FOREIGN DIRECT INVESTMENT- COMPLIANCES
EVERY company having foreign investment(FDI), is required to report Reserve Bank Of India. Below two conditions need to be looked in to in case of FDI .
Foreign investment must be in compliant to FDI policy.
Securities issued must be in accordance with the Foreign Exchange Management.
As announced by the Reserve Bank of India in the First Bi-monthly Monetary Policy Review dated April 5, 2018 announced that, with the objective of integrating the extant reporting structures of various types of foreign investment in India, it will introduce a Single Master Form (SMF) subsuming all the existing reports. The filing of SMF would be online.
Under the head Single Master form FC-GPR, FC-TRS, LLP-I, LLP-II, CN, ESOP, DI, DRR, InVi are to be filed and submitted. The Reserve Bank of India (the “RBI“), on September 1, 2018, released a user manual (the “SMF Manual“) to clearly set out the procedure for filing a single master form (the “SMF“), which it introduced on June 7, 2018, to integrate the existing reporting norms for foreign investment in India.
What is FC-GPR?
Form FC-GPR: Issue of capital instruments by an Indian company to a person resident outside India
It is a form issued by RBI under Foreign Exchange Management Act,1999. When the company receives the foreign investment and against such investment the company allots shares to such foreign investor then it is the duty of the company to file details of such allotment of shares with The RBI within 30 days and for that company has to use the form FC-GPR (Foreign Currency- Gross Provisional Return) for submitting details with RBI.
Details that needs to be obtained before starting the process of filing the Form:
Within 30 days from the date of issue of securities, the company shall file the Form FC-GPR with the RBI in Single Master. Before reporting the transactions the applicant needs to obtain the following details to avoid any hassle while filing the form.
Unique Identification Number from RBI by reporting of Advance Foreign Remittance.
KYC Report for the beneficiary if the beneficiary and remitter are different entities.
Certificate from SEBI registered Merchant Banker/ Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
Statutory Auditor Certificate.
LRN(Loan Registration Number) allotted.
Copy of FIPB approval (if required).
Details of Transfer of shares if any.
No Objection certificate from the remitter for the shares being allotted to the third party mentioning their relationship.
Letter from the foreign investor explaining the reasons for making subscription to shares by the remitter on his behalf.
Copy of Agreement/Board resolution from the investor company for issue and allotment of shares to the foreign investors, other than remitter.
Reason for delay in submission(if required.)
Detailed steps as to how to file Form FC-GPR with RBI:
Now that all the above information and documents are obtained, The Form FC-GPR can be filed using the following steps:
Step 1: Registration for Business User.
Step 2: Logging in to firms.
Step 3: Logging in to SMF and reach out to your workspace.
Step 4: Select the Return type.
Step 5: Common Investment details.
Step 6: Issue Details.
Step 7: Foreign Investment Details.
Step 8: Amount of Issue.
Step 9: Particulars of Issue.
Step 10: Shareholding Pattern.
Step 11: Submitting the Form.
Step 1- Registration for Business User:-
The applicant reporting for the transaction in Single Master form at FIRMS. A business user can use his login credentials for only the entity that has authorized him/her to report the transactions. If the person wants to act as a BU for another entity, he must register himself separately.
For registering as a business user go to the FIRMS website at https://firms.rbi.org.in/
On the website open the Registration or for New Business User.
Now fill up the details in the form namely.
User name (which should be unique)
IFSC Code of the Bank branch to whom the reporting would be made.
Authority letter as an attachment
After filling the details the BU has to submit the form.
After BU submits the registration form, the same will have to be verified by the AD Bank Branch concerned. The approval/ rejection of the same would be communicated through email notification to the BU.
Step 2: Logging in to firms:-
For logging in to FIRMS go to the website https://firms.rbi.org.in
There by using User Name and default password given via an email, the BU will be able to set a new password.
Logging in to FIRMS will lead the BU to his/her workspace.
Step 3: Logging in to SMF and reach out to your workspace:-
After completing the submission process for the form of registration of new business user, you will be able to login to the firms (website for the same is https://firms.rbi.org.in) now you can Login into SMF and reach your workspace (ScreenShot).
Now Click on the left navigation button you will be able to see many options and from that select Single Master Form (ScreenShot).
Step 4: Select the Return type- Form FC-GPR:-
On single Master Form Click on the drop down menu “Return Type”where you will be able to see different types of forms Select “Form FC-GPR” and click on the Add new return.The user will be taken to form FC-GPR. Where certain details will be pre-filled like CIN, Company name, Pan Number etc. while some details like entry route and applicable sectoral cap/statutory ceiling will have to be filled (ScreenShot).
Step 5: Common Investment details.
Then you will have to file the common investment details. These details are common to all the returns that can be reported in SMF In FC-GPR form Fill up the common investment details such as shareholding pattern, Date of issue of shares etc.
Step 6: Issue Details:-
Issue details such as Date of Issue, Nature of Issue, Initial FC-GPR Reference No. in case of subsequent filing.Whether the change in the shareholding pattern due to this transaction being reported has already been accounted in the pre transaction shareholding pattern.
Step 7: Foreign Investment Details:-
Foreign investors details such as Number of investors General details like Name Address Country of residence Constitution/nature of the investing entity (Specify whether)
Step 8: Amount of Issue:-
In the FC-GPR form the next thing you will have to fill in the total amount of inflow and the total amount for which the capital instruments have been issued.
Step 9: Particulars of Issue:-
The next step for reporting the Form FC-GPR to the RBI the next set of details would be particulars of issues.
There would be an auto populated table for the consolidated particulars of issue.
Fair value of issue in rupees to be filled in as per the valuation certificate issued by the authorised person along with the attachment as “valuation certificate”.
And lastly, there would be a declaration by the BU.
Step 10: Shareholding Pattern:-
Value of equity shares (on a fully diluted basis) other than Foreign Portfolio Investment and indirect foreign investment or Value of Capital contribution/profit shares, Foreign Portfolio Investment, and Indirect foreign investment- Value of equity shares (on a fully diluted basis)
Pre transaction values are auto-populated from the Entity Master (tab 3)
Post transaction values are auto-calculated based upon the details provided in the form. Post transaction=Pre transaction value of shares + Value of shares reported in the form.
The Business user shall ensure that the details are correctly filled in the form, so that the shareholding pattern which is auto- calculated is correct.
Step 11: Submitting the Form.
After filling in all details, click on the Save and Submit for submitting the form.
List of documents to be submitted along with Form FC-GPR:-
Declaration : As per the format given in the RBI user manual. To be attached as “other attachments”. (you can find the format at the end of this note.)
CS certificate: As per the format given in the RBI user manual. To be attached as “other attachments”. (you can find the format at the end of this note.)
Valuation certificate: As prescribed and applicable under FEMA 20(R). To be attached at “Valuation certificate”. For rights issue, valuation certificate is not required. A declaration (plain paper) may be attached that the rights issue to persons resident outside India is not at a price less than the price offered to persons resident in India.
Relevant acknowledgment letters for FC-TRS/FC-TRS filed for the original investment for rights or bonus issue. To be attached as “other attachments”
Board resolution : Only the relevant extracts. To be attached as “other attachments”
Memorandum of Association : if applicable. Relevant extracts to be attached as “other attachment”.
Merger/ Demerger/ Amalgamation: relevant extracts to be attached at the specified attachment “relevant approvals from the competent authority”.
FIRC and KYC : at the specified attachments.
Note that only following securities are considered under FDI.
Convertible Preference shares.
FAQs regarding the FC-GPR:
Q-1 Whom should I contact first with respect to Business User registration and forms filed in SMF?
A1. Contact your Authorised Dealer Bank first. Business User registrations and forms filed in SMF are processed at AD level.
Q2. I have registered as an Entity user but cannot see option for filing Single Master Form (SMF)?
A2. For filing in SMF, one has to register as a Business User, which is separate from Entity User.
Q3. I am filing a form in SMF but the pre transaction values in Shareholding pattern are not correct?
A3. The pre transaction values in the Shareholding pattern are fetched from the details in the Entity Master. Please verify the details in the Entity master.
Q4. I have filed one form in SMF, but have not received acknowledgement?
A4. All Forms in SMF are processed at AD bank level. Contact your AD bank to whom the reporting was made (as per the IFSC chosen at the time of Business User registration).
Q5. I have filed one file in SMF, but I cannot file any other form and the error pop-up “Submitted forms are under approval”.
A5. All forms in SMF are integrated with the Entity master and updates the shareholding pattern in the entity master upon acknowledgement. Therefore, the previous forms has to be completely processed before second form can be filed. Please check with your AD bank.
Q6. What is the time limit for filing of Form FC-GPR?
A6. You need to file the Form FC-GPR within 30 days of allotment of shares.
Q7. I have more than 1000 shareholders to whom bonus or rights issue is made. How do I make filing in FC-GPR-SMF?
A7. FC-GPR is required to be filed where the foreign investment is reckoned as an FDI i. e. only for those non-resident investors where the original investment is FDI. File form FC-GPR in SMF accordingly.
However, it is to be noted that merely filing of the Form FC-GPR does not discharge an entity of its duties in regards to compliance with the relevant laws, the same shall be considered complete only after the approval of RBI.
Format of the declaration:
DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE INDIAN COMPANY:
We hereby declare that:
We comply with the procedure for issue of capital instruments as laid down under Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017, as amended from time to time.
The investment is within the sectoral cap / statutory ceiling permissible under the regulations, ibid and in compliance with the attendant conditions.
The capital instruments issued under a scheme of merger and amalgamation of two or more Indian companies or reconstruction by way of de-merger or otherwise of an Indian company is duly approved by a court in India. (strike- out if not applicable)
The foreign investment received and reported now will be utilized in compliance with the provision of a Prevention of Money Laundering Act 2002 (PMLA) and Unlawful Activities(Prevention) Act, 1967 (UAPA). We confirm that the investment complies with the provisions of all applicable Rules and Regulations
We enclose the following documents in compliance with these regulations:
(i) A certificate from our Company Secretary as in the specified format.
(ii) A certificate from SEBI registered Merchant Banker / Chartered Accountant / cost accountant or any other person as authorized under FEMA 20 (R) indicating the manner of arriving at the price of the shares issued to the persons resident outside India (wherever applicable)
(iii) All other necessary documents as applicable to the issue.
(Signature of the Applicant)* :___________________________________________
(Name in Block Letters) :___________________________________________
(Designation of the signatory) :___________________________________________
(* To be signed by Managing Director/Director/Secretary of the Company)
Format for Company Secretary Certificate:
CERTIFICATE TO BE FILED BY THE COMPANY SECRETARY/PRACTICING COMPANY SECRETARY OF THE INDIAN COMPANY
In respect of the details as mentioned as mentioned above, we certify the following:
(i) All the requirements of the Companies Act, 2013 have been complied with.
(ii) Terms and conditions of the Government approval, if any, have been complied with.
(iii)The company is eligible to issue capital instruments/receive capital instruments under Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017, as amended from time to time.
(iv)The company has all certificates issued by authorized dealers in India evidencing receipt of amount of consideration in accordance with Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017, as amended from time to time.
(v) The Investment Agreement/ Shareholder Agreement between the investor and the investee company is in compliance with the provisions of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017, as amended from time to time.
(Name & Signature and Seal of the Company Secretary/practicing Company secretary)