Integrated Reporting Structure: Foreign Investment Received Issued By RBI: Single Master Form
This article is in regards to the newly introduced reporting structure (Single Master Form herein referred thereafter SMF) by Reserve Bank of India (herein referred thereafter RBI) for the reporting of all Foreign Investments so received by Indian Entities.
Before moving forwards, let’s begin with terminology like “Foreign Investments”.
|Foreign Investment in India is regulated in terms of clause (b) sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017 issued vide Notification No. FEMA 20(R)/2017-RB dated November 7, 2017. Where, investments can be made in shares, mandatorily and fully convertible debentures and mandatorily and fully convertible preference shares of an Indian company by non-residents, subject to the pricing guidelines / valuation norms and reporting requirements amongst other requirements as prescribed under FEMA Regulations.
Further any Indian Entity receiving foreign investments were required to report such transactions to RBI which was Regulated by Regulation 13 of the Foreign Exchange Management (Transfer or Issue of Security by Person Resident Outside India) Regulations, 2017 presently prescribes twelve (12) different types of forms for FDI reporting including Advance Remittance Form, Form FC-GPR, Form FC-TRS, Annual Return on Foreign Labilities and Assets, Form ESOP, Form DRR, Form LLP (I), Form LLP (II), Form Convertible Notes, Downstream Investment Form, Form LEC (FII) and Form LEC (NRI).
As the present “Reporting Structure” is not in integrated resulting in different and various forms for different type of foreign investments , RBI has introduced “Integrated Reporting Structure” in form of “Single Master Form” vide a RBI Circular, notified on the 7 June 2018 with the aim of simplifying reporting under the Foreign Exchange and Management Act, 1999 (FEMA). Further On June 27th, 2018, RBI released a User Manual for Entity Master – FIRMS (User Manual) which provides detailed instructions and the process for filing the Entity Master Form.
For the implementation of the above dated circulars; RBI has announced an “ONLINE APPLICATION-FIRMS” (Foreign Investment Reporting and Management System) which will available in Two Phases:
|IN THE FIRST PHASE, THE FIRST MODULE
ENTITY MASTER FORM
|ü The Entity Master, would be made available online
ü Will be available to the public for data entry between June 28 (at 1:00 pm) and July 12, 2018.
ü seeking identification details of Indian entities, specifically seeks information pertaining to foreign direct investment, foreign portfolio investment and the indirect foreign investments received by the Indian entities till date
ü Any Indian entity which does not comply WILL BE LIABLE FOR PENALTY: COMPLETE PROHIBITION ON RECEIVING ANY FORM OF FOREIGN INVESTMENT IN FUTURE.
|IN THE SECOND PHASE, THE SECOND MODULE
SINGLE MASTER FORM
|ü The Single Master form will made available online
ü will be available to the public for data entry from 01st August, 2018
ü It has merged eight (8) of the above twelve (12) earlier reporting requirements, along with an additional obligation of reporting in case of investment by person resident outside India in an Investment Vehicle.
ü Four (4) forms that may remain outside the framework of SMF, and may likely continue to be filed in the manner they are currently filed with the RBI, are Advance Remittance Form, Annual Return on Foreign Labilities and Assets, Form LEC (FII) and Form LEC (NRI)
Note: As the “Single Master Form” will be available from 01st August, 2018; the FAQs in regards to the form will be articulated in next series
 Foreign Investment’ means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP;
Explanation: If a declaration is made by persons as per the provisions of the Companies Act, 2013 about a beneficial interest being held by a person resident outside India, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment.
Note: A person resident outside India may hold foreign investment either as Foreign Direct Investment or as Foreign Portfolio Investment in any particular Indian company.