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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Legal Disclaimer:
Hello Madam, We are startup based in Pune, have secured angel investment from a overseas investor for about 100,000 USD. This amount will come in part (eg 50k first 50k later) my questions are
1) Do we need to do all the complaince & documentation etc before receiving the remittance?
2) Do we need to do all these procedures every time we receive the money?
3) Are there any charges/fees we need to pay to RBI for FDI procedures?
Answers to you questions :-
1. You will need to do all the necessary compliance and documentation after receipt of funds
2. Yes, as and when there will be receipt of funds, you need to comply and report to RBI.
3. It is just reporting so no charges are to be paid to RBI for FDI procedure.
Thanks for this Wonder full Article
My Query is
MR. X was resident at the time of subscribing to MOA of a Pvt Ltd Co., however latter he shifted to USA and no compliance with RBI was done.
Now he intends to transfer those shares to USA based company. Pl guide on Compliances that are required to be done.
As per my view, first of all Mr. X who was resident while incorporation of company, shall subscribe the subscription money to the company as per Memorandum of Association of the company. The board of directors shall include the point of issue of share certificates to Mr. X in minutes of board meeting as company law compliance. Now if Mr. X who is NRI now wants to transfer shares to USA based company, the company shall hold Board meeting and consider consent of transfer of shares between NRI to Body corporation. Since it is transfer of shares from NRI to Body corporate, RBI compliance shall not be required. As per company law, the board resolution, consent of transfer and exchange of money shall take place.
if Investment received from NRE account, is it required to get FIRC and file ARF & FCGPR with RBI, please suggest wheather is it rquired to do or not
As per my knowledge if amount is received in INR, then filing of FCGPR is not required.
how do we apply for prior approval from rbi for transfer of shares in a private company from resident to non resident by way of gift
When shares are transferred by way of gift, the consideration involved is zero. It means there is no outflow or inflow of funds in such a transaction. However, ownership of shares is transferred involving a resident and a non-resident, so ideally there should be a mechanism to report such transactions under FEMA regulations.
For any issue or transfer of shares involving cross border transaction, FEMA requires adherence to sectoral caps, pricing guidelines and reporting requirements. When we analyse rule 9 of Foreign Exchange Management (Non-debt Instruments) Rules, 2019, we find that the term “subject to adherence to sectoral caps, pricing guidelines, reporting requirement etc.” is only used in case the transfer is being done by way of sale. There is no mention of reporting in case of transfer by way of gift.
In the FAQs posted by the RBI, it is clearly mentioned that FC-TRS is not required to be filed in case of transfer effected in the form of gift. But thereafter they were updated in May, 2018 i.e. before the launch of FIRMS portal.
Practically form FCTRS dide not accept zero value in the “consideration”field. Therefore, though RBI had not mentioned anything in the Regulations about such transactions specifically, it was practically not possible to file the form in cases of gift.
After the launch of FIRMS portal (w.e.f. September 1, 2018), in form FC-TRS (under SMF), a separate tab for reporting of transfer by way of gift was added. However, the regulations still did not mention any guidelines or circular about reporting in cases of transfer by way of gift.
RBI also issued a revised user manual detailing the procedure to be followed while reporting under SMF. In the said user manual, it was clearly specified that only the transfers done in accordance with regulation 10(5) of FEMA 20(R)*, i.e., Gift of capital instruments from a person resident in India, including NRI/OCI or eligible investor under Schedule 4 to FEMA 20(R) to a person resident outside India, are required to be reported by filing form FC-TRS on FIRMS portal. In such cases, relevant RBI approval is also required to be mandatorily attached in the form. But still since there is no movement of funds as such, it can be assumed that RBI reporting is not needed. Only ownership will be changed and which will be specified in annual return while reporting to Registrar of Companies.
In such case, if there is difference of opinion, then it would be advisable if the director of the company would ask RBI by way of email about the doubt and way of reporting to RBI. The reply by RBI would be an evidence to show to an Auditor and Government later on.
Dear Madam,
Your article is really helpful. My query is if at the time of Incorporation, there is foreign subscriber but Company has not received any subscription amount from foreign national. In such case what are the consequences Company should face under FEMA.
Every company shall report FCGPR to RBI after receipt of FDI from Foreign subscriber within 30 days. In case company fails to do so, the company can sue motu file compounding application to RBI with reason of non receipt of FDI. So that RBI may after going through the actual facts of the case and reason will reduce the additional fees which company has to pay.
In my case, we have received allotment amount via RTGS from foreign investor, and thus Authorised dealer is not issuing any FIRC for the same, can you please tell me that whether we have to file FC-GPR?
and second question is if we do not have to file the same then in FLA filing, do we have to consider the same as Foreign Investment?
While filing FC-GPR, the company should file certified copy of FIRC to RBI which is mandatory requirement of the form. Without it you can not file FCPGR. If the Bank is not cooperating then please inform to RBI about such kind of service and get the solution from the RBI.
During the year, if company has received FDI , it has to file FLA for that year. As long as it is foreign liability, the company shall be required to file FLA every year to RBI. This is as per RBI Guidelines.
Hi Madam,
Thanks for sharing valuable inputs.
One of my client has received investment in equity shares of the company at the time of incorporation i.e in 2017. But they have not filed any forms to RBI. Could you please help me by providing list of forms to be filed and late fees/penalty to be paid for the delay in filing
I assumed that there is foreign direct investment in equity shares and falling under automatic route. After receipt of amount towards FDI, if the company failed to report to RBI, it is time to go for compounding application along with some logical reasoning about late reporting. RBI after doing scrutiny and checking facts of the case, will issue letter/ notice and mention the amount of penalty.
Hello,
There are various parts to be considered for FDI Reporting with the RBI. Would suggest a discussion on the same.
regards
Dhaval Thakkar [LL.B. C.S.]
Please let me know your queries for discussion.
Can anyone please share the format of CA certificate for valuation of unlisted shares of indian company to be attached in FC – TRS.
It is better if you ask to CA who is statutory auditor of company because they know the method of valuation.
Hi we have a ltd company having two foreign Director and shareholders with paid up capital of Rs.1CR. The company is ten years old but did not commence any business. Now the promoters wish to close the company but before that wants to return the share capital amount, the company has 20 lacs of losses and 80 lacs is lying in bank account. Can we do that by buy back of shares or there is any other convenient method to do it. Further do we require any permission from RBI to return the share money to the foreign Directors?
AS per your query, I would suggest you to go with buy back of shares. While returning share money to the foreign director, RBI reporting is required.
Madam,
Could you please advice how to allot shares if the FDI received is less by Rs.4.5 lakhs due to currency fluctuation. i.e. the offer value is 4.62 cr INR and the amount received is 4.57 inr.
In your company it has received less remittance from subscriber due to currency fluctuation. This happens most of the times while remittance. So always request remiter to send extra amount. Now in your case, i would advise you to refund the remittance to the remitter so as to avoid further complication in RBI reporting. This is because of following reason
the company shall fiel FCGPR about remittance with explanation of receipt of less amount
the company shall file FCGPR about remittance of balance amount again
the company shall need to file two KYC, two CA and two CS certificates
all these increase paper work and efforts in reporting and giving explanation to match the total remittance.
Please note that reporting to RBI and issue of share certificates should be completed within 60 days from date of remittance.
This is my general opinion depending upon information provided by you. You can decide depending upon the days you left to report to RBI.
Dear Ma’am,
Our Indian IT company is a subsidiary company of UK based parent company. Uk based company is shareholder of 95% shares through UK based NRI while Indian citizen holds 5% shares. We do not have any other FDI and ODI. Do we also need to file FLA annual return?
Thanks in Advance.
In case of company having foreign capital and foreign liabilities, the Company shall file FLA every year till these liabilities and capital last long.
If a non resident investor turns resident in the year, is the Indian compay required to file FLA retirns as per FEMA
As per my view, though the investor status is changed from NRI to Resident, FLA shall be filed to RBI on or before 30.07.2019 as per extension provided by RBI. This is because the paid up capital as on today shows amount received from NRI after subscription. As per RBI FDI Policy, unless and until the shares shows outstanding on Balance sheet, the company shall file FLA to RBI.
In FLA form, investor will not specify his shares in category of investor while disclosing his FDI.
Maam,
I found your article very helpful. Thanks for sharing your experience.
My question is whether the Co. has to file any Annual Return for Foreign Inward remittance on annual basis?
Annual Return in FLA format is to be filed every year to RBI on or before 15th July for outstanding assets and liabilities.
Maam,
Thank you for your reply.
My Co has accepted Foreign Direct Investment in the year 2014-15, 2015-16 and 2016-17 and have allotted the shares for the same and also filed the FLA return pertaining to that F.Y.
During the F.Y. 2017-18 and 201-19, the Co has not received any FDI.
Do we still need to file FLA return for F.Y. 2018-19?
Please suggest Maam.
Thanks in advance
Though the company has not received fresh FDI, still the company is required to file FLA to RBI every year till the time the liabilities shows existing equity on liability side of Balance sheet. Because the existing equity is still liability of the company.
Really good article, Thanks for the detailed information…
We are currently UK based IT Company, Opened wholly subsidiary company in India in Mar-2017, In this regard, we’ve transferred 95% of Share capital Investment to Indian Subsidiary account in Oct-2017.
The share capital in GBPs transferred from HSBC, UK to ICICI, India (subsidiary account). However HSBC,UK sent the funds to HSBC, India, which converted and deposited the equivalent INRs via RTGS in subsidiary Company account (ICICI Bank).
Now ICICI denying to Issue FIRC & KYC and HSBC, UK are not aware of FIRC.
Please can you guide us in this regard.
Thanks in advance
Please submit FIRC And KYC to RBI asap. Now a days the submission of FCGPR with FIRC And KYC is online process.
In my case, we are private limited company registered in India which is wholly owned by foreign company.
Foreign company issues RSU (listed in foreign) to the employee of Indian company. In return the Indian company pays the amount for such RSU to foreign company [I have ignored TDS part].
So in this transaction, do I need to report anything to RBI or any other authority? What could be the procedure?
I would advise you to please check if consideration towards issue of RSU is in Indian currency or foreign currency. Accordingly RBI reporting would apply.
worth reading your blog
My client is wholly owned subsidiary company of foreign company. Foreign company has transferred fund to subsidiary for investment in capital of subsidiary company. further foreign fund converted through transfer wise transferred in INR to HDFC bank and then in ICICI bank(subsidiary co holds ac). now HDFC is denying to issue FIRC certificate as money received to them in INR. do i need to file FC-GPR???
Please guide me in this regard
As per my opinion, if the funds are received in INR then FCGPR filing is not necessary.
Dear Ma’m,
My Company has been incorporated in 2011. Earlier its FIRCs were filed by their AD bank, as an additional service to their clients. Then they changed their Banker, as that AD Bank got closed.
I conducted a search and have all the PAS-3/ Form 2 filed for allotment of shares.
My query: Is there any way we can find out the ARFs/ FC-GPR filed by the previous AD Bank on behalf of the Company w.r.t. Issue of Share capital?
(How to get RBI related data?)
As I have to file a Compounding application for this Company.
Since earlier i.e.before 2016 ARF and FCGPR form were to be submitted physically so if company have any physical record it is easy to search for previuos document. otherwise there is no solution. Otherwise you may approach AD bank and request.
A company was incorporated in January 2018 and the subscription money to MOA is received in March 2018. Meanwhile, the company held its first board meeting in February 2018, allotted the shares as per MOA subscription and issued the share certificates prior to receipt of subscription money.
In this case for the purpose of FCGPR, can the date of allotment be prior to the date of receipt of funds??
After receipt of initial subscription, the share certificates should have been issued to initial subscribers of Memorandum of Association and not before that. This is non compliance as per Company law and FEMA Act.
Query:
company issued share of rs 700000 at 120( value including premium 110) Rs.84000000 to NR, but inward remittance amount Credited 8,39,99,891. department raise the comment(share cannot be issued more than inward remittance can u please guide me how i can proceed with and reply to department
and also i m getting delayed to compliance due to firc and kyc delayed from banker side.
Please request remitter to remit balance amount and reply to department that the company shall issue two separate share certificates.
Indian subsidiary company is incorporated on 11-11-2017 and company need to issue Rs 1,00,000 share capital to subscriber of MOA and remittance received of Rs. 99,729.60 on 28-12-2017. Money short Rs. 270.40 due to conversion of currency. and balance money of Rs 270.40 is received on 09-02-2018.The ARF form for money received on 28-12-2017 is filed on 23-01-2018.
Please tell me what allotment date could be decided so that sec 56(4) of companies act 2013 and fcgpr time limit both complied
As per my view, the share certificates should have been issued for full amount before 60 days from date of incorporation. The company shall issue two separate share certificates for Rs 99729.60 and Rs 270.40 and accordingly report to RBI while submitting FCGPR.
In case NRI shareholder renounce his Rights share of a listed company in favour of resident and vice versa, should company has to file FC-TRS as renounce is tantamount to transfer ? What is the procedure ?
As per my view, FCTRS is required for filing with RBI because it is transfer of shares from NRI to Resident. The same process which is explained in the article.
Hello Ma’am,
Need your help to understand, What should be the Post Issue Pattern for Wholly owned subsidiary of Foreign co.? where one share is held by Resident as nominee to comply with the requirement of two shareholders.
If I mention 99.99% shareholding on Foreign company’s name and 1 share on resident name, like how we show in MGT-7, but RBI is raising query that ” The shareholding of Foreign co is not matching with their record”
So need your suggestion for the same
To report to RBI , the remittance should be fully received from Foreign company. there will not be any issue while filing FCGPR form with RBI.
Madam,
thank for your valuable updates.
Please guide on following.
Mr. X holding shares in indian Company as resident shareholder and now shifted to UK and become resident of UK as present status in india is non-resident
1. What complainace to be made to be made under FEMA ?
2. Does Company need to file Statement of Foreign Assets and Liablities ?
3. any other guidance to give effect.
If there is NRI (When he started residing in UK) investment in Indian company then company shall report to RBI about foreign remittance towards equity shares. Yes the company shall be required to file FLA with RBI every year till he is shareholder.
Dear Madam,
Remittance made through NRE account in our case and Bank has provided FIRC and KYC for it. Should we have to file ARF and FC GPR Form ?
If remittance is received in Rupees, then as per my view, there is no need to file ARF and FCGPR form to RBI. Please get it confirmed from Bank also.
Is this necessary to file ARF in case subscription money received from the foreign company(subcriber to MOA) is on non-repatriation basis?
Yes
Hi ma’am,
Reporting of ARF is for the amount of Rs. 100050 and allotment amount is Rs. 100000.
While filing Form FC-GPR, an error is showing that the form is incomplete because of the difference amount.
Kindly suggest what shall be the way out in this case??
While submitting ARF form clarification of extra remittance of Rs 50 to be mentioned and then FCGPR with Rs 1 lakh to be filed. Then there won’t be any query.
Now if ARF with extra amount is filed with RBI, then while submitting FCGPR, please give explanation about extra remittance and file it with RBI.
Hi Ms. Meenal, How to report the inward remittance from an NRI, if the investment is made from his NRE/NRO account, as in such cases the AD is not providing the FIRC & KYC. what options are available to the Investee company in such cases.
For remittance through NRE or NRO account i.e. remittance in rupees, FIRC and KYC will not be required. FIRC and KYC will be required only in cases where remittance is in foreign currency. Therefore reporting to RBI will not be required in such case. Normal issue of shares will be done as per Company law.
Hi Meenal,
If shares are transferred from NR to NRI and payment is done through NRE account of NRI, do we need to do the below compliances:
1. Filing of FC-TRS – Is it required to be filed?
2. Valuation of shares – Is it required and under which method?
3. Can the transfer be done at face value of INR 10 or it has to be done through valuation?
Thanks.
If remittance from NRI is in Rupees, as per my view, there is no need to file ARF form and FCGPR to RBI. Valuation of first subscription money shall be at face value only.
ma’am
1-what are the provisions in relation to the non receipt of inward remittances (subscription money) in case of newly incorporated company from the foreign shareholder within the applicable time period????????????
2–and please tell me the time frame applicable with regards to the receipt of inward remittance by foreign shareholder????????
3–can a foreign shareholder bring inward rremittances after expired time after paying penalty to the RBI??????????
1. The company shall file application to RBI about non receipt of inward remittance describing facts of the case , reason of delay etc.
2. within 2 months from date of incorporation of private ltd company
3. yes.
dear mam,
my company is a joint venture of an Indian and Italian company, in the month of July we made a right issue of shares. our foreign investor brings excess money.
now we have to refund the excess amount.
kindly provide a checklist to refund the excess money.
The Indian company shall remit the excess amount to Italian company within 180 days along with A-2 form through Authorised dealer ( i.e. Bank).
Hi Mam,
Can u brief the process of FDI reporting by LLP. One newly formed LLP has two partners- one Indian n one foreigner. Foreigner has transferred his contribution towards capital from abroad. What’s the process of reporting the same to RBI?
You will have to report to RBI online by filing ARF form within 30 days of remittance and FCGPR online. In case of any doubt please contact my office.
Hi.. Ms.Meenal,
I must congratulate you for the nice blog. I have a querry about my client.
Company incorporated in Dec, 2015 with 5,00,000 Eq.Shares out of which Non Resident subscriber to MOA was allotted 4,99,999 shares and 1 share is held by Indian Subscriber.
Subscription received in August, 2016. AFR filing delayed and started on 10-10-16 but completed on 02-09-2017 due to various reasons. FCGPR filing is yet to be done.
Shares were alloted in Sept, 2016 after receiving the subscription. Thereafter, further money received from the foreign subscriber towards right issue of shares.
AFR procedure for the amounts received towards right issue is yet to be carried out and is under process.
Want to ask :
1 whether FCGPR needs to be filed separately for subscription to MOA and right issue or one FCGPR can be filed for all subsequent right allotment alongwith initial subscription.
2. Any adverse remark about delay in receiving subscription to MOA need to be mentioned in Company Secretary’s certificate?
3. Even if its subscription to MOA, CA certificate is required for issue of shares at PAR?
Your valuable guidance will help me to decide further course of action.
Thanks in advance.
Regards.
Thank you for your comment.
Answers to your queries:- 1) Company needs to file separate FCGPR after receipt of each funds in intervals. 2) Yes, CS should mention in his certificate that compliance as per Company law is not done or if there is delay in receipt of funds due to bank, CS should mention the facts of the case for delay in filing FCGPR. Also Directors should report facts of delay to RBI while filing delay FCGPR. 3) CA certificate is required for first subscription as well as for further subscription. Because share certificates are issued on the basis of valuation done by CA.
As per Notification No. FEMA 205/2010-RBI dated 07 April 2010, Valuation has to be done by a SEBI Category – I Merchant Banker or a Chartered Accountant as per the Discounted Cash Flow (DCF) method. However, in the given case, shares are being issued to the Foreign Party which is one of the subscribers to the memorandum. The company is a JV Company and it is newly incorporated. This is the initial allotment of shares. So can we value the shares at Face Value instead of Fair Value arrived at by Discounted Cash Flow method?
If FDI received from first subscriber of Memorandum after incorporation of company, the valuation shall be made at Face Value.
Good writing, keep going.
Thanks !!
A non-resident non-resident has not remitted the investment funds due to some issues in the banking channels and the remittance get delayed but the shares are already been allotted to the non-resident by the Company.
But the subscription money was received after the allotment is done.
Here is there any non-compliance?
As per Company law, the shares shall be alloted to subscriber after receipt of share application money. The process which company has already completed is not as per Company law. This is non compliance and not legal procedure.
Dear Madam,
We have received FDI in the form equity from an entity in excess of the authorized capital in a private limited company. The excess amount is due to exchange fluctuation. Do we need to return the excess money to the foreign entity?
As per FDI policy of RBI, excess amount shall be remitted to remitter’s bank within 180 days from the date of receipt of amount.
Hello Mam,
Company is incorporated on 22-12-2016
In a company there is a 3 directors in which 2 directors are NRI with 47.5% and 47.5 % shareholding and 1 is indian director is with 5% shareholding and they are subscriber to the memorandum and bank account is open in April but 1 foreign investor could not deposits funds in a bank account .. how will complience is full fill
Subscribers of Memorandum of Association should deposit the subscription money in Company’ bank account and company shall deliver share certificates to them within two months from date of incorporation. Now, if one of the subscribers has not yet deposited money then as per my opinion, company shall intimate the reason of delay to RBI while reporting advance remittance to RBI about other NRI.
Thanks mam for giving me valuable advise
Thank you
can foreign direct investment be used for repayment of loan?
As per my view no.
Hi Ms Meenal,
This is with regards to KYC and FIRC of my Investor,
I am getting delayed from the bankers side for KYC and FIRC unable to submit it with in 30 days to RBI , How do i take extension for submitting the docs
You will have to write the letter to RBI that banker have not provided you KYC and FIRC on time there fore delay occurs. RBI will consider it
A pvt. Ltd. Co. incorporated in Dec. 16. There are two Subscribers to MOA one Indian & other an NRI. The NRI has paid the subscription money by taking laon from Indian Subscriber in Indian Rupees. Whether payment of subscription money allowed under FEMA regulations?
Subscriber of MOA should deposit subscription money individually. NRI person should deposit the money from his NRI account or rupee account and taking loan from Indian subscriber is wrong procedure. Then after receipt of money, Indian company should file ARF and FCGPR with RBI.
Hi Meenal, in this case he is saying that money recd in May and August’2014.when the full amount received in August how can the allotment took place in June?
As per my view the allotment shown in month of June 2016 is totally wrong.
thanks Maam!!
If Pvt Ltd Co received money (40%) in May 2014 & 60% in Aug 2014 towards issue of equity share and Filed return with ROC in Dec 2014 and in Return shown Share Allotted in June 2014.
whether any non- compliance under FEMA/RBI?
since above shows that part money received in May and Balance in Aug but shares allotted in May 2014 but Return filed with ROC in Dec 2014..Please advise
AS per FEMA, Indian company shall report advance reporting within 30 days of receipt of funds and file FCGPR within 30 days of issue of share certificate. If the company fails to comply,it shall be liable for penalty for late filing of ARF and FCGPR. In this case, the company not filed ARF and FCGPR, then RBI will take action and issue show cause notice to company’s director.
Hello ma’am,
We have filled AFR on time,but GC-GPR is yet to be filled as ebiz show error of not matching shareholding.
My question is do we need to show whole inflow by IPO, Or only Foreign investment is need to be shown.
Please guide, we are already running late.
In ARF shareholding of foreign remittance is to be specified. in FCGPR whole shareholding ( means Indian +Foreign remittance) shall be mentioned. It should match as per MOA AOA Subscription pages. Otherwise RBI normally raises query.
Where would i get NIC code for bussiness to fill in FCGPR E-form?
You will get NOC code for business to file FCGPR e-form on RBI site.
mam,
pl. clarify the point.
whether KYC required fresh every time we report to RBI for Advance Reporting Remittance or old KYC taken for earlier remittance will serve the purpose
Fresh KYC shall be required for different inward remittance.
Nice write up and information thank you.
i have question regarding compliance of FEMA
on issue of shares to NRI under right basis at the price not less than the price offerd to existing shareholders by pvt ltd co.
1. Does Company should obtain Valuation report from CA for allotment of right shares to NRI. ?
2. Does Valuation report should be attached to Form FC-GPR ?
Valuation report from CA shall be required for issue of share under right basis and should be attached to Form FC GPR
Company has received FDI as initial subscription on January 2016.There was an excess of Rs.1700 over subscribed amount. But the same was not refunded. We filed FCGPR and nw the form FCGPR has come for resubmission asking details for excess amount. Kindly let us know the consequences of non refunding of excess amount under applicable enactments
As per FEMA Guidelines, extra subscription money shall be refunded within 180 days from date of receipt of funds from subscriber and file form A-2 to RBI. But since it has not been refunded to subscriber and filed with RBI, then in that case you will take advise from audhorised dealer ( Bank) and intimate this to RBI.
Dear Mam,
I have a query in case of private companies when shares are transferred to a shareholder or a director who is a foreign national but residing in India holding OCI card then also FEMA provisions will be attracted? If yes what are the compliances to be followed?Please guide.
File FCTRS with RBI within 60 days from date of receipt of funds from Foreign national.
Hello Ma’am, my query is An NRI had incorporated a pvt. ltd. company and owned 99% shares, Paid up share capital is rs. 10 lacs and Director/Shareholder(NRI) invested Rs. 1 Cr in this company and In balance sheet this 10 lacs has shown as Capital and rest amount is treated as Loan.
The transaction is materialised in the year of 2011.
Is there any requirement to intimate the same to RBI, if yes Then what should we do right now because this transaction is happened in 2011 and we our banker is telling us now, what are the remedies available?
Thanks alot in advance for considering the query.
Please get the guidelines and action plan from bank only because it is an authorised dealer of company.
Hi,
Indian company wants to have equity infusion by way of Right Issue to existing 100% overseas shareholder (parent company). Parent Company have Bank account in INR at overseas. Fund will be remitted from INR Account maintained at overseas and will be credited to Indian Company’s bank account (Say Bank A)through the help another intermediary bank (Say Bank B) in India. This remittance of INR from overseas to the Account of Intermediary bank is called Mirror transactions in the banking language. Bank A authorized dealer Bank. Bank A is saying if INR is received, then they will not be able to provide FIRC to Indian Company. Consequently CS says he will not able to file FCGPR.
Could you guide on this. Thanks
This is my opinion that if it is Rupee to Rupee transfer of funds then Audthorised bank shall not issue FIRC and reporting to RBI is not required. For safer side the company shall inform RBI about the same by writing letter and RBI will decide.
Dear Madam,
Would like to ask who should fill up the KYC form? Remitter or remitter’s bank? Is to only fill up the form for one time or on each remittance?
Remittence shall fill up the KYC format and submit to company’s bank. It is required for each remittance.
Hello Meenal Ma’am, my query is…Our Company has accepted an FDI of 118 Crores through Approval Route. We have completed all the formalities of filing Forms with RBI and ROC by filing form ARF, FC-GPR, FC-TRS and PAS-3. As our FDI is through Approval Route are we have to complied with any other formalities apart from above mentioned like Quarterly filiing of utization of funds with RBI or ROC or any other compliance which are mandatory??
Once you have got FIPB approval from RBI, filing of ARF, FCGPR is necessary. There is no requirement of quarterly filing of utilization of funds with RBI or ROC.
Madam,
I am a practising chartered accountant from France. So i prepare a project about business in India by foreign companies. My question are :
– To establish a wholly owned subsidiary, a foreign company must use the normal formality or INC 29 or Eform SPICE ?
– A foreign company can get oan from indian bank? from foreign bank in India ? from a foreign bank outside of India ?
– In France, to request a loan, the companies must present a business plan, a cash flow statement, a profit and loss forecast. Is it the same procedure in India ?
– A wholly owned foreign subsidiary can benefit the tax advantages from indian government ?
Thank you for your answer
1. INC-29 will be withdrawn from 01.11.2016. Form SPICE is now available in place of INC-29.
2. Yes Foreign company can get loan from an Indian bank.
3. Yes the same procedure.
A company has received subscription for convertible debentures by way of inward remmitance from abroad. UIN has been issued by RBI, now at time of allotment there is excess subscription amount, now the company does not seek to refund the excess amount so can it transfer to unsecured loan account or it has to mandatorily refund? Requesting to guide on this matter with relevant regulations/notification.
I think as per FDI any excess money shall be refunded to the remitter within 180 days of receipt of funds.
Mam, I the foreign investors refuses to pay subscription money (partly) what is the way out, please help?
Each subscriber has to pay full subscription money as per Memorandum of Association otherwise it will be treated as default. He should do it fully.
Hello Maam,
Your blogs are very useful for the people like me who are new in the area FEMA.
I need your suggestions for the following queries.
1) Co is incorporated in November, 2012 with 2 subscribers, out of which one subscriber is Non resident, who brought his share of subscription money in the month of July, 2013. FCGPR was filed mentioning the date of allotment as 17.07.2013.
Now RBI is asking for the Board Resolution for allotment and valuation certificate, but CA is telling that as it is subscription towards MOA, so no valuation report is required. So please clarify??
2) For transfer of shares from resident to non resident is it required to take the date of remittance(money received date) as the date of transfer?
1) Valuation certificate from CA is required for first subscription.
2) Yes
We need to convert CCPS issued to FVCI under auto route now.
Whether any FEMA reporting is required at conversion time
Also it is said that the conversion price will attract gains u/s 47 of IT Act, if so whether TDS required to be collected from the FVCI.
As per my opinion FEMA reporting shall be requried becasue it is conversion of CCPS
Hi meenal, yr blog is really very informative. I also hv a query on FDI. If a company has two foreign shareholders and FCGPR has been filed in respect of their shares but still pending with RBI for some reason (KYC issue). Now can they transfer their shares to another non resident foreigner?
As per my view, after allotment of shares, the shareholder can transfer the shares to another. They don’t need wait till approval of RBI.
Can you please mention if permission of RBI is necessary if yes which form in case of transfer of shares of Indian Pvt ltd co. by NR entity(OCB) to another NR entity(OCB)?
will any tax be payable to Indian Gov..
Regarding transfer of shares from one NR entity (OCB) to another NR entity ( OCB) no approval of RBI shall be required. RBI approval will be required when there is transfer between on NR to resident India or vice versa.
Regarding taxation, I would advise you to ask your auditor regarding double taxation avoidance agreement. This will come under International law.
Hi Ma’am,
This is an issue I face from a regular basis and thought maybe you would be able to assist.
Whenever we do rights issue or private placement and if there is incoming FDI, many times it happens that money has come in extra on account of currency fluctuations. More often than not, it is small amounts like Rs. 200 – Rs. 1000. How do we treat such excess amounts? As if we go in for a refund, the paperwork for refunding such small amounts is very lengthy. I have been advised that we should ask the banks to write off the amounts, but I am not sure of how this works
This practical problem arises due to foreign exchange fluctuation. I would advise to get opinion from CA as well how to treat this excess amount in books of accounts.
Hello Meenal!
In case of Wholly Owned Subsidiary company, If we failed to submit FC-GPR and also allotment of shares and issuance of share certificates to RBI and the matter is more than 3 years old, what could be the possible penalty?
Thank you.
As per RBI Foreign Exchange ( Compounding Proceedings) Rules 2000, dated 26.5.2016, Penalty will be Rs. 10000/- + amount variable as per the amount to be reported on FCGPR.
Madam,
Pl. guide whether FC-TRS is required to be filed with RBI in case payment for transfer of shares is made by Transferee (Resident Indian) to transferor (NRI) in NRO account.
Officials of AD Bank are of the view that since payment is made in NRO account of transferor, payment is made within India and hence no need to file FC-TRS.
Kindly provide your valuable inputs in the matter.
As per my opinion, reporting to RBI in FCTRS will be required because this transfer is from NRI to Resident Indian.
hello mam,
I want to ask something. we have made private placement in private limited company of 9 lakh numbers Non cumulative cumpulsory convertible Preference Shares to the USA Company. The Amount of Issue was total 8,55,00,000/- whereas we have received Rs, 63,945/- Extra.
When i filed FCGPR Form The RBI officials raised the Query regarding the same. our Investors does not want the money back. they advised us to allot them further shares. I Have already filed all the forms with ROC. Now please throw the light that can I further allot them Shares as per Companies Act 2013 and what compliance i have to made.
Either Indian company can refund the excess amount received within 180 days from receipt of total funds or issue shares to USA company through private placement.
Madam ,I really appreciate your web site which is very useful for many investors and for our country.
A Lady doctor from U K wants to start a 100 bed hospital here since 100 % FDI is allowed in it. What are the procedures to get the approval ? How and when to transfer the fund to India? Regards
Sebi
Thank you for your comments. Please check whether the nature of activity falls under automatic or approval route. If it is falling under Approval route then company needs to file application to FIPB (Foreign Inward Remittance Board) and after obtaining approval, can invest in shares. If it falls under automatic route then, then she can directly invest in company and company shall report advance remittance by filing ARF ( Annual Report Format) within 30 days of receipt of funds and FCGPR with RBI within 30 days of allotment of shares to lady. The Lady shall invest money towards shares after incorporation of company in company’s bank. As per Companies Act 2013, the shares to subscriber of Memorandum shall be delivered within 2 months from the date of incorporation.
ARF stands for Advance Reporting Format
FIPB stands for Foreign Investment Promotion Board
yes
If an Indian private company redeems its preference shares issued to a foreign company and remits the amount, whether form FCTRS is required to be filed? AD Bank is asking for the same.
Whether redemption can be treated as transfer of shares?
Under the provisions of FEMA, an Indian company cannot issue redeemable pref shares to a foreign company. Only compulsorily convertible preference shares are allowed to be issued. Issue of redeemable pref shares amounts to ECB. Pl check, if the Indian company has complied with provisions of ECB before issue of redeemable pref shares,
Meenal,
Indian Company received FDI in the Month of March 2016 allotment made under private placement on May 2016. what will be the applicability of filing annual return to RBI(ANRFLA)? is filing of ANRFLA applicable for the F Y 2015-16 or F Y 2016-17?
Annual filing FLA is applicable for FY 2015-2016.
hello mam,
A foreign company want to hire indian employee in indian office for developing software and send through net online, no trading business is there and foreign company pay salary and other things, my question what foreign company need to do, either open pvt. ltd. company or branch office or liason office
It is advisable to have separate legal entity.
Dear Mam,
what are the consequence of delay in filing ARF & FC GPR…Suppose there is a delay of more than a year what are the consequence.
even though we have issued the shares within the time limit, bu have not eported the remittance through ARF & FC GPR
It will be treated as non compliance under FEMA and RBI will issue show cause notice and levy penalty and handle the process from case to case basis.
Hi
Company APL is based in India with promoter Director and Shareholders A and B. APL also have 100% Subsidiary WPL in India.
Now Promoter Directors have also set up three Companies in Dubai.
ASPLLC, WCPLLC and WIPLLC. As per law of Dubai they are 49% shareholding in these Companies and remaining 51% with local Individuals. All the Business of these 3 Companies managed by Indian promoters A & B with a blanket POA from the local Partners.
Now the Promoters A & B wish to transfer ownership of of the shares of the UAE based 3 Companies i.e ASPLLC, WCPLLC and WIPLLC to the Indian Company APL.
my question is what compliance and Procedure required to follow?
Thanks
FEMA compliance and Company law provisions shall be applicable.
Dear Mam,
Whether FEMA compliances to be complied if shares allotted to NRI,inliew of deposits receieved from him and the amount receieved from NRO a/c.
Yes Fema compliance are to be complied with if subscriber is NRI.
Hi, I have a few question based on the objections from e-biz in FC-GPR-:
A) who will issue KYC report for the the beneficiary, if the beneficiary and remitter are different entities.
B) Can i have the draft of NOC from the remitter of shares being alloted to the third party mentioning their relationship
C) We have received remittance of Rs.116000 instead of Rs.100000 (as capital) and want to use balance amount as share application for further allotment in june 16, we have shown it as share application in FC-GPR, now E-biz is asking for explanation letter, what we should write in the same?
A) KYC report will be issued by the Bank where remitter has his own account to the beneficiary.
B) I did not understand your question, please clarify me.
C) If there is difference in amount of remittance than the share application money, RBI needs explanation. The Company needs to provide explanation. But I think whatever is the amount credited towards funds of capital, that has to be reported within 180 days from the date of receipt of funds. You cannot keep balance set aside for further use.
Query regarding validity of the valuation report. I have received a valuation report for issue of shares on rights basis and within two months again going for the rights issue involving foreign shareholders… can i use the same valuation report as the valuations are the same.
You cannot use same valuation report because now there is subscription from foreign subscribers.
Hi Meenal,
Thanks for your blog. As I understand two certificates are needed for RBI-
1) FIRC
2) FMV valuation.
Second one needs to be submitted by a CA. Does a company require any other certificate from the CA?
FIRC, Valuation of shares price by CA, CS certificate for secretarial compliance as per Company law.
We have incorporate a Pvt Ltd company in India. Two investors are from China. They send their share capital money together using single bank to our company account. One of Investor banker doesn’t allow to send money overseas so they send using one Account. They the MOA subscriber.
Now problem is that Can i submit both investor details in ARF KYC form and FC-GPR even.
From 08.02.2016 onwards the reporting of Advance reporting and filing of FCGPR has been initiated online.
As per the facts of the case, firstly the company shall be required to receive share application money from two subscribers separately and not jointly. This is as per Companies Act 2013. Secondly, there shall be request to remitter bank to send remittance to company’s account for FDI purpose. Then the bank will allow send money.
Now in your case, please seek advise from company’s authorised dealer ( i.e. bank) to report advance remittance for this subscription received from one account.
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.
Thank you for your comment. You will get it soon.
Hello Mam,
We have filed the Reporting of Advanced Foreign Remittance with RBI is there any Physical Documents need to be sumitted?
From 08.02.2016, all documents required for Advance reporting and FCGPR are to be filed in scan format to RBI online. RBI has stop accepting physical documents.
Hello Mam
Do you have the format of the consent letter of both buyer and seller, Ca certificate format in case of issue of shares under fc trs at face value, and now it is made online, a little insight about it…
Thank you
There is no specific format of CA certificate. Normally the certificate specifies the reference of regulation / rules of FEMA and pricing details and the method used for price.
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.
As per my view, for pricing current fair valuation certificate would be considered as valid for submitting FCGPR.
Dear Ma’am,
Instead of capital infusion by equity, can ABC Inc. give a loan of that amount to ABC Pvt. Ltd (100% subsidiary of foreign company)? What are the provisions regarding the same in CA 2013 and what are the compliances to follow?
Loan from ABC INC to ABC Pvt. ltd shall be treated as External Commercial borrowings.
madam,
if indian company receives money from NRE Account, which bank shall issue FIRC?
The Bank which is receiving the funds from NRI will issue FIRC.
Hi Meenal,
I have a query in reference to transfer of shares of an indian company by a foreign party to another foreign party.
What all the Indian company will have to do for approving the said transfer?
FC-TRS will not be required. But, is there any document which the foreign party needs to execute for transferring the shares. Like an indian party will be required to execute SH-4, so is there any requirement as such for the foreign parties?
SH-4 is sufficient.
Very Informative blog. keep it up…!!!
Thank you
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.
If you are selling shares to foreign company then foreign company shall directly transfer equivalent amount to you and Indian company shall file FIRC , FCGPR and FCTRS form to RBI
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
Please file form 3 for change in capital contribution and change in business activities.
Hi Ms Menal Abhyankar,
I have the following query :
My Indian Company has recd $ 100 as Un-secured loan from a US company .The US company is still not a Share holder but a Director based in USA who owns the US company and is a Director in the Indian Company.
The Indian Company’s Bankers have asked us to submit copy of Board Resolutions and Bye laws ( MOA ) of both the US and the Indian Companies .
Is it correct and mandatory under RBI rules?
Pl advise.
Tks,
Yes
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
FCGPR has to be signed by Director/ Managing Director/ Secretary.
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.
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?
The company is required to reply to RBI letter along with the suggestion given by the AD bank and wait for further communication from RBI.
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.
Please read the procedure specified on my blog under the head- Foreign Direct Investment (FDI) in India wherein you will get procedure and compliance.
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
If the company is default the company has to explain the facts of delay to the Reserve Bank of India asap in return of notice and pay the penalty as levied.
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.
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.
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.
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?
No.
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?
Bank shall not amend FIRC once it is issued.
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.
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.
1. No. The company can use same current account for accepting remittance as FDI.
2. partly can be made
3. yes
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.
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.
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.
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.
The same procedure you will have to follow as explained in FDI in India Article.
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.
Working capital is not permitted.
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
If it is first subscription money towards MOA AOA, then valuation can be at normal face value.
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.
I think it would be ECB and RBI approval will be required.
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?
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.
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.
The charges of AD banks are different from bank to bank. you may check with few banks and compare.
Very Informative!! Very Useful… and that too in a very simple manner!!
Tahnks
Thank you
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
Please inform RBI about this fault and submit FCGPR again.
THANKS A LOT FOR PUBLISHING SUCH KIND OF INFORMATIVE ARTICLE HAVING EDUCATIVE VALUES.
Thanks for your comments
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.
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.
Madam,
This was helpful. I have applied to our banker for
FIRC , but it appears they are taking their own sweet time
in complying for issuing. In case there is a delay on their
part maybe we can go ahead and do the advance report
form to RBI within the time limit.
ok
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.
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
For refunding excess money, the company shall file form A-2 alongwith letter and copy of FIRC to RBI within 180 days from receipt of funds. This is to be submitted to RBI through an authorised dealer.
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.
If we have received money by way of NRO a/c still we have to file FCGPR form to AD?
AD has denied for filling the FC-GPR and UIN no.
Please confirm
Yes
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.
Sorry for late reply. Please follow the provision as per Companies Act 2013 and allot the shares and file FCGPR within 180 days from the date of receipt of funds
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.
FLA Return is required to be filed by company if there is any FDI as well as issue of shares to foreign holding company. In your case, the company needs to file FLA to RBI.
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.
NRI have to follow the procedure as per FEMA for reporting advance remittance. Advance reporting to RBI shall be made within 30 days of receipt of funds from NRI.
Thank you for the reply Ma’m. But, in my case there is no FIRC so what could be the enclosures with Annexure 6 and/or FC-GPR.
Sorry for late reply. if there is no FIRC still company can report to RBI within 30 days of receipt of remittance with explanation that FIRC is not issued by the Authorised dealer.
MAAM,
What if we ge share application from NRI from NRE account we do not get firc copy from bank how we attach firc copy to advance reporting???
Even though remittance from NRE account, the FDI policy compliance has to be followed by company.
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?
An advance shall not be treated as deposit.
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.
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
As far as FEMA is concern, it will be always advisable to check the penalty for delay in filing form FC-GPR by filing application with RBI.
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.
Registrar of companies will send notice of show cause to the company:- why it failed to pay share application money?
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
FLA to be filed by the Indian company in which there is foreign direct investment.
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.
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.
Thank you for valuable guidance.
The company is Pvt Ltd company.
So it can accept unsecured Loan from Shareholder / Directors.
yes company can accept loan from shareholders/ directors.
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.
I cannot answer this question because there is lot of information required from you. Please call me.
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.
The Private limited company shall be required to open Current account and not Escrow account.
Schedule V, Section 197 is applicable to Public limited company only and not to Private Limited company.
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.
IF USA based company shall be shareholder of Indian company then FDI as per RBI shall be applicable.
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?
FDI amount can be kept in company’s bank account and it is not necessary to keep FDI amount in separate bank account till shares are issued.
Madam,
Your blogs are useful for new learners.Very useful blog
Thanks!!
Hii madam, your blogs are really appreciable.
Thanks for your comment.
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.
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.
I think its a very good presentation. Ques and answer section was giving more clearity on provisions.
thanks for comment
Great Help Mam..!! keep it up
Thanks!!
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.
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.
Well presentation. i must appreciate. the blog is very well in the way everything is presented.
Thanks for your comment
Can the FDI remittance in equity be done in INR by foreign national
Sorry for the delayed reply. Yes FDI remittance in equity can be made in INR by foreign national.
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.
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.
Thanxs for response and guidance.
You are welcome!!
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
As per FEMA company will file file Form FC- TRS to RBI and keep signature ready on share transfer form.
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?
The company shall be required to file FC-TRS to RBI. The person who has remitted the amount towards share transfer, shall give details to his banker and the receiving bank will issue FIRC.
Thank you.
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.
Madam,
Thank You for your clarification.
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.
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
Thanks for your comment.