FDI and RBI Compliances

Foreign direct investment is one of the major monetary source for economic development in India.  Foreign companies invest in India with a view to take advantage of cheaper wages and changing business environment of India. The foreign capital keeps flowing to the Indian economy and it’s contributing towards the economic development. The Government has taken so many favourable policies in the recent years towards foreign investment in various industries by relaxing the foreign investment policies and regimes.  As a part of bringing foreign investment to India, the entity should adhere to the RBI guidelines. The important filings which are applicable at the time of bringing foreign capital are as follows:-

When a company receives foreign investment and against such investment, the company allots shares to such foreign investor, then it is the duty of company to file details of such allotment of shares with RBI in Form FC-GPR within 30 days of such allotment.

1. Declaration by the Non-resident Investor.
2. KYC Form in respect of Non-resident Investor.
3. Copy of FIRC.
4. Valuation Report by a Chartered Accountant or SEBI registered Merchant Banker.
5. Consent Letter duly signed by the seller and buyer or their duly appointed agent and in the latter case the Power of Attorney Document.
6. The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India.
7. Declaration from the buyer to the effect that he is eligible to acquire shares / compulsorily and mandatorily convertible preference shares / debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.

Whenever any transfer of shares takes place between a resident and a non-resident, the resident individual or the entity has to report the transaction to RBI by filing of Form FC-TRS. The reporting of Form FC-TRS should be done within a period of 60 (Sixty) days from the date of receiving the money.

1. Declaration by the Non-resident Investor.
2. KYC Form in respect of Non-resident Investor.
3. Copy of FIRC.
4. Valuation Report by a Chartered Accountant or SEBI registered Merchant Banker.
5. Consent Letter duly signed by the seller and buyer or their duly appointed agent and in the latter case the Power of Attorney Document.
6. The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India.
7. Declaration from the buyer to the effect that he is eligible to acquire shares / compulsorily and mandatorily convertible preference shares / debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.

The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted directly by all the Indian companies which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who holds foreign Assets or Liabilities in their Balance Sheets every year by July 15.

• Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.

• If the company has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the latest year but the company has outstanding FDI and/or ODI, then that company is also required to submit the FLA Return every year by July 15.

• The FLA Return has to be submitted in excel based format, which has inbuilt checks and validations, any other attachment should not be forwarded along with the FLA return.

• After filling in the requisite details, the Company can file the FLA Return by e-mailing the same to the RBI at fla@rbi.org.in from an official e-mail address of any authorized person.

• On submission of the FLA return, an acknowledgement will be forwarded to the E-mail address of the authorised person.