JV in Tier-II cities. In addition, its static XBRL templates do not usually represent dynamic royalty models in VR and AI licensing and underestimate them, which can create friction with Section 188 on related-party transactions. According to the results of the empirical analysis of the data on 2024-2025 JV, each 10%-point rise in compliance costs will translate into an 8%-points reduced volume of IP transfers, further solidifying the control of top companies in the market and barring the entry of new participants to the industry. Nevertheless, the reforms maximize confidence of the investors. According to the estimates of the RBI, automatic guarantees lower the default premiums by 12 basis points and make INR 3,200 crore in low-cost financing of JV. These steps are supplementary to ASEAN-India FTA schemes, which are manifested in an increment of bilateral IP licensing of 20% since August.

Opportunities and Conclusion: Toward a Governance-Innovation Continuum

The new regime opens up opportunities of innovation-oriented JVs, especially in the metaverse and immersive entertainment. The risk-sharing models supported by automatic guarantees, including an OTT-AR partnership between Delhi and Singapore, allow funding IP-backed USD 5 million without clearance, and in 40 seconds, product iteration accelerates, which can be demonstrated by the Indo-ASEAN Tech Summit 2025. At the same time, the systemic disclosures of MCA enhance the trust of investors increasing the ESG-based FDI by 15% due to the declared compliance with the governing rules. Under the NDI Rules Hybrid equity structure balancing guaranteed remuneration of royalty-type applications will encourage balanced 60:40 ownership alongside importing innovative IP will increase ARPU 25x, according to PwC 2025 forecasting. Having 45% of the total streaming earnings in the world being cross-sourced, the policy harmonization in India would be able to achieve 10% of USD 50 billion of the overall entertainment technological market by 2028.

Overall, the August 2025 MCA-FEMA reforms signify a crucial step toward harmonized governance that encourages innovation while safeguarding transparency. Their success, however, hinges on adaptive mechanisms - like RBI’s proposed LSF waivers for startups and MCA’s sector-specific digital modules to prevent compliance fatigue and ensure inclusivity. If effectively implemented, these measures will transform regulatory coordination into a catalyst for sustainable, innovation-driven growth in India’s entertainment technology landscape.

Author: Amrita Pradhan, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney. 

References

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2.     Companies (Accounts) Second Amendment Rules, 2025, Ministry of Corp. Aff., Gov’t of India, Notification No. G.S.R. 357(E) (May 30, 2025), https://www.mca.gov.in/bin/dms/getdocument?mds=CzS0iZxYuJHiPsZmGGao%252Fg%253D%253D&type=open.

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9.     The Companies Act, 2013, No. 18 of 2013, § 188, India Code (2013).