Priyanka Gera

Priyanka GeraThe Reserve Bank of India had issued Notification No. FEMA 20 /2000-RB dated 3rd May 2000 on Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000to prohibit, restrict or regulate, transfer or issue security by a person resident outside India.

These regulations have been made and effect from June 1, 2000 under the Foreign Exchange Management Act,1999 and are applicable on all types of Capital, i.e., equity shares, preference shares, convertible preference shares and convertible debentures. An Indian company issuing shares or convertible debentures in accordance with the said Regulations shall submit to Reserve Bank of India (RBI):

  1. an intimation not later than 30 days from the date of receipt of the amount of consideration
  2. a report in form FC-GPRnot later than 30 days from the date of issue of shares together with the prescribed documents

The said regulations have also defined two types of routes, i.e., Automatic route and Approval route. Under Automatic Route, Government approval is not required which is the case under approval route. However, these routes are entirely depending upon the list of activities which an Indian/reporting company is undertaken.

All the reporting requirements were to be done in physical form prior to RBI’s circular on Foreign Direct Investment –Reporting under FDI Scheme on the e-Biz platform dated February 12, 2015. Post this circular, Indian Companies were enabled to file returns with the Reserve Bank of India on the e-Biz platform as an additional facility viz.

  • Advance Remittance Form (ARF) – used by the companies to report the foreign direct investment (FDI) inflow to RBI; and
  • FCGPR Form – which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow.

RBI has recently issued a circular on Foreign Direct Investment –Reporting under FDI Scheme, Mandatory filing of Form ARF, FCGPR and FCTRS on e-Biz platform and discontinuation ofphysical filing from February 8, 2016 dated February 1, 2016 on the reporting of Foreign Direct Investment (FDI) only in online mode through e-Biz portal will be acceptedand the physical filing of the following forms will be discontinued from February 8, 2016 onwards.

  • Advance Remittance Form (ARF) which is used by the companies to report the FDI inflows to RBI;
  • FCGPR Form which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow; and
  • FCTRS Form which is submitted to RBI for transfer of securities between resident and person outside India.

After this online facility of submission of documents, FDI reporting would be easier for Indian Companies. However, practicality will be seen post February 8, 2016 once all the reporting is made online and an option of submission of physical documents will no more be available.

List of activities or items for which automatic route of Reserve Bank for Investment from Persons Resident Outside India is not available

  1. Banking
  2. NBFC’s activities in Financial Services Sector
  3. Civil Aviation
  4. Petroleum including exploration/refinery/marketing
  5. Housing & Real Estate Development sector for investment from persons other than NRIs/OCBs.
  6. Venture Capital Fund & Venture Capital Company
  7. Investing companies in Infrastructure & Service Sector
  8. Defence and Strategic Industries
  9. Atomic Energy & related projects
  10. Print Media
  11. Broadcasting
  12. Postal services
  13. Agriculture (including plantation)

Disclaimer

This document is intended to give an update on IEOF rules and should not be regarded as offering a complete explanation of the matters referred to. The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. You are requested to seek professional guidance and advice before acting on any of the matters dealt with in this document.

(Author can be reached at Pri.gera05@gmail.com)

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