Foreign Direct Investment (FDI) in India – Reporting & Compliance

In this article I will try to give some insights on the Procedural aspects like remittance, issuance of shares and Reporting/Compliance to RBI (Reserve Bank of India), with the help of a case study.

FDI In India – Basics – methods of investment, who can invest  & entry routes available. 

Each subscriber to the Memorandum of Association  (MoA) of the company (Private or Public), after its incorporation shall be required to deposit minimum subscription money (i.e. first subscription money) as specified in the Memorandum of Association (MoA) against share capital in the Company’s bank account. The subscriber may be a body corporate (company incorporated outside India) or foreign national or PIO/NRI/OCI holder.  In that case an Indian Company receiving investment from either of the above parties should report the details of amount of consideration to the Regional office of Reserve Bank of India (RBI) within whose jurisdiction the office is situated and comply with the rules and regulations as specified in Foreign Exchange Management Act (FEMA) under Foreign Direct Investment Policy.

A case study :-

ABC Private Limited, a company incorporated in Mumbai having two shareholders, one is Mr. A, an individual holding 200 equity shares of Rs. 10 each and other is ABC Inc. (a body corporate) situated in USA, holding 9800 equity share of Rs. 10 each. Hence the total paid up capital of ABC Private Limited  is Rs. 1 Lakh. After incorporation, ABC Inc. has remitted Rs.  98000 to ABC Private Limited towards issue of Equity shares to ABC Inc.

I) Information to be provided by ABC Inc. :

ABC Inc.’s bank will provide following information to Authorised dealer * (AD) of ABC Pvt.Ltd. while remitting amount.

a) Name of the beneficiary : e.g. ABC Private Limited

b) Name and place of the remitter : e.g. ABC Inc. USA

c) Name and place of remitter bank : e.g. ABC Inc’s Bank

d) Foreign currency amount : e.g. INR 98000

e) Purpose of remittance : e.g. Foreign Direct Investment in Equity

An authorised dealer after receipt of remittance and above information, will initiate the process of issuing FIRC (Foreign Inward Remittance Certificate) to ABC Pvt. Ltd.

Authorised Dealer – Authorised dealer means a Institute/Bank authorized as an authorized dealer under sub-section (1) of section 10 of FEMA.

II) Reporting of advance remittance by ABC Pvt.Ltd. to RBI

After receipt of FIRC, ABC Pvt. Ltd. shall be required to report inward remittance to RBI, Mumbai through an authorized dealer which would involve following activities :

Reporting of Inflow to Reserve Bank of India within 30 days from the date of remittance.

a)      To file FIRC (Foreign Inward Remittance Certificate) to the Reserve Bank of India through an Authorised Dealer. The FIRC must contain the purpose i.e. towards Share application money/ towards FDI in India in Equity.

b)     To submit an Advance reporting form and KYC (Know Your Customer) report.  This can be obtained from an authorized dealer from banker of ABC Inc.

The RBI will allot Unique Identification number to ABC Pvt. ltd which can be used for future transactions with the Bank.

III) Issue of Shares by ABC Pvt. Ltd. to ABC Inc. 

ABC Pvt. Ltd. shall be required to issue equity shares/ Convertible Preference shares/ Debentures within 180 days from the date of remittance. After issue of shares, it shall be required to file Form FC-GPR [Foreign Collaboration-General Permission Route] to RBI (Regional Office : Mumbai) within 30 days from the date of issue of shares. This form is to be signed by Managing Director/ Director/ Secretary of the company and submitted to the Authorised dealer. This FC-GPR shall be filed along with certificate from Company Secretary certifying that all the requirement of the Companies Act, 1956, have been complied with. A certification from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of shares issued to the person outside India.

After complying with the provisions of FDI Policy, the RBI will send ABC Pvt. ltd. an acknowledgment towards the same.

IV) Subsequent Remittances

In case of subsequent remittance, an Indian Company shall follow the same procedure of reporting of foreign inward remittance to RBI and also file e-Form 2 (Return of allotment) to the Registrar of Companies (RoC) within 30 days from the date of allotment of equity/ preference/ debenture to any foreign national or body corporate. Before filing e-form 2 with the RoC, the company shall be required to obtain valuation report from a Chartered Accountant who will determine the share valuation price as per discounted cash flow (DCF) method.

Note :

1.  Depending upon the nature of activity of Indian company, one should check whether approval of RBI is needed (i.e. approval route) before investment or it is not required  (i.e. under Automatic route).

2. The latest/updated FEMA Forms can be found on the RBI Website here.



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The information / articles & any replies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do not constitute legal advice or legal opinions. The information / articles & any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, I can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information/article contained without first seeking the advice of a Practicing Professional.

156 thoughts on “Foreign Direct Investment (FDI) in India – Reporting & Compliance

  1. Great Work Meenal Mam.The way you explained the concept of FDI is commendable.
    My request is to please update some more topics related to FEMA and FDI that would be a great.

  2. Hello Mam,

    I had the following queries-

    a) RBI has prescribed pricing guidelines for fair valuation of shares to be issued against FDI. Suppose, notice for EGM for issue of shares is issued in first week of Jan 2016, wherein price has to be mentioned. For pricing, fair valuation certificate has to be given on notice or near to notice date. Subsequently, FDI is received in first week of Feb 2016. So, allotment will be made only after inward remittance. Now, FC-GPR is proposed to be filed in current month, March 2016. So will the fair valuation certificate issued and dated in Jan 2016 hold good for attaching the same with FC-GPR which will be filed in March 2016.

    b) Can a company receiving FDI for permitted construction development business have objects of both FDI compliant projects and prohibited real estate business.

    c) Is investing in a fully constructed property for earning lease rent compliant with FDI policy, more particularly the press note issued by DIPP in Nov 2015.

  3. madam,
    if indian company receives money from NRE Account, which bank shall issue FIRC?

  4. Dear Ma’am,

    Suppose there is a pvt co in which NRI Director wants to become a member of the same company but lives in dubai and he remitted the money through RTGS in his wife account held in india and from that account allotment money is transferred in company account.
    So do we have to comply with reporting forms(FDI) through AD to RBI?

    • First of all the remittance through another account is not permitted. The remittance towards equity capital has to be received to company through subscriber’s account only.

      • Respected Madam

        Last year we formed one company with foreign entity and the share holding pattern is as follow-
        1. Foreign Entity- 51%
        2. Another local partner- 43%
        3. Myself- 6%
        Now I would like to sale my share to foreign company, so they told me they will directly transfer equivalent amount to my personal account, is this transaction allowed as per RBI. If yes then who will do the documents like decleration, FIRC and FCCGPR etc,

        Please advise with correct process.

  5. Madam,
    We have incorporated in India a pvt ltd company which is a subsidy of a Foreign Company incorporated in HongKong . This was incorporated in 2015.
    Till now they have not remitted the subscription amount as per the MOA.
    Now they want to change the holding Company as they want the new company to remit the money.
    Is it possible

  6. Dear Mam,

    If the FCGPR Form is signed by the Authorised signatory who is other than Director and CS ??

    What is the problem to the company and what is the remedy.

    Thanking you

    Regards

    Praveen

  7. Dear Madam

    The blog is very informative.

    I am facing an issue and I request you to please consider the same and give me with the solution.

    A director of both foreign holding company and an Indian subsidiary company is one at the same and the foreign holding company is selling the shares of its Indian subsidiary company, that it is having to that director who is common to both.

    Thus please clarify me the provisions behind it, the steps, other measures as applicable for the above issue.

    • Foreign Holding company selling shares of Indian subsidiary to director of Indian subsidiary means in short, Indian subsidiary is selling shares to Director. The Director will first of deposit share subscription money through normal banking channel and Indian subsidiary will report to RBI under FDI Policy ( because the director is foreign national as per your question) and file FCGPR within 180 days from date of receipt of funds from foreign director. The Indian subsidiary will allot the shares and file PAS-3 with ROC within 30 days of date of allotment.

  8. Dear Madam,
    We in Pvt. Ltd. Company have received funds from NRE account for share allotment in November 2014 but we have not allotted shares to NRI’s so we asked AD bank how to refund back the amount they told they can not tranfer back to NRE account so we have refunded money back to their NRO account, RBI issued a notice to AD regarding funds,what to do now?

  9. I am from Tamilnadu, my friend who is Cameroon citizen want to do business with me. I already running an electronics based manufacturing and services company, but not registered. He is ready to invest to start a new electronics based business in india. Kindly suggest me the formalities to receive the fund.

  10. ABC pvt ltd have received FDI for business in India. It has failed to file FC-GPR form and a RBI notice has arrived. The notice is regarding filing of application for compunding or else a penalty trice the amount involved would be levied. Kindly advice on the issue and way to settle the issue. Thanks

  11. Hi,

    Firstly, thanks a lot for having this blog!

    We have a small start up, a Pvt Ltd Company in social enterprise space. I’m currently facing 2 problems.

    1. We received foreign inward remittance in 2 installments. Our CS wrongly issued and alloted all the debentures on the receipt of the 1st remittance. Our bank pointed out the problem when FCGPR was submitted. We are now advised to do the allotment again separately for both installments. Is this appropriate? Or would you suggest anything else?
    Added to this, we have already delayed FCGPR filing because of some other complication.

    2. Also for various reasons, we have not returned the excess amount that came in because of currency fluctuations. It is now about 200 days. Can we return the funds to the remitter? how do we go about doing it? or is there any other option?

    I can reach out to you directly, if more information is needed.

    Thanks!

    • If RBI has raised query to re submit the documents after receipt of funds for both allotment, please do it asap. The Company has to return excess money to re miter within 180 days from receipt of funds. After expiry of this, refund is not possible.

  12. Dear Ma’am,

    I found your blog very helpful. Thank you for giving us a useful insight.

    I have a small query- For any particular case of inward remittance, who has the obligation to obtain FIRC and KYC from the bank remitting the money ? Is it the AD Bank or the Investee Indian company ? I read the relevant FEMA notification and Master Circular but they are silent on this. This question arises because in my case there was delay in reporting inward remittance because of the fact Company received FIRC and KYC from AD bank with a delay. Since AD bank was not completely aware of the RBI reporting practices, the Company had to do the tasks of coordinating with the remitter bank to arrange for KYC and FIRC. In my opinion, this is the AD bank’s job and not the Company’s so the AD bank should take responsibility for the delay.

    • If there is delay in reporting of advance remittance and filing of FCGPR due to delay in obtaining required information from Authorised bank, then the fact of the case has to be reported to the RBI with evidence. Otherwise it would be very difficult to decide whose fault it is.

  13. Dear Mam,

    I have an query related to transfer of shares of Indian Subsidiary of Foreign Holding.

    There is an Indian Pvt Ltd Company , subsidiary of Foreign Parent Company holding 99.99% shares.

    Now, Parent Foreign Holding Company wants to sale shares to (i) Indian Individual Person -7% shares and (ii) Foreign Entity – 7% shares.

    Kindly let me know the process and documentation requires under Companies Act, 2013 and under FEMA.

    Appreciate your Suggestions !!

    Thanks

    • As per FEMA, after receipt of consideration from buyer, the company shall file form FCTRS with RBI within 60 days from date of remittance of funds towards consideration with consent of buyer and seller. The RBI will approve the form. The company shall file form SH-4 as per Companies Act, 2013 and pass board resolution.

  14. Dear Ma’am

    I have a query:

    A company has received Foreign Inward remittance from a foreign body corporate (Registered in that country) and bank has issued FIRC in the name of that foreign body corporate but while alloting shares the company has alloted shares to the individual(Foreign National) who is owner of the Foreign body corporate.

    Is it allowed to do so?

  15. Hi..my question is related to amendment in FIRC.

    Can FIRC be amended to show that money had come on account of capital infusion instead of reimbursement of services?

    If yes, how can we do advance reporting and file FC- GPR in case we have missed the time limit for allotment?

  16. There is private company limited by shares and it is a subsidiary of foreign company now fcgpr has to be filed or not and what other compliances has to be done by subsidiary company in respect of rbi and fema

    • If foreign company is subscriber of private limited company, the company will submit advance report format to RBI within 30 days of receipt of funds from subscriber. the Private Ltd company shall deliver share certificate to foreign company within 2 months from date of incorporation and file FCGPR within 30 days of allotment of equity shares.

  17. Madam,
    You blog is very informative, thanks for all the details. I have a few question with regard to FCGPR
    1) Is it mandatory to open a new current account for getting the FDI into India rather than using the existing current account of the Indian Company?
    2) Does the whole amount need to be used only for purchase of capital goods or making a Fised Deposit or can be used partly for operational expenses of the company as well?
    3) Post utilization of the FDI and reporting of FCGPR to RBI can the newly opened current account be closed?
    Please let me know on the above points greatly appreciate your inputs.

  18. Hello Mam,

    Thank you for information.

    can you Please tell me what is process for FDI in LLP (services sector). I have already created LLP in 2014. 51 % shareholder is US compaany. Now What is process for FDI and what are the forms require to file and who to require to file ?

    Thanking You in advance

    • In case of LLP, if there is FDI, then depending upon the nature of business of LLP, partners have to invest and before investment in LLP, LLP has to get prior approval of Reserve Bank of India.

  19. Dear Madam,

    My Query is as follows:
    Case:
    (1)Our company is a 100% Subsidiary of Foreign Company.

    (2) It received Share Application money in June 2014 , FIRC filed for money received however Shares has not been allotted as yet.

    My Question is: Whether the same will be treated as deposits or not. if yes what is the quantum of penalty.

    Second Question is: Since there is a FEMA & ROC default what can be done to make good this default.

    • Sorry for late reply. If within 60 days the company fails to issue shares to NRI or foreign company after receipt of subscription money, it will be treated as deposit. There is no way out, one has to pay penalty.

  20. HI,

    Thanks for briefing up the concept of FDI, i have a query about FLA return, Our Company received FDI from USA where one of the shareholder has transferred shares long back, but now that shareholder is a resident and he is staying in India from past two years.

    Can i file FLA return now.,

    Deepika

    • If the Indian company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, the company need not submit the FLA Return.

      If all non-resident shareholders of a company has transferred their shares to the residents during the reporting period and the company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, then the company need not submit the FLA Return.

      But if the company has not filed FLA for outstanding investment in reporting year, then the company shall be required to file FLA now.
      The annual return only specifies about foreign remittances or overseas investment and not of residency of an individual.

  21. It is indeed a very useful article. Can you pls. also incorporate the process of issuing shares to NRI/OCB/foreign entity in consideration for software/technical know how.

  22. Dear Ma’am,
    This article is very good to understand the process of foreign remittances.
    I have a question regarding a matter.
    What are restrictions or procedure to be followed when a foreign parent company issues WORKING CAPITAL to its wholly owned Indian Subsidiary? Will it be considered as a loan or an investment by the foreign company into its Subsidiary?
    Please do reply on the same.
    Thank You.

  23. Hi Ma’am,

    I have a query, in case of Subscription shares is more then Rs. 1,00,000/ do we need to do a DCF valuation for the pricing of the share.

    We have a company incorporated with 99.99% share holding being an body corporate outside india and amount of Subsciption is Rs 10,00,000/-.

    now under the revised pricing guidlines of RBI 2014-15/129 dated July 15 2014, the shares valuation should not be less fair valuation, so do we need to have a DCF valuation for the same or we can issue share at the normal Face Value.

    Request you to please help asap

  24. If a company receives a refundable deposit from its foreign shareholder towards appointment of director as per requirement of Companies Act, 2013, whether such deposit requires RBI approval.

  25. Dear Ma’am Firstly congratulations & thank you for sharing the information. Facts:As per FIRC funds remitted for investment by NR investor are INR 1 Lac.Actual funds recd in bank are 99950. Rs. 50/- deducted as bank/transaction charges by bank.
    Co. allotted shares against funds so received.
    Now query has been received from RBI as to why amount reflected in FC-GPR (99950) not matching with FIRC (01 Lac).
    How do we respond/explain this.? were we supposed to allot shares for INR 1 lac ? or reflect same in FC-GPR.

    • Thanks for your comment.
      Before answering your question, I would like to know how FIRC has been issued for Rs. 1 Lakh, if the bank has received amount of Rs. 99950/-?

    • Thank you so much for the reply ma’am. In this case the FIRC was issued by the foreign bank remitting the funds . Not the Indian bank. Should the FIRC be issued by the Indian bank? I have talked to the bank official but they have advised to mention INR 1 Lac on Annex-6 instead of 99950/-. Will talk to them again to know reason for difference in amount as suggested and why FIRC not issued by local branch,Pls let know whether co. is wrong in allotting shares against 99950/- (as received)instead of 1 Lac (as mentioned in FIRC).

      • First of all FIRC should have been issued by Indian bank which is the bank receiving the funds from Parent company. Please contact to your Indian bank and get more details about FIRC and difference in amount of remittance. The company can allot shares against Rs. 999950/- but the same should have been reflected on FIRC. Normally due to some debit charges, the remittance come less than expected amount. So there would be possibility to issue shares in fraction as per amount of remittance. Here in your case, the company shall make allotment of 9995 equity shares first and 5 equity share later on after remittance of Rs. 50 from Parent company. Kindly let me know what the bank says?

  26. We received FDI from one company in four instalments spanning 4 months. All RBI compliances done. Now we wish to allot shares to this foreign company but CS has informed that shares were to be allotted in 2 months time as per Companies Act whereas FEMA says 180 days. I read definition of Deposit where money recd from foreign company is not considered as deposit. But he says non allotment of shares in 2 months contravenes section 46 calling for penalty. Am in a fix. Please explain the correct scenario in this case. Ours is a pvt ltd. company

    • After implementation of New Companies Act 2013, pursuant to section 56(4)(a), every company shall, deliver the certificates of all securities allotted, transferred or transmitted within a period of two months from the date of incorporation , in the case of subscribers to the memorandum.
      Therefore it is mandatory to open a Bank account and after opening of company’s Bank Account, each subscriber to the memorandum of association should deposit the amount of subscription money of the shares agreed to be taken by him from their respective account in the company’s Bank account by individual cheque or online.
      This procedure should be followed as per the provision of the Act because in case of any default, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five thousand rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

      As per FEMA though company shall make allotment of first subscription money within 180 days from the date of remittance, the company shall comply the provision of Section 56(4)(a) of Companies Act 2013. In most of the cases, the company cannot deliver share certificates to subscribers due to many problems faced from bank in filing advance reporting format, KYC, UIN. In this practical case, instead of waiting for two months, the company can make allotment at zero value and after receipt of remittance, the company shall again make allotment. In such case, the company would comply provisions of Company law as well as FEMA.

      now in your case, the company has not made allotment, the company can either refund the money or make allotment by 01.06.2015. Please refer this notification issued by the Government of India. Please read Companies (Acceptance of Deposits)Amendment Rules, 2015 – notification dated 31.03.2015.

  27. Dear Mam,
    What is the cost involved for filing Advance Reporting form and FC – GPR form. Is it compulsory to find an Authorised dealer bank for submission of those documents. What is the normal fees charged by the AD bank.

  28. Very Informative!! Very Useful… and that too in a very simple manner!!

    Tahnks

  29. Madam, A pvt ltd company received share application money in FICR of 10,38,200 whereas the allotment was made for 10,38,500/- which is in EXCESS than the receipt. what could be done.

    thanks/kota

  30. THANKS A LOT FOR PUBLISHING SUCH KIND OF INFORMATIVE ARTICLE HAVING EDUCATIVE VALUES.

  31. Dear mam,

    I have read many explanation given by you for various questions.

    I would like to know, whether a private limited company needs to file FCGPR if the company receives share application money from NRI’s through NRE account to the company??

    if yes, is it within 30 days after issuing shares to them ??

    Pls confirm

    regards
    Priya

    • Yes company shall be required to file FC-GPR if company receives share application money from NRI through NRE Account to company. Yes FCGPR to RBI shall be made by company within 30 days of issuing shares.

  32. Thanks for such a informative blog.
    I have one query

    Company has received FDI/funds from subscriber to MOA
    Can a company allot shares in the following circumstances.
    1 FIRC is not yet received
    2 FIRC is received but UIN from RBI is not received.

    since company is running out of time of 180 days to file INC21, can company issue shares

    • If the company has received funds from subscriber to Memorandum of Association, then the company shall file Advance reporting format ( ARF) to Reserve Bank of India within 30 days from the date of receipt of funds. If the company did not receive FIRC,it will be the problem of the receiving bank, so the company can report advance remittance to RBI without waiting for FIRC and UIN also. If the reporting will be made within 30 days and issue of shares within 180 days as per FEMA it will be compliance as per FEMA. But as per new Companies Act 2013, the company shall deliver certificate to the subscribers within 2 months from the date of incorporation. Hence the company shall not wait for issue of shares till 180 days, it has to deliver the share certificates within 2 months. Hence as per my opinion, the company can issue share certificates and complete the procedure as per FEMA and Company law.

  33. Dear Ma’am

    Our company’s memorandum has two subscriber’s both of which are foreign companies.

    Subscriber A has subscribed to 9999 shares and subscriber B for 1 share.

    But we received all funds from subscriber A and allotted all shares to Subscriber A and filed FC-GPR. Subsequently one share was transferred to subscriber B.

    Now, the bank has raised a query that shares to both subscribers has to be issued on first allotment because two persons are required to form a company.

    Please help.

    • If there are two subscribers A and B, then the shares shall be alloted to those and not to one. Though A has remitted all funds, but there must be some understanding or relation between A and B ( such as holding or subsidiary company) and therefore A must have remitted full funds.

  34. Dear Madam
    A Company issued shares to NRs with in 180 days of receipt of funds. But due to rupee depreciation, excess amount is parked in NRs account. Pls guide whether this amount to be refunded. Or it can be treated as exchange gain and offered as income

    • As per FDI Policy, extra remittance shall be refunded to investor (i.e. remitter) within 180 days of receipt of funds. Otherwise RBI will raise query in FC-GPR. The company shall file form A-2 with RBI through Authorised dealer and specify the approval details while submitting form FC-GPR with RBI.

      • Mam Thank you so much for FDI. Regarding excess receipt of funds due to foreign currency fluctuations, I was unable to find the information in Gazette.Help me through mentioning the notification number in Gazette , if possible.
        Thank you

  35. Hello Madam,
    Our AD Delayed the submission of Form FC GPR to RBI. Afterwards i received a letter of contravention from RBI for delayed reporting and delayed submission of FC GPR by AD, seeking my acknowledgement of same. Which i acknowledged by signing that letter and emailed the very same letter to RBI.
    However we have received no communication form RBI yet, that the shares allotment is acknowledged in their book. If not, please advise what should be our course of action?
    Thankyou

    • It would be advisable to submit physical letter to RBI through Authorised dealer so that the company will get acknowledgment from AD bank towards submission of reply to RBI. Because normally RBI don’t reply to any reply from client. It will send email in case of any discrepancy in documents or submission, which till take some time. Not receiving email from RBI does not mean that it has accepted the documents.

  36. Hii Mam,

    I have a query..As per sections 42 of Companies Act 2013, shares should be allotted within 60 days of receipt of application money but as per RBI circular it is 180 days. So which one will be applicable on company if it receives money as FDI.

  37. Hi Ma’am,

    We had issued shares to our foreign holding company in last FY and have completed the FCGPR filing through our AD bank. Recently i came to know about FLA returns that the company is required to file for FDI investments in the last FY.

    Does the company have to file FLA returns for FDI receipts against equity too or it is only required if you receive FDI in any other form.

    Please clarify.

  38. Mam,

    What are the Compliance required to be followed in case of NRI invested through NRE Account.

    How Advance Reporting could be done as no FIRC can be obtained?

    Please Reply.

  39. Where a foreign company is shareholder in indian private company, and such a foreign shareholder remits advance against equity the indian company is required to allot shares within 180 days from the date of receipt of advance money. what if it is not able to do so, whether such an advance will be treated as deposit?

  40. Dear Madam

    Your website is very informative and doing excellent service. i have one query regarding subscription to MOA. one of client incorporated 100% subsidiary in India in the month of January 2013 and the foreign company who is a subscriber to MOA not remitted money sofar and they have not filed FC-GPR also.

    Can they send money now and file FC-GPR with RBI. what generally RBI treats this kind of violation and the amount is Rs. 1Lakh.

    • As far as Company Law is concerned the company has not complied with paid up capital requirement and therefore will reply accordingly for the notice which ROC will send to company. As far as FEMA is concerned, the company shall explain the facts of case for non compliance to RBI.But this is violation under both the Acts.

  41. dea r maam,

    company was formed in 2005 under the FDI route .. fcgpr has not not been filed yet ..what quantum of penalties can be expected if fcgpr is filed now

  42. What are the consequences of subscription money not paid by the shareholders for almost two years? The company accounts is not been finalised for these two years. Can Share Capital be credited and Debtors/Accounts Receivable be debited in this case. Now we have received the amounts from the shareholders as well. Kindly request to advise on this accounting treatment. Thanks in advance.

  43. Hello I have a query related to FLA return
    Which companies have to file FLA return. Our company is a subsidiary of foreign holding but doesn’t have any debt capital. What if we haven’t file it on time

  44. Dear Madam,

    Your post has been very informative.

    I have a question
    If a company receives 3-4 remittances from same share holder towards Share capital within a period of 180 days from first remittance, then can the company file one FC GPR towards all the remittances or should file it separately for each remittance?

    Thank you

    • If the remittance towards share application money received 3-4 times but for the total amount ( i.e. in installment) you can file one FC-GPR. but if the 1st remittance is towards subscription money and then 2nd, 3rd, 4th towards 2nd,3rd, 4th allotment, then separate FC-GPR to be filed with RBI.

  45. Mam,

    I want to know whether company can accept unsecured loan from NRI shareholder ( holding 100%) / Directors and to wat extent.

    Shareholder are having NRE Account in india and funds are trf from their NRE Account to company current account.

    What other RBI / FEMA formalties to be followed.

    Thanxs in advance.

    • As per definition of Deposit Section 2(31) of Companies Act, 2013 deposit includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.

      Any money obtained by company from its members or directors out of borrowed funds would be treated as Deposit as per above definition.

      I don’t know whether the company which you are saying is private limited or public limited, hence please refer Chapter V, Section 73 ( prohibition on acceptance of deposit from public, Section 74(Repayment of deposits accepted before commencement of Act, Section 76(Acceptance of deposit from public by certain companies along with Companies (Acceptance of Deposits) Rules 2014.

      As per FEMA formalities, any unsecured loan from NRI shareholder will be treated as External Commercial Borrowings and the company should file Form 83 alongwith the agreement to Reserve Bank of India for obtaining prior approval of RBI before accepting loan from him.

  46. My Query is:

    ** M/s ABC Pvt. Ltd. (Indian Co.) engaged in the business of manufacturing of Machinery & Equipment.

    **Mr. A(99.9%) & Mr. B (0.1%) (Both resident) are the Share holders of the company.

    **Mr. A wants to transfer his all shares to Foreign Company.

    ** In such case as an individual (Mr. A) and as Company (M/s ABC Pvt Ltd), how to proceed to complete the transaction.

    **what are the procedurial, compliance and reporting requirement to be done with ROC and RBI.

    **If M/s ABC has shown that it had already transfer the shares to Foreign co. in its books and in its Board meetings (say, share transfered in Oct-2013), but the consideration is still not received from Foreign company. In such case what will be the consequenses.

    Thanks in advance.

  47. MAAM

    I APPRECIATE YOUR SOCIAL WORK WITH REGARD TO PROFESSIONALISM.

    I HAVE TWO QUERIES.

    1. AS PER NEW COMPANIES ACT , IS THERE A REQUIREMENT FOR PRIVATE LIMITED COMPANY FOR OPENING THE SEPERATE ESCROW ACCOUNT FOR FDI.

    2. IS SCHEDULE V , SECTION 197 IS APPLICABLE TO PRIVATE LIMITED COMPANIES.ALSO IS THERE ANY RESTRICTIONS ON PAYING SALARY TO KMP OF PRIVATE LIMITED COMPANY.

  48. Dear Madam,

    I have one query relating to FDI. Our company is sole subsidiary of US based company. Whether such investment of US Based parent company is treated as FDI under RBI regulation?
    Please clarify the same.
    Thanks.

  49. Madam,

    My query is as below;
    Is it necessary for the FDI receiving company to keep FDI amount in a separate bank account till shares are issued?

  50. Madam,

    Your blogs are useful for new learners.Very useful blog

  51. Hii madam, your blogs are really appreciable.

  52. Hi Mam
    Much appreciate your presentation.
    I have a query, there is a telecom company which is 100% subsidiary of a foreign company. The parent co. has remitted the amount in INR itself. Please guide me if FEMA Act is applicable on the same as amount is recieved in Indian Currency and not in forex.
    Also, please tell what procedures can need followed for the same.

    • As per Foreign Direct Investment, remittance received from country outside India from NRI/ Foreign national/ body corporate towards equity capital, shall follow the FDI Policy and report advance reporting within 30 days to Reserve Bank of India. As per Companies Act 2013, pursuant to section 56(4)(a), every company shall, deliver the certificates of all securities allotted, transferred or transmitted within a period of two months from the date of incorporation , in the case of subscribers to the memorandum.

      Here FEMA as well as New Companies Act 2013 shall be applicable. To know more details please call me.

  53. due to exchange rate fluctuations, the company has received Rs. 1,00580/- towards share application money, instead of Rs. 1,00,000/-. (intended allotment)

    What needs to be done with the remaining Rs.580/- after allotment?

    Whether to be refunded? what is the procedure?

    If not to be refunded, what is the treatment in the books of accounts?

    • Extra amount shall be refunded to the remitter within 180 days from the date of receipt of remittance. If the amount has been received extra due to foreign exchange fluctuation, the company shall specify the reason in FC-GPR and in the books of account it will be treated as foreign exchange inflow.

  54. I think its a very good presentation. Ques and answer section was giving more clearity on provisions.

  55. Great Help Mam..!! keep it up

  56. Hello,

    My query is if a NRI transfers the subscription amount from an NRE account to the Company for subscription of shares, do we have to do the procedure of advance reporting and FCGPR as the funds to be transferred would be in Indian Rupees from an NRE account maintained in India.

    • Yes, if NRI has transferred the subscription amount from an NRE account to the company for subscription of shares, the company has to file advance reporting and FC-GPR to RBI through Authorised dealer. It is specifically mentioned in the FDI Policy.

  57. Madam,

    Pls guide: Shares are issued to subscibers to memorandum, and the remittance from outside India w.r.t that received after the company’s bank account got opened. So while filing FC-GPR we have mentioned date of issue of shares as same as the date of incorporation, but AD bank has objected the same by saying that we cannot issue shares before receiving remittance from subscribers. So how to deal with this case, since, till the bank account of the company is not opened how can an indian company receive funds.

    • Once the company is formed, it has to open Current account of the company and the investor who is foreign national or NRI shall remit amount towards share application money to Company’s Current account.While submitting FC-GPR form with RBI,the date of issue shall be date after allotment of shares and not the date of incorporation.

      In your case if you have mentioned date of incorporation as date of issue then you shall be required to correct the date on FC-GPR and submit FC-GPR again with RBI.

      The allotment of shares to the investor should be made within 180 days from the date of remittance.

      • Company incorporated is 100 percent subsidiary of foreign company. Remittance not recd within 60 days of incorporation. Since shares cannot be issued without receipt of remittance , even share certificates cannot be issues. In this case how do I comply with Section 56 which says share certificates to be allotted within 60 days of incorporation. Section 56 (4) begins with “Every Company shall, unless prohibited by any provisions of law…”. CAn i take shelter in this for not issuing Share certificates within 60 days of allotment?

        • After implementation of New Companies Act 2013, pursuant to section 56(4)(a), every company shall, deliver the certificates of all securities allotted, transferred or transmitted within a period of two months from the date of incorporation , in the case of subscribers to the memorandum.
          Therefore it is mandatory to open a Bank account and after opening of company’s Bank Account, each subscriber to the memorandum of association should deposit the amount of subscription money of the shares agreed to be taken by him from their respective account in the company’s Bank account by individual cheque or online.
          This procedure should be followed as per the provision of the Act because in case of any default, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five thousand rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

          As per FEMA though company shall make allotment of first subscription money within 180 days from the date of remittance, the company shall comply the provision of Section 56(4)(a) of Companies Act 2013. In most of the cases, the company cannot deliver share certificates to subscribers due to many problems faced from bank in filing advance reporting format, KYC, UIN. In this practical case, instead of waiting for two months, the company could have made allotment of shares at zero value and after receipt of remittance, the company shall again make allotment after receipt of funds. In such case, the company would comply provisions of Company law as well as FEMA.

          now in your case, the company has not made allotment, the company can either refund the money or make allotment by 01.06.2015. Please refer this notification issued by the Government of India. Please read Companies (Acceptance of Deposits)Amendment Rules, 2015 – notification dated 31.03.2015.

  58. Well presentation. i must appreciate. the blog is very well in the way everything is presented.

  59. Can the FDI remittance in equity be done in INR by foreign national

  60. dear mam
    i have a FDI in my private ltd company
    due to the delay which is done by RBI to give UIN no. to us we didnt issue share to Investor in 180 days. now days goes out more than that.
    nd one que. is also that about share valuation that is DCF method but i cant get it that what amount is used for share premium when F.V. is 10 and F.M.V is 5188 as on 31 dec 2012. compny incorp in 2012 aprail.
    so what should be do now

    • Actually if you have not received UIN, you could submit FC-GPR saying pending UIN allotment by RBI, because share certificates should be issued to investor within 180 days. After expiry of 180 days, the company shall be required to refund the remittance to investor as per FDI Policy.Regarding DCF method please consult your Chartered Accountant and get pricing.

  61. I want to Form One Pvt Ltd company under CA 2013. Both the Director and Shareholder are NRI. Also Appointing one Indian Resident as Director. Shareholder are having NRE Account and subscriber to MOA & AOA is thru there NRE Account

    Whether RBI Approval is required?
    Whether we hv to file FCGPR?
    Whether co. after incorporation requied to issue FIRC

    • As per Section 149 of Companies Act, every company shall appoint one Indian resident director who has stayed for more than 182 days in previous calender year. As per FDI policy, remittance by investor is allowed from NRE/FCNR account. Regarding RBI approval, it would depend upon the nature of business of Indian company. Accordingly you will have to check the route ( whether automatic or approval). IF the nature of business falls under automatic route then no RBI permission shall be required. But if the nature of business does not fall under automatic route, then prior permission of RBI shall be required. You will have to file FIRC, FC-GPR to RBI. please visit my blog to know FDI reporting and compliance.

  62. Madam,
    We have incorporated a private limited company with two Indian directors.They both are the shareholders at present.Its a software company.
    We would like to appoint four foreigners as directors and transfer 100% shares to them.Kindly let me know the procedure for transfer of the shares ie RBI approval or any other compliances.
    Thanks in advance

  63. Madam,

    We have incorporated a company with two members.It is basically into development of application softwares.
    Now we want to transfer the shares to three foreigners (not indian citizens),,,can u guide us regarding the compliances with RBI or any other compliances,if any

    Thanks in advance

    • Following would be the steps for transfer of share from resident to non resident individual

      1) the Buyer will remit the amount to the seller
      2) the Company’s bank will issue FIRC to it
      3) the company shall report FIRC to RBI through Authorised dealer
      4) the company shall pass board resolution for giving authority to director to sign documents for filing FC-TRS with RBI.
      4) the buyer will sign FC-TRS form and hand over to company
      5) the company shall file FC-TRS to RBI through authorised dealer within 60 days from the date of receipt of the amount towards transfer
      6) the company give effect of transfer on the back side of share certificate and make entry in the Register of transfer of the company.

      • Meenal,

        For FC-TRS, in case the money is sent from a Buyer to the Seller (who is a non-employee, non-director, investor shareholder), is it upon the Seller or the Company to file the FC-TRS? Wouldn’t the Seller’s bank have to issue the FIRC since they have received the money? And in that case should the Seller file the FC-TRS?

  64. Madam,

    Please clarify on the following:

    a) Indian Company, which is an associate of a Foreign company, received funds from Singapore towards meeting operational / administrative expenditure.

    b) Indian company did not obtain any FIRC nor did it inform RBI through AD about the inward remittances for the past 2 years.

    What are the legal implications of the violation and is there any remedy available to get relief from the violations?

    • The purpose of remittance is very important and to be consider while reporting to RBI. If it is towards equity then, as per FEMA, company should file FIRC and FC GPR with RBI. If the purpose is just advance for meeting operational or administrative expenses, no need to follow the compliance under FDI policy.

  65. Madam,

    Suppose that few funds were transferred from a company situated abroad to a company situated in India (both the companies have common management and funds were transferred towards normal operational / administrative expenditure). And the Indian company did not obtain FIRC and did not inform RBI for the past 2 years.

    Please inform the consequences and also legal remedy, if available.

    Thanks in Advance……..

    • The purpose of remittance of amount to Indian company may be different and may not be towards equity capital. Therefore the compliance will be different. if the remittance is towards equity then as per FDI policy, the reporting to be made to RBI. Otherwise it will be default.

  66. Hi Meenal,

    Must appreciate . your website and blog has come up very well. Will talk to you sometime. It was wonderful to see your efforts and the way everything is presented

    Regards
    Nilesh

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