Summary: FDI reporting in India is governed under the Foreign Exchange Management Act (FEMA), 1999, and is facilitated through the Reserve Bank of India’s (RBI) Foreign Investment Reporting and Management System (FIRMS). Form FC-GPR is a crucial document for reporting the issuance of securities to foreign investors within 30 days of allotment. The form is mandatory when a company incorporates with non-resident shareholders or issues shares like equity, convertible preference shares, and convertible debentures. Key documents required include KYC, FIRC from the bank, a company secretary certificate, SEBI registered merchant banker certificate, and various board resolutions and declarations. Companies must log into the FIRMS portal, complete the form with necessary details, and submit it to generate a Foreign Remittance Number (FRN). A penalty is imposed for delays in filing beyond 30 days, ranging from 1% of the investment amount to a maximum of Rs. 5,00,000.
Introduction
As per section 6 of Foreign Exchange Management Act, 1999 (“FEMA”) the Reserve Bank of India (“RBI”) permit certain capital account transactions with respect to acquisition of shares, transfer, borrowing, lending, giving guarantee, deposits, export, import etc. to a person resident outside or transactions between resident and non-resident. The RBI issues certain regulations and directions with respect to the capital account transactions.
RBI has issued guidelines and directions to report such instances in particular forms. Since 2018, RBI has introduced an online application/portal FIRMS (Foreign Investment Reporting and Management System) which would provide a Single Master Form (“SMF”) subsuming all existing reports. FIRMS was made available in two phases. In the first phase the first module viz. Entity Master was made available online. In the second phase the second module was made available. With the impletion of SMF, the reporting of FDI, which was a two-step procedure viz., ARF and FC-GPR were merged into a single revised FC-GPR. In the year 2018, various forms were made available on FIRMS for reporting such as FC-TRS, FC-GPR, LLP-1, LLP-2, ESOP, DRR and DI. Form InVi was made available for filing in SMF in the year 2019. I have already discussed in an separate article on the creation of Entity user and Business User on Firms. Request you to kindly refer the same.
What is FC-GPR?
Foreign Currency-Gross Provisional Return (FC- GPR) is a return filed by a company to be submitted with RBI for reporting issue of eligible securities/instruments to overseas investors against the FDI received in India within 30 days from the date of allotment of securities.
When is FC-GPR to be reported?
Below are the instances wherein the company is required to file form FC-GPR:
1. In case of incorporation, the shareholder is a non-resident
After incorporation a Bank account is opened and the subscribers to the Memorandum are to deposit the amount in the bank account. As per FEMA, there are no timelines for depositing the subscription amount for newly incorporated company, however as per the Companies Act, 2013 (“CA, 2013”) it is mandatory for the subscribers to bring in the subscription money with 180 days from the date of incorporation.
2. In case of further issue of shares
Only the following securities are covered under the FDI
- Equity shares
- Convertible Preference Shares
- Convertible Debentures
Investment in any other instrument shall be treated as borrowings and shall be considered as ECB and is required to fulfill ECB guidelines.
3. Documents/Information required at the time of filing of FC-GPR
- Unique Identification Number which is given once reporting of Advanced foreign remittance has been done to RBI
- Copy of KYC
- Copy of FIRC from AD Bank
- Certificate from Company Secretary at all the requirements of the Companies Act, 2013 has been complied with. In case a Company has appointed a Company Secretary, then such Company Secretary may issue such Certificate. Otherwise the Company has to procure such certificate from the Practicing Company Secretary
- 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.
- Declaration from Director
- Board resolution for Allotment of Securities
- List of Allottees
- Statutory Auditor Certificate
- 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.
- 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 reason for making subscription to shares by the remitter on his behalf.
- Copy of agreement/Board resolution from the investee company for issue and allotment of shares to the foreign investor, other than the remitter
- Details of Transfer of shares if any.
- LRN(Loan Registration Number) allotted
- Copy of FIPB approval (if required)
- Merger/ Demerger/ Amalgamation: relevant extracts to be attached at the specified attachment “relevant approvals from the competent authority”.
- Memorandum of Association: if applicable. Relevant extracts to be attached as “other attachment”.
- Reason for delay in submission (if required)
4. Logging into Firms
- Login into firms.rbi.org.in
- Dashboard will pop up – Click on the left navigation button the left and select Single Master form
- Select the type of form – Form FC-GPR
- Fill in the entity details, entry route details, applicable sectoral reporting, whether FDI is for a specific project
- Fill in Issue Details
- Fill in the Foreign Investor Details, Particulars of Issue/Allotment to each Investor/Mode of Payment/Investment details
- Fill in the details of Amount of Issue
- Fill in the details of Particulars of Issue
- Pre and Post shareholding Pattern will be auto-filled.
- Submitting the Form: Save and Submit the form, FRN will be generated.
5. Penalty/Conclusion
Delay in reporting beyond the prescribed period (30 days from issue of shares in case of report FC-GPR) shall attract a penalty of 1% of the total amount of investment subject to a minimum of Rs. 5,000 and maximum of Rs 5,00,000 per month or part thereof for the first six month of delay and twice that rate thereafter, to be paid online into a designated account in Reserve Bank of India.
Author Bio
Hi. can you say whether valuation certificate is required for shares issued as part of subscriber to MOA?