Documentation for Foreign Direct Investment (FDI) Reporting

CA Shaurabh Shah

What is FDI?

– FDI refers to Foreign Direct Investment in `equity share or fully and mandatorily convertible preference shares or fully and mandatorily convertible debentures’ (FDI Instruments) of an Indian company by non resident entities.

Reporting requirements under FDI scheme as per extant RBI guidelines

– Indian companies are required to report the details of the amount of consideration received for issuance of FDI instruments. Advance reporting format along with KYC report on the Non-resident investor need to be reported through Authorised Dealer Category – I Bank (AD Bank) to RBI within 30 days from the date of receipt of consideration.

– Indian Companies are also required to issue the FDI instruments / refund the advance consideration to the Non-resident investor within 180 days from the date of the receipt of consideration. In case of issue of FDI instrument the same is required to be reported in form FC-GPR through AD Bank to RBI within 30 days from date of issue of instruments.

Documentation for reporting of inward remittance received for issuance of FDI Instruments

– Advance reporting form (Annexure II) duly filled & signed by the client

– Certified copies of FIRC/s, evidencing receipt of remittance. Purpose of FIRC should be in line with the transaction.

– KYC report on Non-resident investor from the overseas bank remitting the amount

Documentation for form FC-GPR – Issuance of FDI instruments

– Form FC-GPR (Annexure I) duly filled & signed by Managing Director/Director/Secretary.

– Certificate from company secretary as per guidelines

– Certificate from Category I Merchant Banker or Chartered accountant for valuation of FDI Instrument as per the RBI guidelines

– Certified copies of FIRC’s

– Unique Identification numbers allotted for all the remittances received as considerations for issuance of shares/debentures. In absence of the same, RBI acknowledged copy of the advance reporting submitted earlier is required.

Common discrepancies in Advance Reporting form noticed by the AD Banks (Annexure II)

– Annexure II incompletely filled: Annexure II needs to filled correctly with the relevant details. No field should be left blank.

– Missing FIRC/s copies: Please attach the attested copies of FIRC/s with the Annexure II.

– Incorrect purpose in FIRC: Customers should advise the remitter to correctly state the purpose of remittance as “Application money for equity shares/preference shares/debentures under Automatic/Approval Route”.

Common discrepancies in form FC-GPR (Annexure I)

– Description of main business activity & NIC code: Indian company (beneficiary) needs to ensure that description of main business activity mentioned in the form is in line with the activity mentioned in the memorandum of association. NIC code should be as per attach list.

– Date of reporting of inflows (refer point 4 (d) of form FC-GPR): This is date of reporting to RBI i.e. date of RBI acknowledgement on the Annexure II

– Valuation method: Discounted Cash Flow (DCF) method needs to be followed for valuation of shares of unlisted Indian companies. DCF method needs to be followed even for the newly formed companies. In case of listed companies price of shares issued shall be on the basis of SEBI guidelines.

– Amount mentioned on FIRCs does not tally with the total amount of FDI instrument issued: This may be due to issuance of FDI instrument for partial amount of application money received. Client needs to provide clarification on status of balance funds.