In alignment with the Indian Government’s continuing efforts to bolster foreign investment and ease of doing business in India, the Reserve Bank of India (RBI) issued an important circular A.P. (DIR Series) Circular No.30 on 7th June, 2018 with the aim of simplifying reporting under the Foreign Exchange and Management Act, 1999 (FEMA).
Through the said Circular, RBI announced two new major developments in the extant reporting structure of various types of foreign investment in India. These are:
|Single Master Form (“SMF”)||Integrates the reporting requirements for Foreign Direct Investment (FDI) in India, irrespective of the Instrument through which Foreign Investment is made.||To be made available w.e.f. 1st August,2018|
|Entity Master Form (“EMF”)||One-time reporting of all form of foreign investment in all Indian Entities||To be filed online between 28th June, 2018 and 12th July, 2018|
In order to implement the announcement, RBI has introduced an online application: FIRMS (Foreign Investment Reporting and Management System) which would provide for the SMF. The application is made available online in two phases:
1st phase– the first module viz. the Entity Master- available to the public for data entry from June 28, 2018 (1:00 pm) till July 12,2018. (Dealt with in detail at a later stage)
2nd phase– the second module viz. containing 9 reports would be made available online w.e.f. 1st August, 2018. With the implementation of SMF:
DETAILED ANALYSIS OF 1st MODULE-Entity Master Form (EMF)
Definition of ‘Entity’
Entities shall provide data with respect to all foreign investments received, irrespective of the fact that the regulatory reporting to the Reserve Bank for the same has been made or not and whether the same has been acknowledged or not.
“Entity User” Registration Process
Creation Of Entity Master
Step 1: Logging on to the Entity master
Step 2: Filling Entity particulars
Step 3: Filling Foreign Investment in Company/LLP
1. Enter all Foreign Investment received by the entity since the date of incorporation. Details of each Issue / transfer (and not investor wise) have to be filled in this page, one after the other.
Fully diluted basis means the total number of shares that would be outstanding if all possible sources of conversion are exercised. It includes:
1. Equity shares: As equity shares
2. CCDS/ CCPS: Equivalent Equity shares (maximum)
3. Share warrants: Equivalent Equity shares considering 100% exercise upfront
4. ESOPs: Equivalent Equity shares considering 100% exercise upfront
Note: If a start-up company has issued, convertible notes the same shall not be included in the paid-up capital on fully diluted.
2. The entity should also report indirect foreign investment received by it.
Step 4: After all the issues / transfers have been added, click the declaration check box to enable submission of the entity master.
Step 5: Submit the form. Once the details have been submitted it will be available on the Entity Master page.
OTHER POINTS TO REMEMBER
E-mail: [email protected]
Telephone Number (022 – 22601000 – Extn: 2617).
NON-COMPLIANCE WITH EMF: Indian entities not complying with this pre-requisite will not be able to receive foreign investment (including Indirect Foreign Investment) and will be non-compliant with Foreign Exchange Management Act, 1999 and Regulations made thereunder.
COMMENTS: The EMF is in essence a diligence check being undertaken by the RBI on all Indian entities which have any form of foreign investment to ascertain whether they have complied with reporting requirements under FEMA till date.
RBI has initiated the EMF with the intent to consolidate all historical data of all form of foreign investment in all Indian entities in one single form (the EMF) and on one single platform (online).
The integration of the extant reporting structures is a positive move made by RBI to simplify and rationalize reporting for foreign investment in India. It is also aimed at ensuring that there is consistency and accuracy of data on foreign investments reported.