Short Summary:
As per Reserve Bank of India, There are various ways of investment in India by foreigners and there are different forms for each type of investment like: Capital contribution in Company, LLP or investment in other investment vehicles.
To make it convenient, ease of doing business RBI will introduce a “Single Master Form (SMF) subsuming all the existing reports. The focus of RBI is on integrating the foreign direct investment reporting system and RBI has introduced TWO FORMS for this. One of them is Entity Master Form.
Entity Master Form:
A. Due date of Filing of e-form ‘Entity Master Form”
The form EMF shall be available between June 28 (at 1:00 pm) and July 12, 2018. In this short spam all the Companies having foreign investment ever have to file EMF.
B. What is the link for website to file EMF?
Uniform Resource Locators (URL) of the application is https://firms.rbi.org.in.
C. Whether Company has to file EMF in case Indian company having investment in foreign?
Extract of RBI Notification “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 no”
As per above mentioned extract, “Entities shall provide data with respect to all Foreign investment received” therefore, one can opine that EMF is applicable only when foreign person having investment in India.
D. If a Company doesn’t having any foreign investment as on date, however it had foreign investment in previous years. Whether Company has to file EMF?
Extract of RBI Notification “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 no”
As per above mentioned extract, it is no where mentioned that company having FDI as on date of notification of this circular have to file EMF. However mentioned that “Entities shall provide data with respect to all foreign investment RECEIVED”.
One can opine that if a company has received Foreign Director/ indirect investment in past have to file EMF with RBI.
E. Whether Company has to file EMF for details of transfer shares to foreigner or from foreigner?
As per Instruction Kit of EMF, Company has to fill the details of all the transfer of shares to foreigner or from foreigner.
F. Whether Company has to give details of foreign investment as on date or foreign investment since incorporation?
As per Instruction Kit of EMF, Company has to enter all Foreign Investment received by the entity since the date of incorporation. (Details of each Issue / transfer).
G. Whether Company has to mention Transaction wise details or investor wise details?
As per Instruction Kit of EMF, Company has to give details of each Issue / transfer not investor wise. However, details shall be entered transaction wise.
H. If a Company having foreign investment indirectly, whether such company has to file EMF?
As per Instruction KIT of EMF, The Indian companies who have made downstream investment in another Indian company for which it is considered as indirect foreign investment in terms of Regulation 14 of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 dated November 7, 2017 and as amended from time to time, shall inform the same to the Indian investee company for the purpose of providing details of indirect foreign investment in Entity Master..
Therefore, one can opine that Company have to file EMF for indirect investment also as mentioned above.
I. Whether Company has to mention details of only shares or other securities to be convertible in shares?
Company has to mention the details of paid up share capital on a fully diluted basis.
Fully diluted basis means: 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. (If the conversion ratio is not fixed upfront, the company may enter the maximum number of equity shares possible upon conversion in compliance with the pricing guidelines)
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.
5. The Indian companies who have made downstream investment in another Indian company for which it is considered as indirect foreign investment in terms of Regulation 14 of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 dated November 7, 2017 and as amended from time to time, shall inform the same to the Indian investee company for the purpose of providing details of indirect foreign investment in Entity Master.
Therefore, one can opine that Company has to mention details of shares and instrument outstanding to be convert in shares.
J. Who is an Entity?
- A company within the meaning of section 1(4) of the Companies Act, 2013
- A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
- A startup which complies with the conditions laid down in Notification No. G.S.R 180(E) dated February 17, 2016 issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India
I. Important Notes for Entity Master
- All details must be provided in one go.
- Only when all the mandatory fields have been filled, the submit button is enabled.
- The RESET button will reset the complete form.
- Once the details have been submitted the Entity user can modify the details.
- The onus of the integrity of the data entered is on the Entity user.
II. Type of Instruments to be mentioned in the form:
- Equity Shares, CCPS, CCDs, Share Warrants, Partly Paid up Shares
III. Description of the allotment/transfer :
- Whether Rights / Bonus / Share Swap / Merger / Demerger / ESOP/ NR to R transfer/ R to NR transfer etc.
Note:
Complete detail that how to fill the form “EMF” has been given by RBI in the form of FAQ’s.
https://rbi.org.in/Scripts/femaview.aspx?femaid=64
Most Important
Indian entities not complying with these instructions will Not Be Able To Receive Foreign Investment (including indirect foreign investment) and will be treated as non-compliant with Foreign Exchange Management Act, 1999 (FEMA) and regulations made thereunder and liable for action as laid in FEMA or the regulations made thereunder.
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