RBI vide circular dated December 20, 2017 updated the Master Direction for reporting under FEMA. The key highlights of the Master Directions are: Foreign Direct Investment in India is undertaken in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 issued vide Notification No. dated November 07, 2017, amongst other things, prescribes the modes of investments i.e. issue or acquisition of capital instruments, manner of receipt of funds, pricing guidelines and reporting of the investments made under it. The reporting formalities for foreign investment are given below
Reporting for issue of Capital Instruments
∙ Reporting of Inflows
The actual inflows on account of issue of capital instruments should be reported by the AD branch in the R-returns in the normal course. ⎫ An Indian company which has received amount of consideration for issue of capital instruments and where such issue is reckoned as Foreign Direct Investment under FEMA, shall report such receipt (including each upfront/ call payment) in ARF to the Regional Office concerned of the Reserve Bank, not later than 30 days from the date of receipt.
- Reporting of Capital Instruments
An Indian company issuing capital instruments to a person resident outside India, and where such issue is reckoned as Foreign Direct Investment under FEMA, shall report such issue in Form FC-GPR to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, not later than thirty days from the date of issue of the capital instruments.
Issue of bonus or rights shares to persons resident outside India directly or on amalgamation/ merger with an existing Indian company, as well as issue of shares on conversion of ECB/ royalty/ lump sum technical know-how fee/ import of capital goods by units in SEZs has to be reported in Form FC-GPR.
∙ Reporting of Transfer of Shares
Form FCTRS is required to be filed for transfer of capital instruments by way of sale in accordance with FEMA between: (i) a person resident outside India holding capital instruments in an Indian company on a repatriable basis and person resident outside India holding capital instruments on a non-repatriable basis; and (ii) a person resident outside India holding capital instruments in an Indian company on a repatriable basis and a person resident in India. The onus of reporting is on the resident transferor/ transferee or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may be.
Reporting of ESOPs and sweat equity shares
An Indian company issuing sweat equity shares/ employees’ stock option/ shares issued against exercise of stock option to persons resident outside India who are its employees/ directors or employees/ directors of its holding company/ joint venture/ wholly owned overseas subsidiary/ subsidiaries shall submit FormESOP to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company operates, within 30 days from the date of issuing sweat equity shares/ employees’ stock option/ shares against exercise of option, as the case may be. All FIRCs and KYC are to be filed as necessary documents along with form ESOP
Delays in reporting
The person/ entity responsible for filing the reports provided in Part IV of this Master Direction shall be liable for payment of late submission fee for any delays in reporting
*As carried by Lex Favious in its Newsletter