Reporting Compliances of Foreign Direct Investment in India/ Time Frame for Issue of Shares in case of Foreign Direct Investment in India/ Compliances for Foreign Direct Investment in India
Reporting Compliances of Foreign Direct Investment in India/ Time Frame for Issue of Shares in case of Foreign Direct Investment in India/ Compliances for Foreign Direct Investment in India
With India’s growing economy Foreign Direct Investment in India is also growing up. The companies for the different parts of the globe investing in India by registration of Subsdiary Company in India, or by setting up joint venture in India, or by registering branch office in India or in any other possible manner. The foreign investment issue is a sensitive part of the economy of any country. In India Reserve Bank of India is keeping watch on the Foreign Investments and regulating the same. As it regulatory part there are some reporting requirement that has been imposed by Reserve Bank of India in case of foreign direct investment in India. The following are the provisions related to the same:
Reporting of inflow of Funds
- An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank through its AD Category I bank, not later than 30 days from the date of receipt in the Advance Reporting Form enclosed in Annex - 6. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. The Form can also be downloaded from the Reserve Bank's website.
- Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (enclosed as Annex – 7) on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.
Time frame within which shares have to be issued
The equity instruments should be issued within 180 days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) account of the non-resident investor. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. In exceptional cases, refund / allotment of shares for the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the Reserve Bank, on the merits of the case.
Reporting of issue of shares
- After issue of shares (including bonus and shares issued on rights basis) and shares issued under ESOP)/ convertible debentures / convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, through it’s AD Category I bank, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website http://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.
- Part A of Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the concerned Regional Office of the Reserve Bank. The following documents have to be submitted along with Part A:
(i) A certificate from the Company Secretary of the company certifying that:
a) all the requirements of the Companies Act, 1956 have been complied with;
b) terms and conditions of the Government’s approval, if any, have been complied with;
c) the company is eligible to issue shares under these Regulations; and
d) the company has all original certificates issued by Authorised Dealers in India evidencing receipt of amount of consideration.
(ii) A certificate from Category I Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
- The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated.
- Part - B of Form FC-GPR should be filed on an annual basis by the Indian company, directly with the Reserve Bank6. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/re-invested earnings/other capital in the Indian company made during the previous years (i.e. the information in Part B submitted by 31st July 2010 will pertain to all the investments made in the previous years up to March 31, 2010). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct / portfolio investment may be separately indicated.
- Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR.
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